In this webinar, FNTC Legal Counsel Marie Potvin discusses and breaks down annual laws under the FMA. This webinar highlights:
Annual Laws and the FMA
Every First Nation that is taxing under the First Nations Fiscal Management Act (FMA) will enact two laws each year: the annual tax rates law and the annual expenditure law.
Annual Tax Rates Law
The annual tax rates law must be made in compliance with the FMA and the standards for First Nation Annual Tax Rates Laws. The annual tax rates law:
- establishes the rate of tax for each class of property; and,
- sets the minimum tax, if any.
The tax rate is typically determined by using one of two methods. One method is to use an average tax bill increase approach, by looking at the increase year over year for a representative property within each property class. The second method is to match the rates of an adjacent government, referred to as the reference jurisdiction.
A minimum tax is the lowest amount of tax that will be levied on any property. A First Nation can set a minimum tax higher than $100 in four circumstances:
- A First Nation had a higher minimum tax at the time of being scheduled to the FMA.
- The First Nation wishes to harmonize with the province or its reference jurisdiction.
- The First Nation’s cost of providing services to properties with lower assessed values exceeds $100.
- Where the First Nation is transitioning from a fee for service arrangement, the minimum tax is equivalent to its previous service fee.
Annual Expenditure Law
Proper budgeting practices is a critical tool in supporting First Nation government financial management and the credit-worthiness of First Nation governments. A strong budgeting and financial system along these lines satisfies two essential requirements of good government:
- it establishes the basis for financial control; and,
- it practices accurate, uniform and timely financial information.
The annual expenditure law sets out how the first nation intends to spend the local revenue is that it will collect for that year. Importantly, it also provides the authority for those expenditures. Local revenues can be spent within the broad categories of local services set out in the Standards for First Nation Expenditure Laws, 2017.
The expenditure law
- Attaches the annual budget as a schedule,
- includes any expenditures made in accordance with section 13.1(a) of the FMA,
- includes a contingency amount between 1% and 10% of total local revenues (with some exclusions),
- lists each service agreement funded from local revenues,
- includes amounts payable under each granting program, and
- sets out reserve fund transfers and balances in appendix.
Process
First Nations typically make their annual expenditure law concurrently with the annual tax rates law. These laws must be made in accordance with the timing set out in each First Nation’s property taxation law. In all cases, the annual laws must be made no later than July 31 in the taxation year, or August 31 for First Nations located in Saskatchewan. These dates are set by the Standards for the Timing of First Nation Annual Rates and Expenditure Laws.
First Nations must publish notice of their annual laws in the First Nations Gazette or on their website prior to submitting the laws to the FNTC.
The FNTC provides sample annual tax rates laws and sample annual expenditure laws for use and adaptation by First Nations. The FNTC also publishes an Annual Laws Bulletin each April, to assist First Nations in the preparation of annual laws for that year.