GST interpretation has businessman confused

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Ron Phillips has been told he owes the Canada Customs and Revenue Agency (CCRA) almost $90,000 in taxes for training he provided to on-reserve First Nations people who are tax exempt.

R.S. Phillips & Associates provides training in the area of First Nation education and health. The company organizes two large conferences called Effective Strategies every year in Winnipeg. They also provide training/workshops on reserve.

"We have not charged GST on the registrations from First Nations because the First Nations provided me a GST exemption statement. It says something like 'We certify that (the First Nation or band-empowered entity) is acquiring property on the reserve or is acquiring services for band-management activities. This supply of services will not be subject to the Goods and Services Tax.'" Phillips has been arguing with local CCRA officials for more than a year, going through appeals with his lawyer. That avenue appears to have been exhausted.

"My lawyer said that if you go by the law, we lose. CCRA's policy and guidelines-the GST exemption for First Nations for acquiring services off-reserve-is not the law. In fact, the law states that all off-reserve purchases of First Nations (goods and services) are taxable," he said.

So while the law says one thing, departmental policy has evolved that allows for First Nations people's special rights and that, technically, is contrary to the law.

When the GST was introduced there was an uproar on First Nation territories. The collection regime requires merchants to collect and remit the tax. First Nation people complained that the Indian Act exempts them from taxation and that means they are not required to pay or collect tax.

Eventually policy evolved to a point where GST was not charged for on-reserve purchases and very complicated policies that would allow reserve residents to purchase goods off reserve for use on reserve were also developed.

But a national policy has come to exist that Phillips says is not being followed in Manitoba.

A very similar policy allows provincial government departments to avoid paying GST. Phillip deals with the province too and those transactions are not being taxed. When Phillips questioned a CCRA official about the decision, he received an answer that made little sense to him.

"He said that attendance at a conference becomes the personal property of the person that attended and therefore GST must be applied. But when I asked him about the provincial people who attended, I never got a reply. When provincial people attend, they don't pay GST. They can get a GST exemption statement and they don't pay it. It's the same principle. The government of Canada recognizes First Nations as governments but they will not recognize them in the same way the province is recognized," he said. "I asked them to explain this and I've never gotten a response. How can you say it becomes the personal property of a First Nation person but not a provincial employee?"

First Nations people, with a legislated tax exemption under Section 87 of the Indian Act, are required to pay the tax, but provincial government employees are not, he said.

"It's a double standard and they enforce their policies very selectively," he said.

Phillips, a non-Native man married to a Native woman, has a PhD in special education from the University of Arizona, specializing in special education services in band operated schools in Manitoba. He has 25 years experience in the field, including 15 years running his own business.

"As far as I know, I've done nothing wrong. If I follow the guidelines of Revenue Canada, it's going to be exempt. The question now is 'Does management activity include board training and staff training?' Of course it does," he said.

This is where it gets truly confusing. A letter from Meg Freeman, a CCRA appeals officer based in Winnipeg, informed Phillips he had to prove that he was providing a service to reserve-based employees and not simply charging amission to the conferences off the reserve in Winnipeg.

The former is tax exempt according to CCRA policies; the latter is not. Phillips argues that someone with an advanced degree and 25 years of experience is not attracting people to come to a conference just to sit in a chair all day. There is a real service being offered to educate employees from a reserve.

But after forwarding piles of receipts from First Nations to CCRA, he was informed he owed tens of thousands of dollars in unpaid GST.

He can't see any reason for this to be happening.

"They have a policy in place. The First Nations have been told they don't have to pay. The provinces have been told they don't have to pay. I deal with both and I treat both the same. I could show you copies of paperwork and if I covered up the names you couldn't tell if it was a province or a First Nation. But I'm only having troubles with my First Nations clients. If someone can explain that to me . . .."

Windspeaker was not able to make contact with the Winnipeg CCRA office before deadline.