If the objective is self-governance, the 2005 First Nations property taxation law fails

Audrey Boissonneault

Significant reforms are needed if the goal of the act is to allow First Nations to write their own path.

When the federal government passed the First Nations Fiscal Management Act (FMA) in 2005, its many objectives were clear. By allowing band councils to levy property taxes, it was aimed at increasing the economic capacity of First Nations and improving their chances of achieving self-government.

Section 5(1) of FMA allows band councils to levy property taxes both to increase their economic capacity — providing them with a source of income — and to improve their self-government options.

Given that no major legislative changes have occurred in this area since the passage of FMA in 2005, we can now assess the success of this legislation in achieving the key government objective of improving self-government. Sadly, 16 years later, that objective hasn’t been met.

While the economic gains are apparent, FMA fails to promote real self-government from political and law-making standpoints. Instead, the powers that it grants are diluted by archaic controls that preclude any experiment in self-government on terms chosen by a First Nation, and that deny First Nations free choice in determining key elements of their laws.

That conclusion is easily reached by assessing the data on the impact of the federal government statutes (either the FMA or the outdated Indian Act).

Approximately 30 per cent of First Nations in Canada now levy property taxes under one of the two acts, and there are considerable data on the impact of these statutes.

There are two major flaws in FMA that hinder self-governance.

First, the constraints set out in the legislation deny First Nations the flexibility they need to develop a property taxation regime that works for them. First Nations have little latitude in deciding on the content and form of their laws, and  the federal government retains pervasive control over the exercise of First Nation taxing powers.

Participating First Nations have no creative freedom as to what form their laws should take. The laws must contain the elements set out in the standards and regulations. Otherwise, they will not be approved, and they will never enter into force. Accordingly, a First Nation seeking to establish a property taxation regime cannot design its own legislative procedures for achieving its objectives. This is a significant limitation on the exercise of self-government. The only forms of self-government actually provided to a First Nation are the ability to decide whether to adopt a law and the ability to set the applicable tax rates.

Second, the federal government remains present at all stages of the process. It sets the requirements contained in the regulations — which currently cover the property assessment process (including appeals), interest and penalties, and the inspection process — and it may add new requirements.

It also appoints the majority of the members of the administrative bodies responsible for adopting standards and approving laws, and those appointments are made on the recommendation of the minister. A federal government that wished to tighten its control would only have to appoint individuals who were sympathetic to its views.

But the flaws in the FMA could be easily remedied through reform.

Allowing for the selection of commissioners of the First Nations Tax Commission (FNTC) by the participating First Nations, for instance, would be a worthwhile measure to further distance the commission from the federal government. In fact, it appears from early proposals on this issue that the majority of appointments were to be made by First Nations.

The federal authority to restrict taxation mechanisms through regulations could also be repealed to allow for greater self-government. Finally, if self-government is truly the federal government’s goal, there is no reason why First Nation laws should require the approval of an external administrative body.

The FNTC could exist as an adviser to First Nations in need of its expertise, without retaining control over laws. If control by the FNTC is absolutely necessary, it might be beneficial to require the commissioners to agree to any law that is reasonable and fair, rather than allowing them to impose a set of standards. This would afford First Nations greater freedom to design their own systems.

At present, the only way for a First Nation to design a property taxation regime outside the federal government’s parameters is to negotiate a self-government agreement.

Some First Nations have been engaged in such negotiations for a number of years without success, while others are not yet ready for this step.

It is unthinkable that, in the meantime, they should have no other means to achieve self-government from a property taxation perspective.

This method of taxation has been delegated to First Nations since 1951. It is high time they be granted the right to manage it without federal intervention. Constitutional protection of the right to self-government must be the ultimate goal.

Audrey Boissonneault is a lawyer and tax specialist with the Mallette Group of chartered professional accountants. This commentary is based on her recent article on the topic in the Canadian Tax Journal.