Revenue Canada GST rule change rejected

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Chief Vernon Syrette of Batchewana First Nation wants nothing to do with Revenue Canada's latest policy change.

Syrette wrote Customs and Revenue Agency (CCRA) Minister Martin Cauchon on Nov. 15, telling the minister the new policy was contrary to current GST regulations and Section 87 of the Indian Act. The chief urged the minister to recall flyers sent to First Nations that explain the change and to reconsider the whole thing.

"I am returning your correspondence and brochures in hopes you might issue a recall as the examples you have given are poor ones and don't reflect the reality of the situation," the chief wrote.

Other First Nation organizations are also preparing their assault on the taxation policy change.

The fight is over subtle changes in the way the GST (or HST-harmonized sales tax-in some parts of the country) applies to tax-exempt Native people.

While the personal property of status Indians is specifically exempted from taxation by Section 87 of the Indian Act, there has been dispute over whether the HST/GST is included in that exemption. Several complex and convoluted court decisions have spawned even more complex regulations that seek to narrowly limit the tax exemption to on-reserve property and transactions. Presently, if a status Indian purchases goods off reserve, he or she must pay the federal sales tax. But if the goods are delivered to a reserve address, they are judged to be tax exempt. CCRA officials have created several hoops for First Nations people to jump through in order to get the GST/HST exemption. Especially for big ticket items, Native customers have to provide substantial proof before the government will recognize their right to be tax-exempt. Letters from the chief, pictures taken of purchased automobiles in front of the band office, are just a couple of examples of the kinds of proof that CCRA expects.

Many off-reserve merchants resent doing the paper-work or being forced to deliver goods to reserve when the Native customer could have carried the goods home quite easily (but would then have had to pay the tax).

Chris McCormick of the Association of Iroquois and Allied Indians (AIAI), an Ontario organization that represents eight First Nations, believes the merchants' complaints are behind the decision to change the rules that will have tax-exempt Native consumers pay first and file for a rebate later.

A letter was sent to First Nations in late August asking chiefs to distribute brochures to their members that state that, as of Jan. 1, 2002, GST rebate claims by "Indians and Indian bands" must be filed within two years and that all claims that are more than two years old must be filed by Dec. 31 this year.

Previously, members employed by a First Nation could get a rebate of GST paid while doing business for the band off of the reserve. In those transactions, rebate forms were filled out and sent to the government. Now the government plans to broaden that practice to include all band members making personal purchases, even those delivered to their on-reserve homes or business, thereby eroding the tax-exempt right again, McCormick said.

McCormick said the government is trying to sneak the GST onto the reserve with this latest move.

"When this brochure goes to merchants, the merchants are going to say to the Indian customer, 'Well, all you have to do to get your money back is fill this out, sir,'" he said.

It's another example where, when the observance of Native rights presents a paper-work problem for non-Native people, the problem is unfairly shifted to Native people, he said.

It also means that more and more Native people will pay the tax at the point of purchase. Many will simply not bother keeping receipts or sitting down and filling out forms in order to get their money back, he said, and in turn give up their tax exempt right because the government has made it too much of a nuisance to defend it.

McCormick said he discussed the matter with a senior bureaucat, saying the policy was contrary to Section 87 of the Indian Act.

"He said it's not a violation. 'You're getting your tax exemption,' he said. 'All you've got to do is fill out the form.' The legislated exemption doesn't say you have to fill out a form. It says you're exempt, period," McCormick said.

The CCRA brochure gave a couple of examples of how the new policy would work. It listed GST on hydro bills or on furniture delivered to the reserve where the merchant insisted the customer pay the tax as examples of when GST could be rebated if the forms were filled out and sent to the government.

Chief Syrette told the minister the people don't have to pay GST, so there's no reason to fill in any forms.

"This brochure, I feel, would lead hydro companies, furniture stores, etc., to believe they could proceed to levy Goods and Services Tax, which is in our view a violation of Section 87 of the Indian Act," he wrote.

McCormick said he would be writing the minister to warn him that First Nations people would not co-operate with this change because it does not respect their rights and it might force confrontations all across the country.