In December, the federal and provincial governments announced a deal to split the excise tax from cannabis sales 75 per cent to 25 per cent in favour of the provinces. Conspicuous in its absence was mention of First Nation cannabis tax jurisdiction.

First Nation cannabis tax jurisdiction is an opportunity to use First Nation tax jurisdiction to address the potential grey market manufacture and sale of cannabis, as has happened with tobacco. Grey market sales of tobacco in Ontario and Quebec cost governments billions in lost tax revenues each year. Restoring our tobacco jurisdiction and recognizing our cannabis jurisdiction provides First Nations with a fiscal benefit to our communities and begins the reconciliation process.

The federal government has committed to a new First Nation fiscal relationship based on First Nation fiscal powers to implement First Nation jurisdictions, such as cannabis regulation. However, the lack of First Nation inclusion in the cannabis tax framework is a missed opportunity for the federal government to demonstrate its commitment to a nation-to-nation relationship that reconciles First Nation governments into the federation.

Over a century ago, First Nation communities understood and paid taxes. The Chinook trade language word for it was “taksis,” and “taksis” helped build community projects like bridges and churches, enabled us to hire lawyers, and send our Chiefs to England to represent us.

The erosion of First Nation tax jurisdiction began with a series of policies, regulations and legislation between 1883 and 1927.  First Nation sun dances and potlaches were banned. First Nation governments were prohibited from raising revenue through property and railway taxation. The policy culminated in the 1927 Indian Act Amendment, which prohibited First Nations from hiring lawyers to defend their claims.

In 1951, this policy was reversed but the damage was done. All tax jurisdiction had been assumed by other governments and we have struggled to restore our jurisdiction ever since.  In 1968, the eight Ontario First Nation signatories of the Indian tax grievance committee said, “It is submitted that … the band collect taxes from their own lands [as] a progressive step towards creating self sufficient Bands”.

It wasn’t until the 1988 First Nation led change to the Indian Act that First Nation property taxation began to grow in earnest. During that time, we learned the four-part formula for restoring First Nation tax jurisdiction. First, proposed taxation legislation must be First Nation led. Second, it must be optional to respect our right to self-determination. Third, our jurisdictions must be supported by First Nation institutions. Finally, there must be a connection between our taxes and our expenditures, to create a jurisdiction based fiscal relationship.

In 2005 this formula was used in the First Nations Fiscal Management Act (FMA) that further expanded First Nation fiscal powers and allowed us to lever revenues to issue debentures. It provided a mechanism to establish greater fiscal accountability and transparency.

The FMA worked. Today, 220 First Nations have opted into the FMA, making it the most successful Indigenous legislative initiative in Canadian history. Participating First Nations have generated over $1 billion in tax revenues. The First Nations Finance Authority has issued $400 million in debentures and almost 100 First Nations have received financial management certifications by the First Nations Financial Management Board.  First Nations using the FMA have generally seen greater economic development and higher standards of community well-being.

The FMA provides the legislative framework to implement cannabis tax jurisdiction for interested First Nations. Optional FMA cannabis tax jurisdiction will provide independent revenues to support costs of regulation on reserve and improve Indigenous services and infrastructure. FMA institutions will help interested First Nations implement their cannabis tax jurisdiction. It will be the next step of a jurisdiction based fiscal relationship.

Participating First Nations would generate sufficient community fiscal benefits to prevent a grey market. They could regulate cannabis on their lands and assume more responsibilities over community health and infrastructure, and begin to reconcile these jurisdictions with those of other governments.

This is exactly what I believe the Prime Minister and the Minister of Justice meant when they promised real reconciliation. We continue to advocate the expansion of the FMA to include cannabis tax jurisdiction. I hope all Canadians will support us.

C.T. (Manny) Jules, Chief Commissioner,
First Nations Tax Commission

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Chief Commissioner C.T. (Manny) Jules appearing before Standing Senate Committee on Aboriginal Peoples regarding Bill C-45

In the news:

Feds must allow First Nations to tax, regulate cannabis

Chief Commissioner C.T. (Manny) Jules discussing First Nation cannabis tax jurisdiction on CBC’s Power & Politics (VIDEO – segment begins at 1:33:38)

ON Point with Alex Peirson: First Nations would like a cut of cannabis tax (RADIO)

First Nations fighting for cut of cannabis tax after legalization (RADIO)

First Nations demanding a cut of cannabis tax after pot legalization

BONOKOSKI: First Nations’ chief taxman wants control of the pot tax

In 2017, the FNTC celebrated 10 years of operation. To honour the anniversary, Commissioners reflected on progress over the last decade.

Healthy, vibrant communities need consistent access to energy, sanitation and clean water, as well as reliable transportation and communication. Governments invest in infrastructure to create lasting economic, social and environmental benefits for its citizens. In turn, citizens contribute to the growth, progress and innovation of their communities.

Many First Nation communities are built with substandard, and in some cases, non-existent infrastructure. The lack of basic needs, at worst, puts the health and safety of the community at risk. At best, it hinders the ability of the community to thrive and prosper.

While funding is available for infrastructure projects, it is limited and layers of bureaucracy and planning gaps often lead to delays in projects. As a result, First Nation infrastructure takes longer to build, costs more to build and does not last as long as municipal government infrastructure. It is not designed to be economically or fiscally sustainable and as result has much lower environmental and health outcomes.

A number of federal programs and initiatives have been developed to address these symptomatic gaps. For example, in the last two budgets, the federal government has substantially increased indigenous infrastructure funding and support. These additional federal resources and efforts are welcome and necessary. They will certainly provide short term improvements to some community infrastructure.

However, unless this additional revenue is supported by a comprehensive proposal to deal with the root causes of the infrastructure gaps – indigenous infrastructure ownership and jurisdiction – it is unlikely that this improved indigenous infrastructure will be fiscally, environmentally, or economically sustainable.

First Nations require an option to close these gaps and implement and protect their infrastructure jurisdiction. The First Nations Fiscal Management Act (FMA) and institutions provide a successful model to address some of these infrastructure challenges and implement jurisdiction.

Almost 230 First Nations are part of the FMA because it closes many infrastructure financing gaps and supports and protects their jurisdiction. The FMA institutions and proponents are proposing the creation of FNII as an additional FMA institution to implement and protect infrastructure jurisdiction for interested First Nations.

FNII will build on the successful framework used by the FMA institutions to help interested First Nations build more sustainable infrastructure faster.

The development of the FNII proposal is guided by the following principles:

First Nation led
The conception and design of the FNII has been and will continue to be guided, directed and controlled by First Nations. The FNII will be a First Nations-led institution that will be accountable to participating First Nations. 

Optional
FNII will be optional and respect the right of self-determination. Interested First Nations would opt into FNII services as with the FMA opt-in framework.

National
FNII will be a national institution with offices across Canada. As a national institution, FNII will work with proponent communities to develop standards and procedures to ensure consistent service quality and efficiency across all regions. A national FNII is necessary to help implement and support infrastructure jurisdiction and move beyond working with INAC for interested First Nations. A national FNII in the FMA can help interested First Nations secure long-term stable infrastructure transfers. 

Sustainable infrastructure
FNII will focus on implementing infrastructure jurisdiction and supporting infrastructure and housing projects that increase economic development and independent revenues and raise environmental sustainability for interested First Nations. FNII will work with and support existing and new First Nation infrastructure institutions (local, regional, or national) and other possible partners that can help participating First Nations build more sustainable infrastructure. 

FNII will be an FMA institution
FNII will help participating First Nations assume jurisdiction over the full infrastructure lifecycle – planning, design, financing, construction, operation, maintenance and replacement. Like the other FMA institutions, it will provide standards, sample laws, training and templates to lower the costs and time of infrastructure. FNII will support those First Nations already in the FMA by helping them build and maintain infrastructure that grows their economies and revenues, faster and more cost effectively. It will help First Nations interested in joining the FMA by helping them access long term financing to build necessary infrastructure sooner and at a better price.

The FMA institutions and proponent First Nations are currently working to advance this initiative, sharing information and discussing the issues with interested First Nations, and seeking support from more potential proponents to help make FNII a reality.

Federal Minister of Justice: “We all need to continue to be strong proponents of change”

The FNTC has long championed the notion that a new fiscal relationship for First Nations should be built on a foundation of clear government powers and authorities that are not financed by transfers, but are instead financed by a core of clear revenue authorities.

On October 13, 2017, as part of regional engagements lead by a member of the AFN Chief’s Committee on Fiscal Relations, Chief David Jimmie of Squiala First Nation, First Nations in BC participated in a second province-wide strategic dialogue session on defining a new fiscal relationship for First Nations and the Crown, building on the work, input and information shared at the initial dialogue session hosted by the First Nations Summit in June 2017. The meeting was also open to delegates from across Canada.

Many First Nations leaders delivered presentations to delegates on working together to create substantive change for Indigenous communities.

Harold Calla of the First Nations Financial Management Board reflected on the problem facing First Nations in Canada, “What happened in colonization is that we were marginalized and frozen in time. We were not allowed to evolve and build the capacities as other modern-day governments have. The majority of our communities are only familiar with transfer payment systems and as service delivery vehicles. What is thought of as self-government is actually self-administration of programs and services.”

FNTC’s Chief Commissioner C.T. (Manny) Jules shared his perspective, “If we’re going to have a level playing field as I said last June, we want the same deal that the federal and provincial governments gave themselves at the time and at the beginning and the birth of this country.”

“They divided up the land, put us on reserves and proceeded to exploit all the bounty of the land. And what do we do? We ask for transfers. Transfers are a nice way to say we’re dependent on somebody else. What we want is ultimately our own jurisdiction that extends beyond the postage stamp reserves that we live in. We have to be able to have our own jurisdiction.”

“We have all the differences like communities where I come from and other communities that are remote. How do we begin to overcome those differences? Tecumseh, one of my cultural heroes, said a single twig breaks but a bundle of twigs is strong. And that’s what we’ve been able to demonstrate here in British Columbia. Without the involvement of the Union, the Summit and the BCAFN, the whole approach to fiscal relations isn’t going to happen. We have to do it together.”

“For the smaller communities, national institutions are critically important because what we can do as a national institution is create standards and models that you would be able to assume at the local level. Not taking away any of your jurisdiction because I firmly believe all of our institutions are designed to facilitate your jurisdiction as opposed to the jurisdiction of the institutions.”

Canada’s Minister of Justice and Attorney General, Jody Wilson-Raybould delivered a keynote address, stating, “Everyone in this room shares the same values and we all have the same goal of ultimately improving the lives of our people back home in our communities.”

“We are arguably in the best position that we could be, the best position that we have been in in a long time, perhaps forever, to do something truly transformative about advancements of rights and on a scale that we haven’t previously known.”

“Moving forward, what we do together in partnership over the coming months and years will continue to lay the groundwork for truly changing the way Canada is governed, and the place of Indigenous people and our nations within Canada”

“We are in this place today because of all of you, because of your vision and the work that so many of you have done to get us to this point. It has been through your tenacity, your ingenuity, your leadership that many First Nations have already been able to begin to break through the most insidious of fiscal and government’s constraints that have inhibited Indigenous growth and potential and for you to have taken significant steps on the road to self-determination and self-government. But as we all know, more needs to be done.”

“If I can be so bold, and in my mind, today’s conference is all about planning, about being strategic, being progressive, being the trailblazers I know you all are. As Manny Jules likes to say, being on the bleeding edge of change. I think we can say we are no longer on the edge, rather we are now in the centre of the transition our country is going through to fully implement UNDRIP, to give meaning to s. 35 and to implementing the inherent right of self-government, creating opportunity and supporting positive change in communities.”

“We all need to continue to be strong proponents for change. To continue to be courageous and take bold steps.”

At the end of November, Chief Jimmie completed a report summarizing the input gathered from the regional engagement sessions and presented it to the Assembly of First Nations Special Chiefs Assembly.

In his presentation to the chiefs in assembly, Chief Jimmie said, “As part of the chief’s committee on fiscal relations, we’ve opened the door to dialogue amongst our people. Throughout the process, each of our provinces and territories had a responsibility to go out to the communities and do some regional engagement.”

“In BC, we’re looking at jurisdiction and we’re looking at expanding tax powers, those were common themes we heard. We’re looking at these long-term commitments on funding and transfers. But how do we enshrine those in legislation? That’s the kind of commitment and true nation-to-nation relationship that we’re looking for.”

BC First Nations will continue to advance the fiscal principles they have adopted as the foundation for a new fiscal relationship. First Nations, the fiscal institutions and other First Nations organizations are committed to working together on options and recommendations.

The First Nations Tax Commission will continue to advocate for a fiscal relationship that is based on First Nation revenue jurisdiction.

July 2017 marks the FMA institutions’ 10th year of operations for the First Nations Fiscal Management Act (FMA). The First Nations led FMA has been instrumental in establishing jurisdiction and creating new fiscal resources for First Nations. It has helped redefine the relationship between First Nations and other governments.

The Act enables First Nations to participate more fully in the Canadian economy, become less dependent on government services and improve local economies through increased employment and business development.

The First Nations Fiscal and Statistical Management Act (FSMA) came into force with all-party support in 2006 establishing the three fiscal institutions: The First Nations Finance Authority (FNFA), the First Nations Financial Management Board (FMB), the First Nations Tax Commission (FNTC) and the First Nations Statistical Institute (FNSI). The Act was amended to form the FMA when FNSI ceased operations.

To mark the operational milestone, the institutions are planning a national meeting for all FMA First Nations in the spring of 2018. The meeting aims to showcase the successes participating FMA First Nations have experienced. It will also create a platform to engage in dialogue, re-establish the vision for the future of the FMA and consolidate support for expanded jurisdiction and other important legislative and operational changes.

Since 2007, 220 First Nations have voluntarily joined the FMA. Participating First Nations have used the tools created by the FMA to bring investment to their lands, improve the values of property, create employment opportunities, develop own source revenues and improve local services, housing and infrastructure.

FNTC Chief Commissioner C.T. (Manny) Jules reflected on the impact of the FMA:
“In November 1969, as a 17-year-old I attended a meeting where all but four First Nation communities in British Columbia came to Kamloops to reject the proposed federal assimilation policy known as the White Paper. I listened as our leaders spoke of their vision to restore our nations, build our economies, generate our own revenues, and become self-reliant governments within Canada. Working with First Nations from across the country, together, we have restored our jurisdiction, built Indigenous institutions and created strong, supportive legal and administration systems.”

“Tax jurisdiction is the foundation for a system of Indigenous government that allows our communities to prosper. It allows us to restore our jurisdictions. It means we can design policies and programs and build competitive infrastructure that supports the individual creativity of our members so they can escape poverty.”

Harold Calla, Executive Chair of the FMB provided this perspective:
“We have proven the theory that First Nations can collectively secure an investment grade credit rating and go to the capital markets. That was our biggest test. We continued to exercise our taxing jurisdictions and expand upon them.”

“A growing success is the reality that many First Nations want to become certified by the FMB in advance of taxing or borrowing. They may not be in a position to do either at the moment, but they are keen to develop the fiscal capacity to eventually do both. We now have one in three First Nations in Canada scheduled to the Act. It’s a pretty significant achievement.”

Since inception, the initiative to expand First Nation jurisdiction and taxation powers and support pooled borrowing has been First Nation-led. In 2002, First Nations took a major step and worked closely with the government to introduce a bill to create the  First Nations Fiscal Management Act, which underwent a series of amendments before receiving royal assent in March 2005 and came into force in April 2006. The Act established First Nations fiscal powers and the institutional framework, mandates and purposes of the three institutions. The FMA has gone through evolutionary change and improvements in the past three decades as a result of input from scheduled First Nations and the fiscal institutions.

The development of the Other Revenues Regulation in 2011 opened the FMA to non-property tax debentures and allowed a variety of First Nations’ Own-Source Revenues to be leveraged into approximately $400 million in low-cost loans by 2017.

Ernie Daniels, President and CEO of FNFA remarked on the progress:
“The FMA is likely the most successful legislation for First Nations in terms of creating tangible change, such as building infrastructure and organizing First Nations under an independent, robust financial system and tax regime. It was developed and led by First Nations and is now governed and managed by First Nations, which is really important for further engagement with First Nations.”

And Joe Bevan, First Nations Finance Authority Chair said: 
“I believe in these fiscal institutions. They are helping to kick the door open for some of us. The FMA institutions are trying to create economic development and wealth for our communities. We trust the institutions because the FMA has always been First Nations-led.”

Many fiscal and governance experts believe taxation is a fundamental for good governance. The FMA system provides First Nations with a voluntary means of reasserting their tax jurisdiction through real property taxation. It creates real incentive to improve transparency and accountability regarding expenditures of revenues. A key factor in governance is regulation, which is central to developing viable self-governing First Nations. The FMA system demonstrates how First Nations can structure their own regulatory regimes in the areas of property taxation, financial management and debt financing.

“We are proud of our accomplishments but we know we have just started. We have to fully utilize the tax powers we restored in 2005. We need to expand our tax jurisdictions to include tobacco, cannabis, corporate and resource taxation. We need to ensure our jurisdiction reflects aboriginal title and ownership of resources in our territories. We have been working on several proposals for legislation and institutions following our successful formula. We know it will be challenging, but I have great hope,” Chief Commissioner Jules stated.

“The institutions are currently working on advancing further amendments to the FMA.” Harold Calla said. “What is the scope of the FMA going to be? How will the FMA respond to self-government initiatives for the federal government and treaty First Nations? These are matters that are yet unresolved and we’re hopeful in the next budget implementation act, there will be the legislative amendments we have been pursuing to expand the scope and opportunity of First Nations to benefit from the Act.”

“We need to expand jurisdiction into other forms of taxation and even help the government do their job by building more infrastructure and more housing,” said Ernie Daniels. “These systems are in place to support development and because of the success we’ve had, there’s been significant interest in what else can be done under the Act.”
An independent study of the FMA and the fiscal institutions was undertaken by INAC to assess the progress of the FMA and the fiscal institutions, as well as to identify aspects of the system that might require attention in order to function more effectively.

The study concluded:
“The three organizations collectively are producing large and tangible impacts on First Nation communities, impacts in the form of new infrastructure, increased own source revenues, substantial economic development opportunities, increased independence from government, improved financial management and governance to name a few.”

“All three institutions are centres of innovation. They have developed and then implemented new approaches to taxation, access to capital markets, and regulation and have helped create solutions to deal with issues of scale. Their efforts at developing capacity among First Nations, capacity which is sustainable, is especially noteworthy. And they are currently involved in developing new approaches to resource development, taxation, economic development, infrastructure management, third party management and mechanisms for structuring a new fiscal relationship with the federal government.”

“These three institutions established by the Act are the most interesting innovation to occur over the past decade in First Nation country.” 

The FMA has demonstrated that First Nations can take charge of their own affairs and in doing so, provide benefits for their communities and the country. The FMA model can and must be expanded to become an important part of a national strategy for closing the gap, improving productivity and achieving a nation-to-nation framework for reconciliation.
None of these successes would have been possible without engaged and dedicated First Nations working closely with the institutions to continue to expand First Nation jurisdiction to build strong First Nation economies.

The fiscal institutions look forward to the national meeting next spring and many more years of working together to create substantive change for our communities.

On June 7, 2017, First Nations in BC participated in a province-wide strategic dialogue session on defining a new fiscal relationship for First Nations and the Crown. Discussion focused on the principles of a new fiscal relationship that could support stable self-government. First Nations Summit (FNS) Chiefs-in-Assembly discussed supporting and advancing the principles with the Assembly of First Nations through a resolution.

A First Nations-Crown fiscal relationship determines many things for First Nations, including jurisdiction over taxation, the ability to generate revenue and engage in revenue sharing services and the transfer amounts from other governments to ensure First Nation services are delivered to national standards.

The current fiscal relationship does not recognize sufficient First Nation tax or service jurisdiction and does not provide stable, long-term revenues to support First Nation planning, services and infrastructure at national standards. In essence, it is not a nation-to-nation relationship.

The principles of a new fiscal relationship that support stable self-government were identified and discussed during the session, including:

New relationship to reflect the United Nations Declaration on the Rights of Indigenous Peoples, in particular, Article 4
A new First Nations-Crown fiscal relationship must reflect Article 4 of the United Nations Declaration on the Rights of Indigenous Peoples: “Indigenous Peoples, in exercising their right to self-determination, have the right to autonomy or self-government in matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions.”

Expanded tax powers and clear revenue and service jurisdiction
First Nations need protected and certain tax powers and clear jurisdictions that are similar to other governments. Also needed is a legislative framework for the transfer payment system that provides autonomy and flexibility. Finally, First Nations must be consulted on any legislation from other governments that may impact the First Nations fiscal relationship.

Incentives for economic development
First Nations need broader and more certain transfers and tax jurisdictions so they are not forced into commercial enterprises to create revenue. They also need incentives to develop better quality services and seek service efficiencies. The relationship between own source revenue (OSR) and transfers must create incentives and not unduly penalize First Nations for developing their revenue base.

Revenue related to service responsibilities
First Nations should have a clearly defined bundle of service responsibilities and a related bundle of clearly defined revenue options to help meet the costs of these services. Tying specific revenue jurisdictions to specific service responsibilities leads to better services and infrastructure and supports accountability from all governments to citizens.

Comparability
First Nation jurisdictions and revenue authorities need protections comparable to the provinces and First Nations should have comparable quality and access to government services. First Nations need the revenues to be able to provide services up to the national standards in order to “catch up” and “keep up” to the quality of life enjoyed by other Canadians.

Improved statistics
The quality of and access to First Nation statistics must be improved and First Nations will need independent capacity to develop statistics to support a new fiscal relationship.

Institutional support
First Nations require our own institutions to support, protect and expand jurisdictions and for capacity development, training and advice. First Nations also require our own institutions to establish standards and tools, and carry out research, advocacy and government-to-government relationship building.
The resolution was passed and the FNS Chiefs-in-Assembly are encouraging First Nations to review and discuss these principles within their respective communities and to refine them as necessary to meet each community’s unique vision.