First Nation tax authorities levy and collect taxes in the same manner as other local governments throughout Canada. First Nation tax systems base taxation on a property assessment, use market value assessment methods, use professional assessors, and set rates based on a budget. Procedures for assessment appeals and tax enforcement in First Nation tax systems are also similar to other local governments.
A First Nation wishing to levy property taxes pursuant to section 83 of the Indian Act must establish their property taxation system by passing property taxation and assessment by-laws, as well as by-laws dealing with the setting of annual tax rates and the expenditure of property taxation revenues. These by-laws must comply with all requirements under the Indian Act and any policies developed by the FNTC.
Section 83 of the Indian Act provides a power for Indian Act bands to make by-laws for the taxation of land or interest in land in the reserve. Real property tax by-laws, enacted pursuant to section 83 of the Indian Act, are submitted for review to the FNTC, which may recommend them to the Minister of Aboriginal Affairs and Northern Development for approval.
A First Nation Expenditure by-law provides the First Nation with the authority to expend revenues collected under a property taxation by-law. Expenditure of local revenues can only be made in accordance with a budget set out in an expenditure by-law. This by-law details how the First Nation intends to spend the property tax revenues it will collect, establishes the budget year for the First Nation, outlines grant amounts, and establishes and authorizes transfers to and from reserve funds.
First Nations taxing under section 83 are required to make an annual expenditure by-law. The annual budget must be balanced (i.e. budgeted expenditures must equal budgeted revenues). The FNTC has established policies and sample for the expenditure by-law which can be found below.
Section 83 taxing First Nations must enact an annual rates by-law. This by-law establishes the rate of tax for each class of property and sets minimum taxes if used. Also called the mill rate, the tax rate is typically based on the budget requirements of the First Nation with consideration of the rates used by the adjacent local government.
Annual tax rate by-laws enacted under section 83 must comply with the Indian Act, any policies established by the FNTC. The FNTC has established Policies for First Nation annual rates by-laws that provide further requirements for the form and content of rates by-laws. The policy as well as the sample rates by-law are available below.
First Nation Property Taxation by-laws create the framework for the administration of a real property taxation system under section 83 of the Indian Act. A First Nation taxing under section 83 must have in place a property taxation and assessment by-law before it can levy and collect property taxes. Property Taxation by-laws set out the requirements for the appointment of a tax administrator, outline any exemptions from taxation, outline the preparation of the tax roll and tax notices and the details for the payment of taxes, any tax abatement or granting programs, the imposition of penalties and interest and refunds, the provisions for the enforcement and collection of taxes, and the use and investment of reserve funds.
First Nations may prepare a separate or an amalgamated property taxation and assessment by-law.
A First Nation Property Assessment by-law creates the legal framework for conducting assessments of interests in land on reserve. Prior to implementing taxation under section 83 of the Indian Act, a First Nation must enact a Property Assessment by-law. The First Nation Property Assessment by-law outlines the duties of the assessor, the assessment dates, property classes, assessment methods to be used, and the assessment role, the procedures for the correction of errors and omissions, the assessment notification process, the assessment appeal process, and the establishment of an Assessment Review Tribunal.
First Nations may make business licensing by-laws under section 83 of the Indian Act. Business Licensing by-laws are established to regulate and licence businesses, business activities and persons engaged in business on reserve.
Business licensing by-laws outline: the requirements for obtaining a license to conduct or carry on a business on a reserve, the business licence application process, the appointment and duties of a licence inspector, the licensing period, the licence fee structure, the requirements for retaining, refusing, suspending and revoking business licences, the appeal process, and any penalties under the by-law.
Business licensing by-laws enacted under the Indian Act must comply with the Act and any policies established by the FNTC. The FNTC has established policies for business licensing by-laws that provide further requirements for the form and content of these by-laws.
First Nations may make local service or improvement tax by-laws under section 83 of the Indian Act. These taxes are levied to fund the costs of providing a specified service or improvement to an area. The service taxes are generally applied to specific parcels of land, are allocated as an annual charge and may be levied for a set number of years depending on the by-law. Types of local services include: street improvements; bridge developments; sewer and water works; and park acquisitions and improvements. The cost of work undertaken is paid up front by the First Nation then recovered from property owners within the service area using the tax.
Local service or improvement tax by-laws outline: the service or work provided by on behalf of the First Nation for which a service or local improvement tax will be levied; the estimated cost of the service and the estimated cost of the service that will be recovered through the tax; the basis on which the tax will be levied; the rate of tax to be applied and the duration of the tax; the construction schedule; the service or local improvement area; any exemptions; details regarding the tax roll, notice requirements, and review panel; and enforcement measures.
Service and local improvement tax by-laws enacted under the Indian Act must comply with the Act and any policies established by the FNTC. The FNTC has established policies for service and local improvement tax by-laws that provide further requirements for the form and content of these by-laws.
First Nations may make a telephone companies taxation by-law under Section 83 of the Indian Act. A telephone companies taxation by-law establishes the framework for the taxation of real property interests held by telephone companies operating on reserve. The basis for assessment and valuation of the real property interests is a percentage of the total gross receipts collected from on-reserve customers. Telephone companies taxation by-laws enacted under the Indian Act must comply with the Act and policies established by the FNTC.