The Impact of Tax Exemptions for First Nations Reserves

Abstract

Debates over the adequacy of Aboriginal funding usually miss a key and neglected component: tax exemptions. Section 87 of the Indian Act dictates such exemptions. This section clearly states that no person living on reserve may be taxed for their work there, nor can any product or service delivered to or on reserve be taxed. This means multiple millions of dollars stay in the hands of First Nations people when they would otherwise go into provincial and federal coffers. Prior to this capstone, no one has made as comprehensive an effort to calculate the aggregate value of all reserve tax exemptions. Thomas Courchene estimated in 1992 that if all Aboriginal reserves constituted a province, it would get $103 million in provincial income taxes. In 2012, Gormanns and Waslander estimating that the tax exemption on B.C. reserves was worth $20 million. Via information requests, the Canadian Taxpayers Federation (CTF) also revealed substantial tobacco tax exemptions of $54 million for tobacco and $14 million in fuel in Saskatchewan in 2008-09. Some advocacy and anti-smoking organizations have also drawn attention to the problem of illegal contraband cigarettes that originate from reserves.