In December, the federal and provincial governments announced a deal to split the excise tax from cannabis sales 75 per cent to 25 per cent in favour of the provinces. Conspicuous in its absence was mention of First Nation cannabis tax jurisdiction.
First Nation cannabis tax jurisdiction is an opportunity to use First Nation tax jurisdiction to address the potential grey market manufacture and sale of cannabis, as has happened with tobacco. Grey market sales of tobacco in Ontario and Quebec cost governments billions in lost tax revenues each year. Restoring our tobacco jurisdiction and recognizing our cannabis jurisdiction provides First Nations with a fiscal benefit to our communities and begins the reconciliation process.
The federal government has committed to a new First Nation fiscal relationship based on First Nation fiscal powers to implement First Nation jurisdictions, such as cannabis regulation. However, the lack of First Nation inclusion in the cannabis tax framework is a missed opportunity for the federal government to demonstrate its commitment to a nation-to-nation relationship that reconciles First Nation governments into the federation.
Over a century ago, First Nation communities understood and paid taxes. The Chinook trade language word for it was “taksis,” and “taksis” helped build community projects like bridges and churches, enabled us to hire lawyers, and send our Chiefs to England to represent us.
The erosion of First Nation tax jurisdiction began with a series of policies, regulations and legislation between 1883 and 1927. First Nation sun dances and potlaches were banned. First Nation governments were prohibited from raising revenue through property and railway taxation. The policy culminated in the 1927 Indian Act Amendment, which prohibited First Nations from hiring lawyers to defend their claims.
In 1951, this policy was reversed but the damage was done. All tax jurisdiction had been assumed by other governments and we have struggled to restore our jurisdiction ever since. In 1968, the eight Ontario First Nation signatories of the Indian tax grievance committee said, “It is submitted that … the band collect taxes from their own lands [as] a progressive step towards creating self sufficient Bands”.
It wasn’t until the 1988 First Nation led change to the Indian Act that First Nation property taxation began to grow in earnest. During that time, we learned the four-part formula for restoring First Nation tax jurisdiction. First, proposed taxation legislation must be First Nation led. Second, it must be optional to respect our right to self-determination. Third, our jurisdictions must be supported by First Nation institutions. Finally, there must be a connection between our taxes and our expenditures, to create a jurisdiction based fiscal relationship.
In 2005 this formula was used in the First Nations Fiscal Management Act (FMA) that further expanded First Nation fiscal powers and allowed us to lever revenues to issue debentures. It provided a mechanism to establish greater fiscal accountability and transparency.
The FMA worked. Today, 220 First Nations have opted into the FMA, making it the most successful Indigenous legislative initiative in Canadian history. Participating First Nations have generated over $1 billion in tax revenues. The First Nations Finance Authority has issued $400 million in debentures and almost 100 First Nations have received financial management certifications by the First Nations Financial Management Board. First Nations using the FMA have generally seen greater economic development and higher standards of community well-being.
The FMA provides the legislative framework to implement cannabis tax jurisdiction for interested First Nations. Optional FMA cannabis tax jurisdiction will provide independent revenues to support costs of regulation on reserve and improve Indigenous services and infrastructure. FMA institutions will help interested First Nations implement their cannabis tax jurisdiction. It will be the next step of a jurisdiction based fiscal relationship.
Participating First Nations would generate sufficient community fiscal benefits to prevent a grey market. They could regulate cannabis on their lands and assume more responsibilities over community health and infrastructure, and begin to reconcile these jurisdictions with those of other governments.
This is exactly what I believe the Prime Minister and the Minister of Justice meant when they promised real reconciliation. We continue to advocate the expansion of the FMA to include cannabis tax jurisdiction. I hope all Canadians will support us.
C.T. (Manny) Jules, Chief Commissioner,
First Nations Tax Commission
In the news:
Chief Commissioner C.T. (Manny) Jules discussing First Nation cannabis tax jurisdiction on CBC’s Power & Politics (VIDEO – segment begins at 1:33:38)