FNTC: NEWS
FNTC and Southern Chiefs Organization sign MOU
The First Nations Tax Commission (FNTC) and the Southern Chiefs Organization (SCO) signed an MOU on September 18, 2019 in Winnipeg, Manitoba; as part of the Chiefs-in-Summit meeting, to formalize a partnership to work on developing a tax framework that will lead to more self-governance. The MOU was signed by SCO Grand Chief Jerry Daniels and FNTC Chief Commission Manny Jules.
“Business is happening all around us and we are not involved. They are operating in our territories and should be paying a tax. This agreement allows the SCO to access the FNTC’s expertise to help facilitate investment in our communities,” said Grand Chief Daniels.
The FNTC first began working with the SCO in the fall of 2018, and this MOU formalizes their working relationship.
“The FNTC, through this MOU, is committed to working with the Southern Chiefs Organization, in a cooperative and mutually supportive manner, to help grow SCO First Nation economies, jurisdictions and fiscal powers and establish an improved First Nation fiscal relationship,” said Chief Commissioner Jules.
This MOU establishes a work plan and strategy including:
- Developing a taxation framework
- Training for designated SCO staff at the Tulo Centre of Indigenous Economics
- Increase economic benefits before lands are added to First Nation jurisdiction
- Maximize fiscal benefits through efficient ATRs
- Infrastructure capital and financial planning
- Implement FMA powers
- Work with other governments
- Work with other FMA institutions
The SCO represents 34 First Nations in Southern Manitoba. The SCO was established by the Chiefs of Southern Manitoba to protect, preserve, promote and enhance First Nation’s people’s inherent rights, languages, customs and traditions through the application and implementation of the spirit and intent of the Treaty-making process.
Update from BC Assessment: Two Important changes to Vancouver Island First Nations for 2019
Mobile Home Assessments
Leading up to the preparation of the 2019 First Nation assessment rolls, BC Assessment conducted a review of all Mobile Home assessments on Vancouver Island. This review included verification of all existing mobile home improvements using both aerial imagery and on-site inspections, and a review of the land assessments for those homes, including research of comparable fee simple sales of mobile homes off reserve. The result was significant increases for mobile home assessments.
This assessment review was necessary because the 2018 Assessment Review Boards for both the Songhees Nation and the Tsawout First Nation indicated that BC Assessment should be using the same approach to valuation for mobile homes as it uses for other residential properties. While land assessments for single family dwellings located within these First Nation jurisdictions were similar to the assessments of comparable property assessments off reserve, the Board noted that land assessments of mobile home occupiers were lower and that this resulted in inequity in the assessments. In their decisions, the Assessment Review Boards found that BC Assessment should be using a direct comparison approach when valuing mobile homes, and strongly urged the Assessor to correct the mobile home assessments for the 2019 Rolls.
The assessment increases were communicated to the mobile home occupiers through a Pre-Roll Letter delivered in early December 2018, followed by the formal Assessment Notice in early January 2019. BC Assessment recently held taxpayer information meetings at both the Songhees Nation and the Tsawout First Nation.
BC Assessment is currently responding to inquiries from individual mobile home occupiers on Vancouver Island. BC Assessment expects numerous reconsideration requests and also anticipates appeals resulting from the increase in assessments. BC Assessment will provide an appraisal report to the appropriate Assessment Review Boards in defence of each appeal.
New Assessments for Billboards
BC Assessment conducted a Billboard Assessment Review that included identifying all existing billboards and conducting the land and improvement assessments for these occupations. This project was contemplated for a number of years, during which time BC Assessment researched the best assessment methodology to use. BC Assessment has implemented both a direct comparison and an income approach to valuation in order to assess the land on which billboards are located. This required extensive research into both off reserve comparable sales and lease documentation available on reserve. The billboard improvements have been assessed using a depreciated cost of replacement approach. It is important to note that BC Assessment is assessing the occupation of these lands and improvements and not the value associated with an advertising business.
Leading up to the final delivery of the 2019 Assessment Notices, BC Assessment notified affected First Nations and the billboard operators. Considering the unique nature of these assessments, BC Assessment expects that there may be appeals.
Moving Forward
BC Assessment is hopeful that both these initiatives will be met with success when any appeals are heard by the appropriate Assessment Review Boards and their decisions are delivered. BC Assessment is currently considering expanding these changes to all other First Nation customers throughout the Province and will plan accordingly. An important part of that plan will include
communication with property occupiers and each affected First Nation. Success will depend on open lines of communication between BC Assessment and the affected First Nations, including provision of the necessary information that assists BC Assessment in correctly creating the annual assessment rolls. For the Billboard Assessment Review, BC Assessment depends heavily on information provided by the First Nation, and asks that all of its FMA and Indian Act customers obtain lease documentation for billboard occupations and send that information to BC Assessment as soon as possible.
For more information on the assessment or mobile homes, or to provide billboard information, please contact BC Assessment at firstnations@bcassessment.ca.
Understanding Assessment of First Nation Lands
Understanding Assessment of First Nation Lands under the First Nations Fiscal Management Act and section 83 of the Indian Act.
First Nations contract with qualified, independent assessors to assess the leases, licenses and other occupations of their lands (generally referred to as “interests in land”). Over the past 30 years, a national approach to assessment of these interests in land has developed. To understand the approach and the reasons for the approach, it is important to understand the key elements of First Nation taxation systems.
How are First Nations Lands different from other land in Canada?
First Nation lands are “reserve” lands, the title to which is held by the Government of Canada for the use and benefit of the First Nation. This means that reserve lands do not have titles that are registered in the provincial land title office, and that no one can own a fee simple interest in the reserve lands. Even the First Nation itself does not have a fee simple interest in the land.
What types of interests in land exist on reserve lands?
There are different ways that non-members of the First Nation may occupy reserve lands. The most common way is through a lease either with a member of the First Nation or with the First Nation itself. Leases can range from short term, such as 10 years, to long term, usually up to 99 years. Leases can be pre-paid for the term or have annual payments with periodic rent reviews. It is common for different types of leases with varying terms to exist on a single reserve at any given time.
There may also be short or long-term licenses of occupation, permits to occupy, or rental agreements, and there may also be simple occupations of reserve lands without any legal documentation.
What interests in land are taxable on reserve lands?
Provincial property tax systems generally levy taxes on the fee simple interest of a property, and it is the owner of the fee simple interest who is liable for the taxes. Because there are no fee simple interests in reserve lands, a different approach is necessary.
First Nation property tax systems levy taxes on occupiers of reserve lands, regardless of the nature of the occupation. This means that occupiers of reserve lands, whether they hold a lease, license, permit or simply occupy the land, can be liable for taxes. In this sense, the taxation is on the occupation of the land, and not related to the specific way that the person occupies the reserve lands.
Occupations can be for a range of uses, including residential, commercial, industrial, agricultural or utility. The full range of occupations can be taxable, just as they are off reserve.
How are occupations of reserve lands assessed?
Where provincial property tax is levied on the fee simple interest, the province assesses the value of the fee simple interest. Although the specific rules and approach vary among the provinces, generally the objective is to determine the market value of the property.
A common approach to determine market value is the sale price of the property on the open market. Some provincial systems also have rules for assessing non-fee simple interests that are taxable, including leases, licenses and other occupations. Where a person is occupying Crown land (whether by lease, license or otherwise), that person’s occupation is taxable, and the provincial assessment legislation directs the assessor to assess the occupation based on the full market value of the property as though it were held in fee simple by the occupier.
First Nations across Canada have adopted this approach to assessment of occupational interests in their reserve lands. On reserve lands, it is the First Nation’s property assessment law which governs how the assessor must assess each interest in land, as provincial assessment legislation does not apply. The approach is reflected in each First Nation’s property assessment law, which generally direct the assessor to assess each interest in land as though it is held in fee simple off reserve. It is “off reserve” because there is no fee simple interest in reserve land, there tends to be a lack of comparable data on reserve lands, it avoids issues of reserve land valuation, and it provides for a similar tax burden to off reserve properties.
Why is this approach the best assessment approach for First Nation property tax systems?
There are several reasons why this approach is used and why it makes sense for First Nation property taxation systems.
- The approach is used provincially for occupational interests and is familiar to taxpayers.
- The approach enables assessors to use the same rules for assessment that are used provincially, which are based on fee simple assessments. This means the assessment process does not require new and different rules, has comparable properties, and is cost effective to implement.
- The approach ensures that tax revenues do not depend on whether the occupation is under a lease, license or other arrangement or on the time remaining on the occupation. The assessed value and proportional share of taxes for a class of property will be the same as off reserve lands, whether a property is held under a lease or a license or whether that tenure is short or long term. This ensures a similar distribution of tax liability as is achieved on non-reserve lands.
- Using an approach that is similar to the system used off reserve enables First Nations and their taxpayers to compare their annual tax rates to adjacent non-reserve jurisdictions.
How are taxes determined on reserve lands?
The method for determining taxes on reserve lands is the same as for properties on non-reserve lands. The First Nation sets annual tax rates for each property class (e.g. residential, commercial etc.). The applicable tax rate is multiplied by the assessed value of the property to create a tax bill. First Nation tax rates are similar, and in many cases identical, to those of adjacent governments. Using a similar assessment method means that taxpayers pay similar amounts to amounts paid off reserve.
30th Anniversary of Bill C-115
This year marks the 30th Anniversary that Bill C-115, better known as the “Kamloops Amendment”, received Royal Assent.
Our ancestors and leaders have fought hard for our jurisdiction. It is precious. We must assert it. We must protect it and we must continue to clear the path for others.
– Chief Commissioner Jules
This indigenous-led amendment to the Indian Act made it possible for First Nations to begin implementing property taxation, significantly increasing revenue options and expanding jurisdiction. While the step taken in 1988 is of historical significance, it is important to remember that the restoration of First Nation tax jurisdiction did not start there. In 1875, the Mohawks of Tyendinaga attempted to implement a property tax system but were turned down by the Department of Indian Affairs. Later, in 1927, the ability for First Nations to raise revenues was removed. Progress took a long time and and a lot of effort from many dedicated individuals.
In 1988, Bill C-115 created First Nation property tax jurisdiction. The Supreme Court of Canada stated in 1995 that First Nation tax jurisdiction was “an inherently governmental power”, and it wasn’t until 2005 that First Nations were able to formalize and expand their tax jurisdiction with the First Nations Fiscal Management Act.
Since that time, First Nation communities have generated over $1 Billion in cumulative tax revenues and have established new jurisdictions over revenues such as development cost charges, taxation for the provision of services and business activity taxes.
First Nation Cannabis Jurisdiction Update: June 2018
The First Nations Tax Commission (FNTC) and proponent First Nations have been working towards cannabis tax jurisdiction over the past year. This has included extensive legal and policy research, discussions and work with many First Nation proponents and advancement of a cannabis tax jurisdiction proposal at the FMA/FNLMA national meeting in May 2018 (350 attendees from over 160 First Nation communities). The FNTC has also advanced the proposal to several departments in the federal government and to the Senate. Some First Nations have also been active in advancing cannabis tax proposals to their provinces and to Canada.
It is important to note this cannabis proposal should be considered as part of a broader agenda to implement First Nation jurisdiction for the many First Nations using the First Nations Fiscal Management Act (FMA) and First Nations Land Management Act (FNLMA) legislative frameworks.
Bill C-45 Progress
- March 2017 – The federal government introduced the Cannabis Act (Bill C-45). First reading of Bill C-45 in the House of Commons was in April 2017.
- September 2017 – The Department of Finance proposed changes to the Excise Act, 2001 to implement the cannabis excise tax – the higher of $1/gram or 10% of the sale price.
- December 2017 – Two-year agreement established between federal government and provinces that federal government would receive 25% of the excise tax revenues (capped at $100 million annually) with provinces receiving 75% plus any additional provincial taxes levied, such as those considered by Alberta and Saskatchewan.
- March 2018 – Second Senate reading of the Bill. After positive vote the Bill was sent to five different Senate committees for review, including the Standing Senate Committee on Aboriginal Peoples.
- Early June 2018 – 11 members of the Senate Committee on Aboriginal Peoples planned to support an amendment deferring Bill C-45, pending a report on government efforts to address the concerns of Indigenous communities. However, Health Minister Ginette Petitpas Taylor and Indigenous Services (ISC) Minister Jane Philpott sent a letter to the Committee promising a full report to Parliament in September and another within 12 months. Highlights of the letter:
- Committed $200 million over five years to enhance the delivery of addictions treatment and prevention services.
- Will work with First Nations on public education materials.
- Establishment of a special navigator service exclusively for Indigenous businesses seeking to become federal licensees under the Cannabis Act.
- Committed to continued engagement and work with Indigenous communities to address and accommodate jurisdictional issues.
- Committed to working with the First Nations Tax Commission on revenue sharing and taxation arrangements.
- June 7, 2018 – Result of the third senate vote on Bill C-45 was 56 / 30 in favour of legalization. The Bill was moved back to the House of Commons for deliberations on almost 50 proposed Senate amendments, including some more noteworthy ones such as:
- Allowing provinces to prohibit home cultivation of cannabis if they choose;
- More stringent restrictions on advertising on promotional clothing and items; and
- Penalties on young adults sharing cannabis with minors.
- Current Status – On June 18, the House made their decision on the Bill’s amendments, but because they did not agree to the amended Bill C-45 in its entirety, the Bill was sent back to the Senate after the House voted 205-82 to pass the amended Bill C-45. The House of Commons agreed to most of the amendments (27 plus 2 others amended), but denied 13 amendments, including providing the provinces and territories the power to ban home-grown cannabis, prohibiting producers from distributing branded merchandise, and setting up a registry for shareholders involved in cannabis companies. On June 19, the Senate voted 52-29 to accept the House’s position and agree to finalize the Bill. On June 20, Prime Minister Trudeau announced that online sales will begin shortly after Royal Assent and the retail system will begin on October 17, 2018, providing provinces 17 weeks to prepare. On June 21, Bill C-45 received Royal Assent and is now ready to be made into law.
Proposal
There are four rationales for the FNTC’s proposal on cannabis tax jurisdiction. First, cannabis tax revenues could be part of a more self-sufficient fiscal relationship for interested First Nations. Second, cannabis tax revenues could be used to address the health, education, infrastructure and regulation issues associated with cannabis legalization on First Nation lands. Third, comprehensive First Nation cannabis tax powers would reduce the potential for unregulated and untaxed grey market sales of cannabis on First Nations lands like the situation associated with tobacco. Fourth, recognition and implementation of First Nation cannabis taxation jurisdiction would provide a practical example of reconciling First Nation governments within Canada.
There are five distinct elements to the proposal to develop a First Nation cannabis tax jurisdiction option for interested First Nations, these include amendments to the FMA, Excise Act, 2001 (Bill C-74 Budget Implementation Act), Cannabis Act (Bill C-45), and FNGST Act.
- FMA – Enables First Nation option for cannabis excise tax, FNGST and licensing powers.
- Excise Act, 2001 – Federal government established excise jurisdiction through amendments to Excise Act, 2001 with Bill C-74. Amendment to Excise Act, 2001 enables First Nation cannabis excise tax jurisdiction.
- Cannabis Act – Enables First Nation regulatory powers and coordination with other governments.
- FNGST Act – Enables First Nation collection of GST on cannabis and include FNGST revenues as FMA local revenues.
- FNTC Support – The FNTC will work with interested First Nations to support communications, develop sample laws, provide training and build the necessary administrative capacity to implement cannabis tax jurisdiction.
For detailed information on these amendments and distinct elements of the cannabis proposal please see “Summary of the Legislative Proposal to Create a First Nation Cannabis Tax Jurisdiction Option.”
Next Steps
The FNTC will engage with ISC and the Department of Finance to follow up on the proposals submitted and the letter provided to the Senate related to cannabis tax jurisdiction and a new fiscal relationship. Interested First Nation communities are encouraged to contact the FNTC for more information or to work with the FNTC to express support for the further advancement of First Nation cannabis tax jurisdiction to the provincial and federal governments.
First Nation Cannabis Jurisdiction Proposal in Context
The First Nations Tax Commission (FNTC) and proponent First Nations have recently submitted several legislative amendment proposals about implementing First Nation cannabis regulatory and tax jurisdiction. The FNTC is seeking the implementation of these amendments; however, it is important to recognize these proposals should be considered as part of a broader agenda to implement First Nation jurisdiction for the many First Nations using the First Nations Fiscal Management Act (FMA) and First Nations Land Management Act (FNLMA) legislative frameworks.
The federal government has expressed its commitments to decolonization and transition to a nation-to-nation jurisdictional framework supported by an improved fiscal relationship. This is significant, as it has increased expectations and pressure to deliver. However, the key question is: what is the most effective way to realize these commitments and facilitate a sustainable jurisdictional transition from the Indian Act to First Nation government?
Discussion
The FMA institutions have been successful at facilitating a sustainable jurisdictional transition for taxation and financial management from the Indian Act to First Nation governments. This FMA success can be attributed to six qualities:
- First Nation led – Proposed changes are First Nation led and the experience, expertise and stability of the First Nation leadership is perhaps the most important contributing factor for success.
- Optionality – Proposed changes need to be optional and respect the right of self-determination to ensure a clear choice and commitment is made by participating First Nations.
- Legislative Framework – Changes must be supported by a legislative framework to facilitate an orderly transition from federal (or provincial) jurisdiction to First Nation jurisdiction.
- Institutional Support – First Nation institutions are a bridge to help First Nations assume jurisdiction. They provide standards, sample laws, certification, law review, templates, systems and support. As a result, they ensure there is an efficient and cost-effective transition from the previous Indian Act regulatory framework to the new First Nation regulatory framework. Stated differently, they reduce the switching costs from the old colonial system to the new First Nation one.
- Capacity – First Nation institutions support capacity development so First Nations can implement their jurisdictions in a way that supports better services and infrastructure, grows their economies and helps them generate more revenues to assume more jurisdictions.
- Revenue Generation – Changes that support economic development and generate revenues are more likely to be successful because they are more fiscally sustainable, and they provide a strong incentive to join the optional framework.
The success of the FMA framework and underlying qualities has been recognized through independent review and confirmed by the commitment to expand this framework in the most recent federal budget.
The FMA institutions and Lands Advisory Board hosted a national meeting of FMA and FNLMA First Nations on May 16th and 17th in Vancouver, BC. The purpose of the meeting was to showcase the success of these initiatives, present several new proposals to facilitate more First Nation jurisdictions, and to seize the federal commitment to transition from colonialism to First Nation jurisdiction. The meeting had over 350 registered participants from over 160 FMA and/or FNLMA First Nations. Most attendees commented that it was the best, most forward-looking and optimistic First Nation led meeting they had ever attended. A goal of the conference was to obtain broad based social license to proceed with proposals to expand the FMA / FNLMA frameworks. This goal was certainly achieved based on the comments, applause for the proposals and strong support voiced by participants during and after the conference. An overview of the agenda, presentations, videos and proposals can be found at www.fnleadingtheway.com.
Summary of the proposals advanced and supported by participants:
Grow current First Nation institutions – The FMA/FNLMA institutions have advanced several amendments to create greater certainty and increase the jurisdictional power of First Nations.
First Nations Tax Commission – Expand & clarify existing FMA fiscal powers: property transfer tax, business activity tax, accommodation tax and associated FNTC support through sample laws, standards, admin. support, coordination with other governments as necessary, and training.
First Nations Financial Management Board (FMB) – Improve federal transfer mechanism (10-year grants) without offsets to facilitate transition to a revenue based fiscal relationship supported by FMB certification.
First Nations Finance Authority (FNFA) – Enable First Nations to monetize their transfers in combination with other First Nation independent revenues to support FNFA debentures.
Lands Advisory Board – Expand and clarify FNLMA powers relating to Land Code voting threshold, First Nation enforcement powers, transfer of Indian monies upon successful Land Code vote, streamlined ATRs, land management jurisdiction and law making, and environmental assessments.
New Tax Jurisdictions – These new tax jurisdictions are part of the development of a revenue based fiscal relationship option for interested FMA First Nations. This includes providing an option for participating First Nations to associate exclusive service responsibilities and jurisdictions with these independent revenues using the FMA framework.
- Cannabis tax – First Nation cannabis tax jurisdiction option that means First Nations would obtain fiscal powers associated with cannabis excise tax and FNGST on cannabis sales. This requires amendments to the Cannabis Act (Bill C-45), FMA, Excise Act, 2001, and FNGST Act to advance a First Nations cannabis tax jurisdiction option.
- Tobacco tax – Option for tobacco tax jurisdiction for interested First Nations in the FMA. First Nations receive fiscal powers associated with tobacco taxes levied on consumers, equivalent to tax levied by the applicable province.
- Aboriginal Resource Tax (ART) – First Nations are advancing the ART to ensure they are adequately compensated for resource projects on their traditional territories. The tax should be developed from tax room currently occupied by other governments; standardized and transparent; not subject to unilateral change; based on world bench mark prices; integrated into an improved fiscal relationship; and, administratively supported by the FNTC.
- Improved First Nations Goods & Services Tax jurisdiction – Includes bringing FNGST in the FMA as local revenues that can be pledged for financing debentures, FNGST legislation recognizing FMA as optional law-making authority for FNGST laws, lifting the three-product moratorium and including cannabis as a fourth product, restructuring revenue sharing elements to support improved fiscal relationship & facilitating more debenture financing, and increased support from FMA institutions.
Increase Institutional Support – Create and expand other important First Nation institutions.
- First Nations Infrastructure Institute (FNII) – Create FNII within the FMA to help build more economically and fiscally sustainable infrastructure for interested First Nations.
- First Nations Statistics – Re-establish a statistics organization focussed on supporting a revenue based fiscal relationship.
- Tulo Centre of Indigenous Economics – Expand capacity development to support a First Nation public service that can implement FMA, FNLMA and other institutionally supported jurisdictions by expanding Tulo to support First Nation public service capacity development.
Summary of the Legislative Proposal to Create a First Nation Cannabis Tax Jurisdiction and Regulation Option
The federal government proposed the draft Cannabis Act (Bill C-45) in March 2017. In September 2017, they proposed a framework for a federal excise tax (to be shared with the provinces) to be implemented by amendments to the Excise Act, 2001. In both cases, First Nations jurisdictions were not considered.
The FNTC has been working with proponent First Nations to advance a First Nation cannabis tax option since March 2017. The FNTC made proposals about this option in April 2017 to the Minister of Justice and in August 2017 to the Department of Finance. Proponent First Nations have been seeking greater support for this option over the last several months.
On February 28, 2018 the Chief Commissioner made a presentation to the Senate Committee on Aboriginal Peoples who were reviewing Bill C-45 the Cannabis Act to suggest specific amendments to enable First Nation regulatory and tax jurisdiction. The proposal was well received by the Senate Committee and has gained positive support from interested First Nations. The FNTC advanced suggested wording for amendments to the Cannabis Act to create First Nation regulatory jurisdiction on March 16, 2018.
On May 8, 2018 the Chief Commissioner made a presentation to the Senate Standing Committee on National Finance regarding Bill C-74 Budget Implementation Act, 2018. Bill C-74 includes the proposed amendments to the Excise Act, 2001 that would create the federal excise tax on cannabis once it is legalized. As follow-up to the presentation, the FNTC provided specific amendments to Bill C-74 that would enable a First Nation excise tax on cannabis under the Excise Act, 2001. On June 6, 2018, in a letter sent from Health Minister Ginette Petitpas Taylor and Indigenous Services Minister Jane Philpott to the Standing Senate Committee on Aboriginal Peoples, the federal government committed to continued engagement and work with Indigenous communities to address and accommodate jurisdictional issues and to work with the FNTC on revenue sharing and taxation arrangements.
Overview of First Nation Cannabis Tax Option
The FNTC and proponent First Nations envision a First Nation cannabis tax and regulatory option that includes:
- First Nation cannabis excise tax jurisdiction and associated revenues.
- First Nation cannabis GST jurisdiction and tax revenues through the FNGST Act and the First Nations Fiscal Management Act (FMA).
- First Nations cannabis licensing regulation and fees.
- Possible First Nation cannabis provincial sales tax revenues through agreements with provinces.
- Harmonized First Nation cannabis regulatory frameworks to effectively implement these taxes.
Objectives of Proposed First Nation Cannabis Tax Option
The FNTC and proponent First Nations are seeking to achieve several broad objectives with their amendment proposals. Achieving these objectives will require amendments to the FMA, Excise Act, 2001, Cannabis Act (Bill C-45) and FNGST Act. In general, these amendments provide a framework to support an improved jurisdiction-based fiscal relationship and recognize and effectively implement First Nations government jurisdictions within the federation.
- First Nations Fiscal Management Act (FMA) Amendments – Provides an efficient and effective option for First Nations to implement fiscal powers associated with cannabis excise tax, FNGST and licensing (and associated fees). The amendments would also enable efficient revenue collection mechanisms (possibly parallel to the FNGST framework under which Canada acts as an agent for the First Nation) and allow interested First Nations to generate revenues to support health, education, infrastructure and regulatory requirements associated with cannabis manufacturing, distribution, sales and consumption on First Nations lands.
- Excise Act, 2001 Amendments – Enables the First Nation cannabis excise tax through FMA law-making and administration agreements between Canada and First Nations. The proposed FNTC amendments for the Excise Act, 2001 were originally proposed for Bill C-74, Budget Implementation Act. Bill C-74 set out amendments to the Excise Act, 2001, Excise Tax Act and other legislation to implement the new federal excise duty framework for cannabis in coordination with the Cannabis Act. In Bill C-74, amendments to the Excise Act, 2001 Schedule 7, the federal government is establishing its duty at 25% of the C$1 per gram or 10 per cent excise duty rate as per their agreement with the provinces. The provinces are able to coordinate the implementation of their portion of the excise tax through a coordination agreement with the federal government. Bill C-74 was passed by the House and the Senate and received Royal Assent on June 21, 2018. Future changes related to the excise framework will be through the Excise Act, 2001, a future Budget Implementation Act or possibly other federal legislation specific to First Nation cannabis excise tax jurisdiction.
- Cannabis Act (Bill C-45) Amendments – Provides First Nation regulatory powers for cannabis tax and ensures regulations are coordinated efficiently and potentially harmonized with other governments. These amendments will provide options for First Nations to create regulatory frameworks on their lands for cannabis parallel those implemented by the provinces. In this regard, it is anticipated that First Nations may choose to tie into and apply certain aspects of provincial frameworks on their lands, for administrative efficiency.
- FNGST Act Amendments – Restores and enhances the option for collecting FNGST on specific products (fuel, alcohol, cannabis and tobacco – FACT tax). It enables a harmonized cannabis FNGST for interested First Nations and allows First Nations to make FNGST laws under the FMA. This includes making FNGST revenues local revenues and providing First Nations an option to associate exclusive service responsibilities and jurisdictions to these independent local revenues using the FMA framework.
Next Steps
Interested First Nation communities are encouraged to contact the FNTC for more information or to work with the FNTC to express support for First Nation cannabis jurisdiction and these proposed amendments to the provincial and federal governments.
Tulo student profile: Annamarie Demchuk
Annamarie (Morin) Demchuk, class of 2018 valedictorian, Enoch Cree Nation tax administrator, is a member of the Enoch Cree Nation located just outside the city of Edmonton, AB. She has a strong background in education and business and holds an MBA. Anna strongly believes in lifelong learning, having recently graduated from the Tulo Centre with a Certificate in First Nation Tax Administration. She was named class valedictorian by her fellow cohort members and was proud to walk hand-in-hand with her peers during the graduation ceremony. Anna is also currently enrolled in the Tulo Centre’s brand new Applied Lands Management certificate program and is on her third course out of the eight courses required to graduate from that certificate program.
Clearing the Path recently had the opportunity to sit down with Anna to learn more about her experience in the First Nation Taxation certificate program.
How did you first learn about the Tulo centre and its programs?
I became aware of the Tulo Centre and the FNTC many years ago. My brother Don, who was the CEO for Enoch Cree Nation’s economic development department at the time, had a vision to ensure we had a complete department with a focus not only development for our nation, but also some missing pieces for us to move forward with, such as taxation, infrastructure and planning. At that point, we began our journey to learn as much as we could to ensure proper development for our nation.
Enoch was very progressive in the 70’s and was actually one of the first communities to implement taxation under section 83 of the Indian Act. Later, the First Nations Fiscal Management Act (FMA) passed royal assent and the FNTC was created to develop a thorough taxation regime that could be used by all First Nations in the country to exercise their rightful jurisdiction with a taxation regime.
How does your experience at Tulo relate to your work at Enoch?
The taxation program at Tulo has given me more insight and a strong educational foundation to ensure that we’re fully implementing all jurisdictional powers available to us through the FMA. For example, in learning about revenue options available under the FMA and in working with the FNTC, our nation became the first in Canada to receive approval to recover payments-in-lieu-of-taxes (PILTs) for an RCMP building located on our lands.
Enoch is adjacent to the City of Edmonton in a situation very similar to that of Westbank First Nation and the City of Kelowna. Enoch and Westbank met several times to exchange knowledge and information. Through those visits, Enoch decided they could develop a better tax system with the help of the Tulo taxation program. I had been working in our tax department with our legal counsel since 2010 implementing taxation through s 83 of the Indian Act. Then in 2014, we decided we wanted to join the FMA so at that time, our former leadership enacting a BCR to be scheduled to the FMA, and that felt like the most opportune time to take the First Nation Taxation certificate program.
Prior to taking the program, I was doing things the hard way where I was developing my own drafts of laws and going through a lawyer and paying their legal fees but with First Nations Tax Commission, they have already went through all this stuff and have made templates, standards and samples available so it saves you so much in time and legal fees. I thought that was really helpful.
We’ve built up Enoch’s tax regime and now within two years, our tax revenues and the services we are able to provide are comparable to our reference jurisdiction, which is the City of Edmonton. It’s given us a lot of confidence to know we can do this. It’s very powerful.
What has been the most valuable aspect about the program for you so far?
While at first I was a little afraid to go back to school; in the end I am very glad I did. A valuable learning experience for me has been that you are never too old or too educated to go back to school. I have learned so much more about implementing a comprehensive tax regime for Enoch with taxation laws that have to be abided by regardless of what elected leadership is in. New leadership every two years can create instability and uncertainty in many communities, but now we at least have our tax laws in place that provide procedures, transparency, and proper accounting controls to ensure taxation revenues will be spent in a manner consistent with our laws. Our current leadership is proud of me for completing the taxation course, with honours, and is grateful for the growth taxation has provided to our community. We now have comparable tax rates to our reference jurisdiction, the City of Edmonton, which is because we’ve done our due diligence and taken the time to fully understand the taxation regime. This is a result of the education I gained from Tulo that provided me invaluable taxation knowledge and experiences.
Another aspect I appreciated is that Tulo brings students together (both First Nations and non-First Nations) from many different provinces all over Canada. Through the cohort model, we are able to develop long-term friendships, share many of our concerns, similarities, and give each other advice, if asked and needed.
How does that taxation fit into your community’s future?
Enoch’s taxation regime will help us ensure that as we develop, we have proper property taxes for commercial and residential developments. As we grow, we have learned that tax revenues are so important. Those revenues can help fund capital infrastructure projects and make your community a better place to live in today, and more importantly for our future generations to thrive.
Do you have any final thoughts?
I see taxation as an incredibly helpful tool to empower many bands to take control of their jurisdictional powers and help their communities.
I am very grateful to all of the people involved in the overall development of the Tulo programs. I would like to also thank our previous leadership at Enoch, along with Ernest Jack at Westbank, and Trenton Paul at FNTC for their support and encouragement for Enoch to become scheduled to the FMA and work with the FNTC. Through their support, Enoch has been empowered to understand our tax regime better and fully implement it as a result of the Tulo program.
“Information and Education is powerful, if used the right way” – HIY HIY
CLEARING THE PATH: NEWS & SUCCESS STORIES
FNTC and Southern Chiefs Organization sign MOU
The First Nations Tax Commission (FNTC) and the Southern Chiefs Organization (SCO) signed an MOU on September 18, 2019 in Winnipeg, Manitoba; as part of the Chiefs-in-Summit meeting, to formalize a partnership to work on developing a tax framework that will lead to more self-governance. The MOU was signed by SCO Grand Chief Jerry Daniels and FNTC Chief Commission Manny Jules.
“Business is happening all around us and we are not involved. They are operating in our territories and should be paying a tax. This agreement allows the SCO to access the FNTC’s expertise to help facilitate investment in our communities,” said Grand Chief Daniels.
The FNTC first began working with the SCO in the fall of 2018, and this MOU formalizes their working relationship.
“The FNTC, through this MOU, is committed to working with the Southern Chiefs Organization, in a cooperative and mutually supportive manner, to help grow SCO First Nation economies, jurisdictions and fiscal powers and establish an improved First Nation fiscal relationship,” said Chief Commissioner Jules.
This MOU establishes a work plan and strategy including:
- Developing a taxation framework
- Training for designated SCO staff at the Tulo Centre of Indigenous Economics
- Increase economic benefits before lands are added to First Nation jurisdiction
- Maximize fiscal benefits through efficient ATRs
- Infrastructure capital and financial planning
- Implement FMA powers
- Work with other governments
- Work with other FMA institutions
The SCO represents 34 First Nations in Southern Manitoba. The SCO was established by the Chiefs of Southern Manitoba to protect, preserve, promote and enhance First Nation’s people’s inherent rights, languages, customs and traditions through the application and implementation of the spirit and intent of the Treaty-making process.
Update from BC Assessment: Two Important changes to Vancouver Island First Nations for 2019
Mobile Home Assessments
Leading up to the preparation of the 2019 First Nation assessment rolls, BC Assessment conducted a review of all Mobile Home assessments on Vancouver Island. This review included verification of all existing mobile home improvements using both aerial imagery and on-site inspections, and a review of the land assessments for those homes, including research of comparable fee simple sales of mobile homes off reserve. The result was significant increases for mobile home assessments.
This assessment review was necessary because the 2018 Assessment Review Boards for both the Songhees Nation and the Tsawout First Nation indicated that BC Assessment should be using the same approach to valuation for mobile homes as it uses for other residential properties. While land assessments for single family dwellings located within these First Nation jurisdictions were similar to the assessments of comparable property assessments off reserve, the Board noted that land assessments of mobile home occupiers were lower and that this resulted in inequity in the assessments. In their decisions, the Assessment Review Boards found that BC Assessment should be using a direct comparison approach when valuing mobile homes, and strongly urged the Assessor to correct the mobile home assessments for the 2019 Rolls.
The assessment increases were communicated to the mobile home occupiers through a Pre-Roll Letter delivered in early December 2018, followed by the formal Assessment Notice in early January 2019. BC Assessment recently held taxpayer information meetings at both the Songhees Nation and the Tsawout First Nation.
BC Assessment is currently responding to inquiries from individual mobile home occupiers on Vancouver Island. BC Assessment expects numerous reconsideration requests and also anticipates appeals resulting from the increase in assessments. BC Assessment will provide an appraisal report to the appropriate Assessment Review Boards in defence of each appeal.
New Assessments for Billboards
BC Assessment conducted a Billboard Assessment Review that included identifying all existing billboards and conducting the land and improvement assessments for these occupations. This project was contemplated for a number of years, during which time BC Assessment researched the best assessment methodology to use. BC Assessment has implemented both a direct comparison and an income approach to valuation in order to assess the land on which billboards are located. This required extensive research into both off reserve comparable sales and lease documentation available on reserve. The billboard improvements have been assessed using a depreciated cost of replacement approach. It is important to note that BC Assessment is assessing the occupation of these lands and improvements and not the value associated with an advertising business.
Leading up to the final delivery of the 2019 Assessment Notices, BC Assessment notified affected First Nations and the billboard operators. Considering the unique nature of these assessments, BC Assessment expects that there may be appeals.
Moving Forward
BC Assessment is hopeful that both these initiatives will be met with success when any appeals are heard by the appropriate Assessment Review Boards and their decisions are delivered. BC Assessment is currently considering expanding these changes to all other First Nation customers throughout the Province and will plan accordingly. An important part of that plan will include
communication with property occupiers and each affected First Nation. Success will depend on open lines of communication between BC Assessment and the affected First Nations, including provision of the necessary information that assists BC Assessment in correctly creating the annual assessment rolls. For the Billboard Assessment Review, BC Assessment depends heavily on information provided by the First Nation, and asks that all of its FMA and Indian Act customers obtain lease documentation for billboard occupations and send that information to BC Assessment as soon as possible.
For more information on the assessment or mobile homes, or to provide billboard information, please contact BC Assessment at firstnations@bcassessment.ca.
Understanding Assessment of First Nation Lands
Understanding Assessment of First Nation Lands under the First Nations Fiscal Management Act and section 83 of the Indian Act.
First Nations contract with qualified, independent assessors to assess the leases, licenses and other occupations of their lands (generally referred to as “interests in land”). Over the past 30 years, a national approach to assessment of these interests in land has developed. To understand the approach and the reasons for the approach, it is important to understand the key elements of First Nation taxation systems.
How are First Nations Lands different from other land in Canada?
First Nation lands are “reserve” lands, the title to which is held by the Government of Canada for the use and benefit of the First Nation. This means that reserve lands do not have titles that are registered in the provincial land title office, and that no one can own a fee simple interest in the reserve lands. Even the First Nation itself does not have a fee simple interest in the land.
What types of interests in land exist on reserve lands?
There are different ways that non-members of the First Nation may occupy reserve lands. The most common way is through a lease either with a member of the First Nation or with the First Nation itself. Leases can range from short term, such as 10 years, to long term, usually up to 99 years. Leases can be pre-paid for the term or have annual payments with periodic rent reviews. It is common for different types of leases with varying terms to exist on a single reserve at any given time.
There may also be short or long-term licenses of occupation, permits to occupy, or rental agreements, and there may also be simple occupations of reserve lands without any legal documentation.
What interests in land are taxable on reserve lands?
Provincial property tax systems generally levy taxes on the fee simple interest of a property, and it is the owner of the fee simple interest who is liable for the taxes. Because there are no fee simple interests in reserve lands, a different approach is necessary.
First Nation property tax systems levy taxes on occupiers of reserve lands, regardless of the nature of the occupation. This means that occupiers of reserve lands, whether they hold a lease, license, permit or simply occupy the land, can be liable for taxes. In this sense, the taxation is on the occupation of the land, and not related to the specific way that the person occupies the reserve lands.
Occupations can be for a range of uses, including residential, commercial, industrial, agricultural or utility. The full range of occupations can be taxable, just as they are off reserve.
How are occupations of reserve lands assessed?
Where provincial property tax is levied on the fee simple interest, the province assesses the value of the fee simple interest. Although the specific rules and approach vary among the provinces, generally the objective is to determine the market value of the property.
A common approach to determine market value is the sale price of the property on the open market. Some provincial systems also have rules for assessing non-fee simple interests that are taxable, including leases, licenses and other occupations. Where a person is occupying Crown land (whether by lease, license or otherwise), that person’s occupation is taxable, and the provincial assessment legislation directs the assessor to assess the occupation based on the full market value of the property as though it were held in fee simple by the occupier.
First Nations across Canada have adopted this approach to assessment of occupational interests in their reserve lands. On reserve lands, it is the First Nation’s property assessment law which governs how the assessor must assess each interest in land, as provincial assessment legislation does not apply. The approach is reflected in each First Nation’s property assessment law, which generally direct the assessor to assess each interest in land as though it is held in fee simple off reserve. It is “off reserve” because there is no fee simple interest in reserve land, there tends to be a lack of comparable data on reserve lands, it avoids issues of reserve land valuation, and it provides for a similar tax burden to off reserve properties.
Why is this approach the best assessment approach for First Nation property tax systems?
There are several reasons why this approach is used and why it makes sense for First Nation property taxation systems.
- The approach is used provincially for occupational interests and is familiar to taxpayers.
- The approach enables assessors to use the same rules for assessment that are used provincially, which are based on fee simple assessments. This means the assessment process does not require new and different rules, has comparable properties, and is cost effective to implement.
- The approach ensures that tax revenues do not depend on whether the occupation is under a lease, license or other arrangement or on the time remaining on the occupation. The assessed value and proportional share of taxes for a class of property will be the same as off reserve lands, whether a property is held under a lease or a license or whether that tenure is short or long term. This ensures a similar distribution of tax liability as is achieved on non-reserve lands.
- Using an approach that is similar to the system used off reserve enables First Nations and their taxpayers to compare their annual tax rates to adjacent non-reserve jurisdictions.
How are taxes determined on reserve lands?
The method for determining taxes on reserve lands is the same as for properties on non-reserve lands. The First Nation sets annual tax rates for each property class (e.g. residential, commercial etc.). The applicable tax rate is multiplied by the assessed value of the property to create a tax bill. First Nation tax rates are similar, and in many cases identical, to those of adjacent governments. Using a similar assessment method means that taxpayers pay similar amounts to amounts paid off reserve.
30th Anniversary of Bill C-115
This year marks the 30th Anniversary that Bill C-115, better known as the “Kamloops Amendment”, received Royal Assent.
Our ancestors and leaders have fought hard for our jurisdiction. It is precious. We must assert it. We must protect it and we must continue to clear the path for others.
– Chief Commissioner Jules
This indigenous-led amendment to the Indian Act made it possible for First Nations to begin implementing property taxation, significantly increasing revenue options and expanding jurisdiction. While the step taken in 1988 is of historical significance, it is important to remember that the restoration of First Nation tax jurisdiction did not start there. In 1875, the Mohawks of Tyendinaga attempted to implement a property tax system but were turned down by the Department of Indian Affairs. Later, in 1927, the ability for First Nations to raise revenues was removed. Progress took a long time and and a lot of effort from many dedicated individuals.
In 1988, Bill C-115 created First Nation property tax jurisdiction. The Supreme Court of Canada stated in 1995 that First Nation tax jurisdiction was “an inherently governmental power”, and it wasn’t until 2005 that First Nations were able to formalize and expand their tax jurisdiction with the First Nations Fiscal Management Act.
Since that time, First Nation communities have generated over $1 Billion in cumulative tax revenues and have established new jurisdictions over revenues such as development cost charges, taxation for the provision of services and business activity taxes.
First Nation Cannabis Jurisdiction Update: June 2018
The First Nations Tax Commission (FNTC) and proponent First Nations have been working towards cannabis tax jurisdiction over the past year. This has included extensive legal and policy research, discussions and work with many First Nation proponents and advancement of a cannabis tax jurisdiction proposal at the FMA/FNLMA national meeting in May 2018 (350 attendees from over 160 First Nation communities). The FNTC has also advanced the proposal to several departments in the federal government and to the Senate. Some First Nations have also been active in advancing cannabis tax proposals to their provinces and to Canada.
It is important to note this cannabis proposal should be considered as part of a broader agenda to implement First Nation jurisdiction for the many First Nations using the First Nations Fiscal Management Act (FMA) and First Nations Land Management Act (FNLMA) legislative frameworks.
Bill C-45 Progress
- March 2017 – The federal government introduced the Cannabis Act (Bill C-45). First reading of Bill C-45 in the House of Commons was in April 2017.
- September 2017 – The Department of Finance proposed changes to the Excise Act, 2001 to implement the cannabis excise tax – the higher of $1/gram or 10% of the sale price.
- December 2017 – Two-year agreement established between federal government and provinces that federal government would receive 25% of the excise tax revenues (capped at $100 million annually) with provinces receiving 75% plus any additional provincial taxes levied, such as those considered by Alberta and Saskatchewan.
- March 2018 – Second Senate reading of the Bill. After positive vote the Bill was sent to five different Senate committees for review, including the Standing Senate Committee on Aboriginal Peoples.
- Early June 2018 – 11 members of the Senate Committee on Aboriginal Peoples planned to support an amendment deferring Bill C-45, pending a report on government efforts to address the concerns of Indigenous communities. However, Health Minister Ginette Petitpas Taylor and Indigenous Services (ISC) Minister Jane Philpott sent a letter to the Committee promising a full report to Parliament in September and another within 12 months. Highlights of the letter:
- Committed $200 million over five years to enhance the delivery of addictions treatment and prevention services.
- Will work with First Nations on public education materials.
- Establishment of a special navigator service exclusively for Indigenous businesses seeking to become federal licensees under the Cannabis Act.
- Committed to continued engagement and work with Indigenous communities to address and accommodate jurisdictional issues.
- Committed to working with the First Nations Tax Commission on revenue sharing and taxation arrangements.
- June 7, 2018 – Result of the third senate vote on Bill C-45 was 56 / 30 in favour of legalization. The Bill was moved back to the House of Commons for deliberations on almost 50 proposed Senate amendments, including some more noteworthy ones such as:
- Allowing provinces to prohibit home cultivation of cannabis if they choose;
- More stringent restrictions on advertising on promotional clothing and items; and
- Penalties on young adults sharing cannabis with minors.
- Current Status – On June 18, the House made their decision on the Bill’s amendments, but because they did not agree to the amended Bill C-45 in its entirety, the Bill was sent back to the Senate after the House voted 205-82 to pass the amended Bill C-45. The House of Commons agreed to most of the amendments (27 plus 2 others amended), but denied 13 amendments, including providing the provinces and territories the power to ban home-grown cannabis, prohibiting producers from distributing branded merchandise, and setting up a registry for shareholders involved in cannabis companies. On June 19, the Senate voted 52-29 to accept the House’s position and agree to finalize the Bill. On June 20, Prime Minister Trudeau announced that online sales will begin shortly after Royal Assent and the retail system will begin on October 17, 2018, providing provinces 17 weeks to prepare. On June 21, Bill C-45 received Royal Assent and is now ready to be made into law.
Proposal
There are four rationales for the FNTC’s proposal on cannabis tax jurisdiction. First, cannabis tax revenues could be part of a more self-sufficient fiscal relationship for interested First Nations. Second, cannabis tax revenues could be used to address the health, education, infrastructure and regulation issues associated with cannabis legalization on First Nation lands. Third, comprehensive First Nation cannabis tax powers would reduce the potential for unregulated and untaxed grey market sales of cannabis on First Nations lands like the situation associated with tobacco. Fourth, recognition and implementation of First Nation cannabis taxation jurisdiction would provide a practical example of reconciling First Nation governments within Canada.
There are five distinct elements to the proposal to develop a First Nation cannabis tax jurisdiction option for interested First Nations, these include amendments to the FMA, Excise Act, 2001 (Bill C-74 Budget Implementation Act), Cannabis Act (Bill C-45), and FNGST Act.
- FMA – Enables First Nation option for cannabis excise tax, FNGST and licensing powers.
- Excise Act, 2001 – Federal government established excise jurisdiction through amendments to Excise Act, 2001 with Bill C-74. Amendment to Excise Act, 2001 enables First Nation cannabis excise tax jurisdiction.
- Cannabis Act – Enables First Nation regulatory powers and coordination with other governments.
- FNGST Act – Enables First Nation collection of GST on cannabis and include FNGST revenues as FMA local revenues.
- FNTC Support – The FNTC will work with interested First Nations to support communications, develop sample laws, provide training and build the necessary administrative capacity to implement cannabis tax jurisdiction.
For detailed information on these amendments and distinct elements of the cannabis proposal please see “Summary of the Legislative Proposal to Create a First Nation Cannabis Tax Jurisdiction Option.”
Next Steps
The FNTC will engage with ISC and the Department of Finance to follow up on the proposals submitted and the letter provided to the Senate related to cannabis tax jurisdiction and a new fiscal relationship. Interested First Nation communities are encouraged to contact the FNTC for more information or to work with the FNTC to express support for the further advancement of First Nation cannabis tax jurisdiction to the provincial and federal governments.
First Nation Cannabis Jurisdiction Proposal in Context
The First Nations Tax Commission (FNTC) and proponent First Nations have recently submitted several legislative amendment proposals about implementing First Nation cannabis regulatory and tax jurisdiction. The FNTC is seeking the implementation of these amendments; however, it is important to recognize these proposals should be considered as part of a broader agenda to implement First Nation jurisdiction for the many First Nations using the First Nations Fiscal Management Act (FMA) and First Nations Land Management Act (FNLMA) legislative frameworks.
The federal government has expressed its commitments to decolonization and transition to a nation-to-nation jurisdictional framework supported by an improved fiscal relationship. This is significant, as it has increased expectations and pressure to deliver. However, the key question is: what is the most effective way to realize these commitments and facilitate a sustainable jurisdictional transition from the Indian Act to First Nation government?
Discussion
The FMA institutions have been successful at facilitating a sustainable jurisdictional transition for taxation and financial management from the Indian Act to First Nation governments. This FMA success can be attributed to six qualities:
- First Nation led – Proposed changes are First Nation led and the experience, expertise and stability of the First Nation leadership is perhaps the most important contributing factor for success.
- Optionality – Proposed changes need to be optional and respect the right of self-determination to ensure a clear choice and commitment is made by participating First Nations.
- Legislative Framework – Changes must be supported by a legislative framework to facilitate an orderly transition from federal (or provincial) jurisdiction to First Nation jurisdiction.
- Institutional Support – First Nation institutions are a bridge to help First Nations assume jurisdiction. They provide standards, sample laws, certification, law review, templates, systems and support. As a result, they ensure there is an efficient and cost-effective transition from the previous Indian Act regulatory framework to the new First Nation regulatory framework. Stated differently, they reduce the switching costs from the old colonial system to the new First Nation one.
- Capacity – First Nation institutions support capacity development so First Nations can implement their jurisdictions in a way that supports better services and infrastructure, grows their economies and helps them generate more revenues to assume more jurisdictions.
- Revenue Generation – Changes that support economic development and generate revenues are more likely to be successful because they are more fiscally sustainable, and they provide a strong incentive to join the optional framework.
The success of the FMA framework and underlying qualities has been recognized through independent review and confirmed by the commitment to expand this framework in the most recent federal budget.
The FMA institutions and Lands Advisory Board hosted a national meeting of FMA and FNLMA First Nations on May 16th and 17th in Vancouver, BC. The purpose of the meeting was to showcase the success of these initiatives, present several new proposals to facilitate more First Nation jurisdictions, and to seize the federal commitment to transition from colonialism to First Nation jurisdiction. The meeting had over 350 registered participants from over 160 FMA and/or FNLMA First Nations. Most attendees commented that it was the best, most forward-looking and optimistic First Nation led meeting they had ever attended. A goal of the conference was to obtain broad based social license to proceed with proposals to expand the FMA / FNLMA frameworks. This goal was certainly achieved based on the comments, applause for the proposals and strong support voiced by participants during and after the conference. An overview of the agenda, presentations, videos and proposals can be found at www.fnleadingtheway.com.
Summary of the proposals advanced and supported by participants:
Grow current First Nation institutions – The FMA/FNLMA institutions have advanced several amendments to create greater certainty and increase the jurisdictional power of First Nations.
First Nations Tax Commission – Expand & clarify existing FMA fiscal powers: property transfer tax, business activity tax, accommodation tax and associated FNTC support through sample laws, standards, admin. support, coordination with other governments as necessary, and training.
First Nations Financial Management Board (FMB) – Improve federal transfer mechanism (10-year grants) without offsets to facilitate transition to a revenue based fiscal relationship supported by FMB certification.
First Nations Finance Authority (FNFA) – Enable First Nations to monetize their transfers in combination with other First Nation independent revenues to support FNFA debentures.
Lands Advisory Board – Expand and clarify FNLMA powers relating to Land Code voting threshold, First Nation enforcement powers, transfer of Indian monies upon successful Land Code vote, streamlined ATRs, land management jurisdiction and law making, and environmental assessments.
New Tax Jurisdictions – These new tax jurisdictions are part of the development of a revenue based fiscal relationship option for interested FMA First Nations. This includes providing an option for participating First Nations to associate exclusive service responsibilities and jurisdictions with these independent revenues using the FMA framework.
- Cannabis tax – First Nation cannabis tax jurisdiction option that means First Nations would obtain fiscal powers associated with cannabis excise tax and FNGST on cannabis sales. This requires amendments to the Cannabis Act (Bill C-45), FMA, Excise Act, 2001, and FNGST Act to advance a First Nations cannabis tax jurisdiction option.
- Tobacco tax – Option for tobacco tax jurisdiction for interested First Nations in the FMA. First Nations receive fiscal powers associated with tobacco taxes levied on consumers, equivalent to tax levied by the applicable province.
- Aboriginal Resource Tax (ART) – First Nations are advancing the ART to ensure they are adequately compensated for resource projects on their traditional territories. The tax should be developed from tax room currently occupied by other governments; standardized and transparent; not subject to unilateral change; based on world bench mark prices; integrated into an improved fiscal relationship; and, administratively supported by the FNTC.
- Improved First Nations Goods & Services Tax jurisdiction – Includes bringing FNGST in the FMA as local revenues that can be pledged for financing debentures, FNGST legislation recognizing FMA as optional law-making authority for FNGST laws, lifting the three-product moratorium and including cannabis as a fourth product, restructuring revenue sharing elements to support improved fiscal relationship & facilitating more debenture financing, and increased support from FMA institutions.
Increase Institutional Support – Create and expand other important First Nation institutions.
- First Nations Infrastructure Institute (FNII) – Create FNII within the FMA to help build more economically and fiscally sustainable infrastructure for interested First Nations.
- First Nations Statistics – Re-establish a statistics organization focussed on supporting a revenue based fiscal relationship.
- Tulo Centre of Indigenous Economics – Expand capacity development to support a First Nation public service that can implement FMA, FNLMA and other institutionally supported jurisdictions by expanding Tulo to support First Nation public service capacity development.
Summary of the Legislative Proposal to Create a First Nation Cannabis Tax Jurisdiction and Regulation Option
The federal government proposed the draft Cannabis Act (Bill C-45) in March 2017. In September 2017, they proposed a framework for a federal excise tax (to be shared with the provinces) to be implemented by amendments to the Excise Act, 2001. In both cases, First Nations jurisdictions were not considered.
The FNTC has been working with proponent First Nations to advance a First Nation cannabis tax option since March 2017. The FNTC made proposals about this option in April 2017 to the Minister of Justice and in August 2017 to the Department of Finance. Proponent First Nations have been seeking greater support for this option over the last several months.
On February 28, 2018 the Chief Commissioner made a presentation to the Senate Committee on Aboriginal Peoples who were reviewing Bill C-45 the Cannabis Act to suggest specific amendments to enable First Nation regulatory and tax jurisdiction. The proposal was well received by the Senate Committee and has gained positive support from interested First Nations. The FNTC advanced suggested wording for amendments to the Cannabis Act to create First Nation regulatory jurisdiction on March 16, 2018.
On May 8, 2018 the Chief Commissioner made a presentation to the Senate Standing Committee on National Finance regarding Bill C-74 Budget Implementation Act, 2018. Bill C-74 includes the proposed amendments to the Excise Act, 2001 that would create the federal excise tax on cannabis once it is legalized. As follow-up to the presentation, the FNTC provided specific amendments to Bill C-74 that would enable a First Nation excise tax on cannabis under the Excise Act, 2001. On June 6, 2018, in a letter sent from Health Minister Ginette Petitpas Taylor and Indigenous Services Minister Jane Philpott to the Standing Senate Committee on Aboriginal Peoples, the federal government committed to continued engagement and work with Indigenous communities to address and accommodate jurisdictional issues and to work with the FNTC on revenue sharing and taxation arrangements.
Overview of First Nation Cannabis Tax Option
The FNTC and proponent First Nations envision a First Nation cannabis tax and regulatory option that includes:
- First Nation cannabis excise tax jurisdiction and associated revenues.
- First Nation cannabis GST jurisdiction and tax revenues through the FNGST Act and the First Nations Fiscal Management Act (FMA).
- First Nations cannabis licensing regulation and fees.
- Possible First Nation cannabis provincial sales tax revenues through agreements with provinces.
- Harmonized First Nation cannabis regulatory frameworks to effectively implement these taxes.
Objectives of Proposed First Nation Cannabis Tax Option
The FNTC and proponent First Nations are seeking to achieve several broad objectives with their amendment proposals. Achieving these objectives will require amendments to the FMA, Excise Act, 2001, Cannabis Act (Bill C-45) and FNGST Act. In general, these amendments provide a framework to support an improved jurisdiction-based fiscal relationship and recognize and effectively implement First Nations government jurisdictions within the federation.
- First Nations Fiscal Management Act (FMA) Amendments – Provides an efficient and effective option for First Nations to implement fiscal powers associated with cannabis excise tax, FNGST and licensing (and associated fees). The amendments would also enable efficient revenue collection mechanisms (possibly parallel to the FNGST framework under which Canada acts as an agent for the First Nation) and allow interested First Nations to generate revenues to support health, education, infrastructure and regulatory requirements associated with cannabis manufacturing, distribution, sales and consumption on First Nations lands.
- Excise Act, 2001 Amendments – Enables the First Nation cannabis excise tax through FMA law-making and administration agreements between Canada and First Nations. The proposed FNTC amendments for the Excise Act, 2001 were originally proposed for Bill C-74, Budget Implementation Act. Bill C-74 set out amendments to the Excise Act, 2001, Excise Tax Act and other legislation to implement the new federal excise duty framework for cannabis in coordination with the Cannabis Act. In Bill C-74, amendments to the Excise Act, 2001 Schedule 7, the federal government is establishing its duty at 25% of the C$1 per gram or 10 per cent excise duty rate as per their agreement with the provinces. The provinces are able to coordinate the implementation of their portion of the excise tax through a coordination agreement with the federal government. Bill C-74 was passed by the House and the Senate and received Royal Assent on June 21, 2018. Future changes related to the excise framework will be through the Excise Act, 2001, a future Budget Implementation Act or possibly other federal legislation specific to First Nation cannabis excise tax jurisdiction.
- Cannabis Act (Bill C-45) Amendments – Provides First Nation regulatory powers for cannabis tax and ensures regulations are coordinated efficiently and potentially harmonized with other governments. These amendments will provide options for First Nations to create regulatory frameworks on their lands for cannabis parallel those implemented by the provinces. In this regard, it is anticipated that First Nations may choose to tie into and apply certain aspects of provincial frameworks on their lands, for administrative efficiency.
- FNGST Act Amendments – Restores and enhances the option for collecting FNGST on specific products (fuel, alcohol, cannabis and tobacco – FACT tax). It enables a harmonized cannabis FNGST for interested First Nations and allows First Nations to make FNGST laws under the FMA. This includes making FNGST revenues local revenues and providing First Nations an option to associate exclusive service responsibilities and jurisdictions to these independent local revenues using the FMA framework.
Next Steps
Interested First Nation communities are encouraged to contact the FNTC for more information or to work with the FNTC to express support for First Nation cannabis jurisdiction and these proposed amendments to the provincial and federal governments.
Tulo student profile: Annamarie Demchuk
Annamarie (Morin) Demchuk, class of 2018 valedictorian, Enoch Cree Nation tax administrator, is a member of the Enoch Cree Nation located just outside the city of Edmonton, AB. She has a strong background in education and business and holds an MBA. Anna strongly believes in lifelong learning, having recently graduated from the Tulo Centre with a Certificate in First Nation Tax Administration. She was named class valedictorian by her fellow cohort members and was proud to walk hand-in-hand with her peers during the graduation ceremony. Anna is also currently enrolled in the Tulo Centre’s brand new Applied Lands Management certificate program and is on her third course out of the eight courses required to graduate from that certificate program.
Clearing the Path recently had the opportunity to sit down with Anna to learn more about her experience in the First Nation Taxation certificate program.
How did you first learn about the Tulo centre and its programs?
I became aware of the Tulo Centre and the FNTC many years ago. My brother Don, who was the CEO for Enoch Cree Nation’s economic development department at the time, had a vision to ensure we had a complete department with a focus not only development for our nation, but also some missing pieces for us to move forward with, such as taxation, infrastructure and planning. At that point, we began our journey to learn as much as we could to ensure proper development for our nation.
Enoch was very progressive in the 70’s and was actually one of the first communities to implement taxation under section 83 of the Indian Act. Later, the First Nations Fiscal Management Act (FMA) passed royal assent and the FNTC was created to develop a thorough taxation regime that could be used by all First Nations in the country to exercise their rightful jurisdiction with a taxation regime.
How does your experience at Tulo relate to your work at Enoch?
The taxation program at Tulo has given me more insight and a strong educational foundation to ensure that we’re fully implementing all jurisdictional powers available to us through the FMA. For example, in learning about revenue options available under the FMA and in working with the FNTC, our nation became the first in Canada to receive approval to recover payments-in-lieu-of-taxes (PILTs) for an RCMP building located on our lands.
Enoch is adjacent to the City of Edmonton in a situation very similar to that of Westbank First Nation and the City of Kelowna. Enoch and Westbank met several times to exchange knowledge and information. Through those visits, Enoch decided they could develop a better tax system with the help of the Tulo taxation program. I had been working in our tax department with our legal counsel since 2010 implementing taxation through s 83 of the Indian Act. Then in 2014, we decided we wanted to join the FMA so at that time, our former leadership enacting a BCR to be scheduled to the FMA, and that felt like the most opportune time to take the First Nation Taxation certificate program.
Prior to taking the program, I was doing things the hard way where I was developing my own drafts of laws and going through a lawyer and paying their legal fees but with First Nations Tax Commission, they have already went through all this stuff and have made templates, standards and samples available so it saves you so much in time and legal fees. I thought that was really helpful.
We’ve built up Enoch’s tax regime and now within two years, our tax revenues and the services we are able to provide are comparable to our reference jurisdiction, which is the City of Edmonton. It’s given us a lot of confidence to know we can do this. It’s very powerful.
What has been the most valuable aspect about the program for you so far?
While at first I was a little afraid to go back to school; in the end I am very glad I did. A valuable learning experience for me has been that you are never too old or too educated to go back to school. I have learned so much more about implementing a comprehensive tax regime for Enoch with taxation laws that have to be abided by regardless of what elected leadership is in. New leadership every two years can create instability and uncertainty in many communities, but now we at least have our tax laws in place that provide procedures, transparency, and proper accounting controls to ensure taxation revenues will be spent in a manner consistent with our laws. Our current leadership is proud of me for completing the taxation course, with honours, and is grateful for the growth taxation has provided to our community. We now have comparable tax rates to our reference jurisdiction, the City of Edmonton, which is because we’ve done our due diligence and taken the time to fully understand the taxation regime. This is a result of the education I gained from Tulo that provided me invaluable taxation knowledge and experiences.
Another aspect I appreciated is that Tulo brings students together (both First Nations and non-First Nations) from many different provinces all over Canada. Through the cohort model, we are able to develop long-term friendships, share many of our concerns, similarities, and give each other advice, if asked and needed.
How does that taxation fit into your community’s future?
Enoch’s taxation regime will help us ensure that as we develop, we have proper property taxes for commercial and residential developments. As we grow, we have learned that tax revenues are so important. Those revenues can help fund capital infrastructure projects and make your community a better place to live in today, and more importantly for our future generations to thrive.
Do you have any final thoughts?
I see taxation as an incredibly helpful tool to empower many bands to take control of their jurisdictional powers and help their communities.
I am very grateful to all of the people involved in the overall development of the Tulo programs. I would like to also thank our previous leadership at Enoch, along with Ernest Jack at Westbank, and Trenton Paul at FNTC for their support and encouragement for Enoch to become scheduled to the FMA and work with the FNTC. Through their support, Enoch has been empowered to understand our tax regime better and fully implement it as a result of the Tulo program.
“Information and Education is powerful, if used the right way” – HIY HIY