Proposed Standards for First Nation Accommodation Operator Business Activity Tax Laws, 2016
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 Canada, many provincial and local governments have various forms of accommodation/hotel taxes. Typically the tax ranges between 1% and 5%, and is applied to the price of one night of accommodation. In many instances, the revenue from these taxes is earmarked for local tourism initiatives or for a local tourism board. Increasingly, First Nations are involving hotel properties as a part of their overall commercial development strategy, and therefore an accommodation/hotel tax provides for significant fiscal benefits.
The proposed Standards would apply to business activity tax laws that provide for a tax on business operators providing accommodation on reserve. While similar to accommodation taxes or hotel taxes levied by provincial and local governments, the First Nation Accommodation Operator Business Activity Tax Law is distinguished by its application; it is a tax on the accommodation operator, and not on the consumer of accommodation.
Accommodation would include lodging at hotels, motels, resorts, and other lodging establishments included in the First Nation’s law that meet minimum requirements reflected in section 3.3 of the proposed Standards (i.e., accommodation must be for a period less than 28 days of consecutive lodging, lodging charges must be greater than $30 per day or $210 per week, and the operator must offer more than four units of lodging).
The tax would be based on a rate applied to the gross revenue of the business operator. Under the law, the business operator would be required, by a specified date, to submit a tax return to the First Nation and the tax payment. The return would be subject to tax reassessment conducted by the tax administrator.
Section 5 of the proposed Standards places limits on tax rates. In the first year of the tax, rates could not exceed the rates set by adjacent governments. In provinces where an accommodation/hotel tax is not used, rates would be limited to maximum of 5%. In the second year of the tax, First Nations would be able to amend their laws to provide for a rate no greater than 5%.
The Standards would further require the law to provide for tax refunds, record keeping, confidentiality, requirements if late payment penalty provisions are used, and limits on the use of exemptions. Finally, a complaints process would be required in each law so that business operators can make complaints on errors or omissions in the tax reassessment notice.
The FNTC is seeking public input in respect of these proposed amendments to the Standards. If you wish to learn more about the proposed changes, please contact the FNTC at firstname.lastname@example.org or by telephone at (250) 828-9857.
An electronic version of the proposed Standards is available by clicking the button below:
Please direct your written comments on or before February 10, 2016 to:
First Nations Tax Commission
321-345 Chief Alex Thomas Way
Kamloops BC V2H 1H1
Telephone: (250) 828-9857
Fax: (250) 828-9858