Proposed Standards for First Nation Fee Laws, 2017
Standards established by the First Nations Tax Commission (FNTC) reflect best practices in property taxation, and are designed to support First Nation economic growth, First Nation jurisdiction, property tax harmonization, and the interests of all stakeholders in the First Nation property tax system.
Under the First Nations Fiscal Management Act (FMA or the “Act”), the FNTC reviews and approves laws. Section 35(1)(a) of the Act gives the FNTC the authority to establish standards, not inconsistent with the regulations, respecting the form and content of local revenue laws. The standards established by the FNTC are additional requirements and, together with the Act and its associated regulations, form the regulatory framework governing First Nation taxation under the Act.
As a matter of policy, the FNTC seeks public input prior to introducing or significantly amending its standards. This input is critical in developing standards that are acceptable and effective for participating First Nations and their taxpayers.
In 2016, amendments to the Act came into force, including the charging of fees as a new fiscal power under s.5.(1)(a.1). Fees are distinct from taxes in that fees are connected to the cost of the services provided, and must be expended for that purpose. The addition of this new power responded to growing interest from First Nations to have the legal authority to collect fees for a wide array of services (e.g., water, sewer, garbage collection, and use of facilities).
In 2017, the FNTC completed its work on proposed Standards to help shape the new fiscal power.
The Proposed Standards for First Nation Fee Laws, 2017 set out the following requirements for fee laws made under the Act:
Administration and Description of Service
Section 1 requires the appointment of a tax administrator to oversee the administration and enforcement of the Law. Section 2 requires that the Law describe the service respecting which the fee is levied. These provisions are similar to requirements found in other Standards, and are intended to facilitate clarity in the administration and scope of the Law.
Basis of Fee
Section 3.1 requires a fee law to state the basis of the fee, and provides for three fee types: 1.) services to property, 2.) services not provided to property (including use of a facility), and 3.) a regulatory process, permit, licence or other authorization.
o Section 3.2 set outs that for services to property (e.g. garbage collection), the fee can be based on either use/consumption, per unit, per service provided, taxable area, or frontage.
o When setting fees, the law can provide for different rates for different property classes (paragraph 3.3(a)); however, within a property class the rates or level of fees must be the same (paragraph 3.3(b)).
o Section 3.4 provides an exception to paragraph 3.3(b) where the First Nation has established tax districts and the cost of services varies, or where it has more than one reserve, and costs of services varies with each reserve.
o Section 3.5 requires where a fee is for services not provided to property (e.g., use of a recreational center, ferry service) the fee must be based on use or consumption. Section 3.6 provides that in establishing fees made under s. 3.5, the Law can have categories of users or uses and can establish different rates and levels of fees for the categories (e.g., lower rates for elders and the youth).
o Section 3.7 sets out that in establishing the fees for a regulatory process, permit, license or other authorization, the Law can establish different rates or levels of fees based on one or more factors set out in the Law.
Cost of Service
Section 4.1 requires the Law to set out that the rates and levels of fees reflect the projected cost of administration, operation and maintenance of the service or portion of the service that is to be funded by the fee. This reflects the principle that fees are for cost recovery.
Section 4.2 requires the fees to be supported by a report (made available at the First Nation’s office or website as required by section 4.3) setting out the projected cost of the service, how the cost of the service was determined, and the proportion of the total cost that the First Nation will recover through the fee.
Finally, section 4.4 enables First Nations to use the same rates and levels of fees set by another government for a service, provided the First Nation has a service agreement and levies a fee with respect to a service associated with the agreement.
Section 6 requires a Law to set out any exemption the First Nation wishes to provide. Where an exemption from a fee is on the basis of First Nation membership, the Law must require the First Nation to either:
(a) pay from its general revenues into the local revenue account (i.e., the bank account in which all local revenues are deposited) the fee that would have been payable by the member for the service; or
(b) reflect in the tax administrator’s annual report that the service is partially funded by general revenues (e.g., First Nations may have funding agreements with other governments that cover all or a portion of the service costs for members).
o Refunds- Section 7 requires the Law to include procedures for refunds where a person pays a fee that was not payable, or makes an overpayment.
o Revenues and Expenditures – Section 8 requires the Law to provide that the fee revenue must be used solely for the service, and that revenue must be accounted for separately.
o Records and Reporting –Section 9 provides for the Law to include a requirement that the tax administrator keep records of fees (levied and collected), refunds, complaints, and enforcement proceedings, and provide an annual report to Council.
o Complaints to Tax Administrator – Section 10 requires that the Law include a process for complaints to the tax administrator.
o Penalties and Interest – Section 11 sets out the maximum penalties and interest rate that may be included in a Law, and requires the Law to set out how the penalties and interest rates will be calculated and applied.
o Enforcement – Section 12 requires the Law to set out enforcement measures, and enables the Law to provide that unpaid fees can be collected in the same manner as taxes levied under the First Nation’s taxation law. Further, where a fee is levied for a service provided to property, the Law may provide for the First Nation to use the enforcement measures set out in the First Nations Taxation Enforcement Regulations, provided the Law (a) requires the First Nation to follow the procedures for those enforcement measures that are set out in the First Nation’s taxation law; or (b) incorporates into the Law the procedures set out in the First Nations Taxation Enforcement Regulations.
o Confidentiality – Similar to other local revenue laws, section 13 requires fee laws to have confidentiality provisions.
An electronic version of the proposed Standards is available by clicking the button below:
Please direct your written comments on or before November 3, 2017 to:
First Nations Tax Commission
321-345 Chief Alex Thomas Way
Kamloops BC V2H 1H1
Telephone: (250) 828-9857
Fax: (250) 828-9858