Property Tax Powers by First Nations

October 17, 2016 - Indigenous communities can gain revenue and valuable experience tackling the problem of service provision by taxing residents and businesses on reserve land. First Nations in Canada have tax powers similar to those of municipalities. Under the 1989 Kamloops Amendment to the Indian Act, and the 2005 First Nations Financial Fiscal Management Act (FNFMA), indigenous communities can assert their tax jurisdiction on reserve land. The First Nations Tax Commission certifies property tax bylaws, ensuring that residents paying taxes to indigenous governments are treated fairly, and that they receive services (roads, fire, police protection, water, etc.) in exchange for what they pay.

The power to levy tax stemmed from difficulties experienced by the Kamloops Indian Band (Tk'emlúps te Secwepemc). In the 1960s, the Band developed a business park and collected leases from businesses who resided there. However, the nearby City of Kamloops collected property taxes from those businesses without offering services. The 1989 amendment allowed the Band to collect taxes and to provide maintenance and services, as well as the ability to deal with delinquent ratepayers. In 2005, federal legislation augmented these powers, allowing First Nations to issue debentures against future revenues in order to develop infrastructure.

In 2010-2011, First Nations property tax revenues totaled over $50 million. Meanwhile, the First Nations Tax Commission has worked with many groups – such as the Canadian Energy Pipeline Association - to promote the use of property tax powers and economic partnerships.

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In Ontario, few First Nations opt to exercise these powers. There are a number of barriers to their doing so. A major source of property tax revenue would be infrastructure on reserve lands like transmissions lines. But Crown Corporations like Hydro One and Ontario Power Generation are exempt from tax. Although they pay First Nations annually in lieu of taxes, the financial benefits of that these payments provide don't come with requirements to provide services or opportunities to develop experience administering a tax system.

Where indigenous communities do have opportunities to raise revenue and deliver services, many chose not to. Curve Lake First Nation, outside of Peterborough, is home to many recreational leaseholders. Unlike leaseholders on Crown land, cottagers on Curve Lake do not pay the Provincial Land Tax. But Curve Lake First Nation doesn’t impose taxes on cottagers either, nor does it provide municipal services to leaseholders. The rationale from the First Nation has been that local cottagers don't demand these services.1

Earlier this year, the government announced that Fort William First Nation near Thunder Bay would assert its tax jurisdiction under the First Nations Fiscal Management Act. Fort William is a prime candidate to reap the benefits of the FNFMA, having prioritized economic development and partnering with neighbouring non-indigenous communities as a path forward. 

A first step to overcoming the challenges that keep First Nations from exercising their tax jurisdiction would be to identify potential opportunities to raise property tax revenue. For example, the Energy East Pipeline project will cross dozens of traditional territories and create millions of dollars’ worth of taxable infrastructure if it is approved.

There are positive benefits to overcoming the challenges that keep First Nations from asserting tax jurisdiction. Developing property tax bylaws and services would allow First Nations and neighbouring non-indigenous communities to develop business opportunities. It would require taxation and service delivery to be conducted in a way that is open, accountable, and leads to long-term stability. Finally it would allow First Nations to take control over providing services and reduce their dependence on federal funding and local service agreements that pass funds from one outside government to another without giving indigenous communities ownership or control.

Adam Patrick is a former policy intern at Northern Policy Institute.

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  1. First Nations Tax Commission, “Clearing the Path,” Vol. 2 Issue 3 (Fall 2008), p4.

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