First Nations’ taxation powers expanded
Proposed measures would allow sales levy on fuel, alcohol, cannabis, tobacco, vaping products
Prime Minister Justin Trudeau used the federal budget this week to open a door that Conservative Leader Pierre Poilievre has already signalled he’s ready to walk through: giving Indigenous communities more power to levy taxes.
The budget unveiled Tuesday by Finance Minister Chrystia Freeland proposes widening measures already available to Indigenous governments by allowing them to impose a sales tax on fuel, alcohol, cannabis, tobacco and vaping products on reservations and settlement lands.
The government also said it is looking at tax measures that would allow Indigenous communities to benefit from natural resource development.
Advocates say the new policy could result in meaningful tax revenues for Indigenous communities, but that its success will depend on how easy it is for them to set up these tax arrangements with the federal government.
First Nations Bank president and CEO Bill Lomax says it is up to Indigenous nations to decide for themselves if the new tax framework makes sense and is “an economic winner” for them.
“In the end, we support First Nations sovereignty and self-determination. Having a stable tax base is a hallmark of stable governments all over the world,” Lomax said in a written statement to the Star.
The practice of taxing goods and services on First Nations lands would not be a new one. A tax on some goods and services has been in effect on an opt-in basis since 2003 and there are currently 34
First Nations — primarily in the Yukon and British Columbia — with an effective sales tax in place.
Indigenous governing bodies can sign a tax-sharing agreement with the federal government to levy a sales tax at five per cent on most properties, products and services on their lands.
For these purchases, GST and the federal portion of the harmonized sales tax (HST) in Ontario do not apply.
Outside of these agreements, First Nations status members — those who are legally recognized as an “Indian” under the Indian Act — are exempt from paying GST on these properties, products and services.
The change proposed this week by the federal government would allow First Nations to apply the same five per cent sales tax on fuel, alcohol, cannabis, tobacco and vaping products. Previously, cannabis and vaping were not taxable products in Indigenous communities.
The proposal comes following consultations with Indigenous organizations. The First Nations Tax Commission (FNTC) recommended the tax measure on fuel, alcohol, cannabis, tobacco products, as well as on casinos, ATMs and carbon levies, to the federal government in their prebudget submission.
“This will accelerate First Nations economic growth, residential development and help erase the federal government’s liabilities attached to substandard First Nation infrastructure,” the FNTC said.
The announcement of the new tax framework comes after Poilievre signalled his own support for First Nations levying taxes in their communities.
At a news conference in Vancouver in February, Poilievre announced his support for the FNTC’s proposed First Nations resource charge, which would allow Indigenous nations to levy taxes on natural resource projects on their lands.
The move was seen as a shift in Poilievre’s previous stance on Indigenous issues, something he has been working to change since becoming the Conservative leader in 2022.
Caroline Thériault, a spokesperson for the Ministry of Finance, said the government is working with Indigenous partners to finalize the new tax framework and legislation will be tabled “in due course.”