First Nations should take advantage of laws

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Income tax time is fast approaching and most Canadians are getting ready to file their returns. Contrary to popular belief, most First Nations people are required to file a return with Revenue Canada. This article will briefly examine the unique features of First Nations taxation, especially in relation to income. It will be shown that First Nations taxation is a continually evolving field.

Not so long ago, most First Nations people had very limited exposure to the taxman. This is because of two main reasons:

1. Our economies were relatively simple, relying upon food gathering and trading with others.

2. The interpretation of First Nations tax laws was relatively simple.

However, over the last generation, in particular, we are finding that both of these factors are rapidly changing. In turn, deciding when and how First Nation tax laws apply is no longer a simple exercise. So, if you're feeling a bit overwhelmed about filing your taxes this year, rest assured that you're not alone. Things have gotten fairly complex in a relatively short time.

First, it must be acknowledged that Canadian taxpayers are entitled to arrange their affairs in such a way that it minimizes their tax burden (see Supreme Court, Neuman v the Minister of National Revenue). Indeed, so long as you play by the rules, taxpayers should make every effort to minimize their taxes. That's just common sense.

However, it appears that Revenue Canada has had difficulty accepting that this fundamental right applies to First Nations people. They have argued for years that First Nations people should not arrange their affairs to take advantage of the relevant tax laws. But in a recent Federal Court of Canada case (1999), Shilling vs. the Queen, Justice Sharlow criticized Revenue Canada's position, saying that to penalize First Nations for tax planning "makes no sense."

Second, First Nations taxation, for the most part, is derived from Section 87 (b) of the Indian Act. This section reads "the personal property of an Indian or a band situated on a reserve" is exempt from taxation. This phrase has been the central issue of many First Nations taxation cases and deserves closer analysis.

Note that Section 87 does not specifically state that an Indian's "personal property" includes his income. Rather, the courts have determined, in other non-Indian taxation rulings, that "personal property" includes income.

Also, the phrase "situated on a reserve," has been the subject of much legal debate. The central, contentious issue seems to be: Under what circumstances does a person's property qualify as being "situated on a reserve?" Once again, as our economies have developed, this becomes a more difficult question to answer.

Third, it must be recognized that First Nations tax laws are constantly evolving. The Supreme Court has been especially influential in defining and redefining these laws. How First Nations taxation was interpreted several years ago may not be entirely relevant today. This is why you should get professional advice from a qualified accountant if you have any questions about your circumstances. They will be able to provide you with the most relevant, up-to-date advice.

Finally, it must be emphasized that First Nations tax laws apply only to status First Nations people. They do not apply to other Aboriginals, such as the Metis or Inuit. To learn more about First Nations taxation, read some of the rulings from Canada's courts, especially the Federal and the Supreme Courts. You can download cases from the web (check out http://www.fja.gc.ca/en/judges/courts.html). Also, visit the Canada Customs and Revenue Agency website (www.ccra-adrc.gc.ca). At any of these websites use their search engine and key in words like "Indian" or Indian taxation." After doing this background work, and you are still unsure about your situation, get professional advice.

Andrew Leach is from the St'at'imc Nation, which is located in central British Columbia. He hs a Bachelors and Masters degree in Business Administration and is presently completing his doctorate in management. If you are interested in responding to this article, please email Andrew at andrewleach@home.com.