In April of this year, an amendment to the First Nations Fiscal Management Act (FMA) came into force which added “payments in lieu of taxation” (PILTs) to the definition of local revenues under the FMA. This is an important step in expanding First Nations tax-related revenues. The amendment ensures these revenues can now be included as a part of the First Nation’s local revenue account, and perhaps more importantly, it may assist in encouraging provinces to change current policies to enable these types of payments to First Nations.
Each year over $1.7 billion is paid by governments or government organizations to other governments in lieu of property tax. For the federal government, over $500 million in PILTs, are made by the Public Works Canada or Crown corporations to provinces, local governments and taxing First Nations for federally-owned properties (e.g., RCMP buildings, border facilities, Canada Post, CMHC). First Nations who have property tax laws and federal property on their lands are eligible to receive PILTs; but must complete an application each year for the PILT (for more information visit the PILT website at http://www.tpsgc-pwgsc.gc.ca/biens-property/peri-pilt/index-eng.html).
In the case of provinces, similar payments are made by the province or provincial Crown organizations to local governments for provincially-owned properties (e.g., provincial office buildings, SaskPower, BC Ferries, LCBO, Manitoba Hydro). These provincial payments are often termed “grants in lieu of taxation” (GILTs).
PILTs and GILTs evolved because of the “Crown immunity” reflected in section 125 of the Constitution. Section 125 provides an intergovernmental immunity from taxation on “…lands or property belonging to Canada or any province…”. PILTs and GILTs therefore enable the federal and provincial governments to contribute to the cost of local services while ensuring section 125 is not contravened. Most PILTs and GILTs are based on legislation (e.g., the federal Payments in Lieu of Taxation Act or Ontario’s Electricity Act), but in some cases are based on provincial policy.
While the vast majority of local governments receive PILTs and GILTs for federally-owned and provincially-owned properties situated in their jurisdictions, only a small fraction of the Canada’s First Nations receive these payments (currently four First Nations receive federal PILTs, despite the fact that there are over 100 federal properties on reserve across the country.).Though there are several reasons for this disparity (e.g., not all First Nations have tax regimes, and the amount of federal and provincial property on reserve is less than off- reserve), the most noteworthy reason is nearly all provincial governments and their Crown corporations have not extended PILTs to First Nation governments. For example, legislation supporting BC Hydro empowers the company to pay GILTs to BC cities and towns, but not to First Nation governments in BC. The same is true for SaskPower, NB Power, SaskTel, and Manitoba Hydro. All of these provincial Crown corporations occupy interests on reserve, but do not pay GILTs to First Nations.
To get a better appreciation of the PILT and GILT revenue loss experienced by First Nations, the FNTC recently commissioned economic research on federal and provincial PILT and GILT programs. This research, along with recent changes to the FMA, will greatly assist the FNTC in increasing awareness, and supporting First Nations who are taking their case for fairness to provincial policy-makers. Provincial governments will need to change their current approach to GILTs so First Nation governments are treated equally in the application of GILT programs.