New Brunswick First Nations under no obligations to remit provincial taxes: expert

Click to play video: 'N.B. government approach to tax sharing could backfire'
N.B. government approach to tax sharing could backfire
WATCH: Earlier this week the government announced it would cancel tax sharing agreements with First Nations over fears of the future impact to government coffers, but according to some experts the government’s approach could backfire if indigenous governments choose to exercise their jurisdiction over taxation. Silas Brown has more – Apr 16, 2021

When current tax agreements between First Nations and New Brunswick expire, the province expects that provincial sales tax (PST) will be collected and remitted for on-reserve businesses.

But some Indigenous leaders are already raising the possibility that they won’t comply.

“If those agreements are no longer in place … we have no choice but to assert our own jurisdiction,” said Madawaska Chief Patricia Bernard on Tuesday. “Unfortunately that may be a route that we may take.”

On Tuesday Premier Blaine Higgs announced that the province would not be renewing existing tax agreements with more than a dozen Wolastoqey and Mi’kmaq First Nations. The agreements were put in place in 1994 and allow First Nations to keep 95 per cent of provincial tax collected for non-Indigenous customers to on-reserve businesses up to $8 million and 70 per cent beyond that.

Click to play video: 'Controversy around premier’s comments on tax sharing agreement with First Nations'
Controversy around premier’s comments on tax sharing agreement with First Nations

Prior to those agreements First Nations in the province didn’t collect provincial sales tax and according to one expert, they’ll be under no obligation to do so when the agreements end.

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“These tax agreements are actually to the benefit of the province, where First Nations are voluntarily doing this. They don’t have to,” said Pamela Palmater, a professor and the chair in Indigenous governance at Ryerson University.

“The province acting in this way, to rip up these agreements, that doesn’t serve them in any way shape or form, because there’s nothing requiring First Nations to actually embrace provincial laws and start applying them in either of their territories, on or off reserve.”

Palmater says that section 35 of the constitution, as well as treaty rights in New Brunswick, give First Nations autonomy over their lands, both traditional and those on reserve. That includes whether or not to levy taxes and what form those taxes might take.

“They have an inherent sovereignty and right to be self-determining over whether or not they charge tax at all and how they’re going to do that,” Palmater said.

Metepenagiag Chief Bill Ward told Global News on Tuesday that Indigenous Nations need to be able to generate revenue, but what form that could take is still a matter of discussion.

“As our own government we need to start looking at these things in order to start generating our own revenue just as every other government does,” Ward said.

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“We’ve never ceded our territory, it belongs to us just as much as anyone else and we need to start collecting or generating revenue from the use of this land.”

Click to play video: 'New Brunswick will not renew tax agreement with First Nations'
New Brunswick will not renew tax agreement with First Nations

The federal government does set out other processes for First Nations to collect taxes. The collection of real property tax is set out in section 83 of the Indian Act and other sales taxes, that replace the federal harmonized sales tax, exist as well. The use of tax agreements, like the one currently in force in New Brunswick, is also encouraged.

“What the province is clearly saying is ‘we don’t want these tax agreements,'” Palmater said. “Now it’s up to First Nations to decide how they want to proceed, if they want to collect tax, what kind of tax and in what areas.”

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Along with concerns about sustainability, Higgs has cited concerns over business competitiveness. But Bernard says nearby businesses would feel a much greater impact should Madawaska decide what taxes it does and doesn’t levy.

“The ramifications of pulling these agreements could be grave — not just for the First Nations but to the surrounding businesses of those First Nations,” she said.

The province says they will expect First Nations to comply and remit provincial taxes.

“Everyone who sells a taxable good is required to collect and remit taxes by laws of general application that apply everywhere in the province,” said finance and treasury board spokesperson Valerie Kilfoil in an email.

On Tuesday, Aboriginal Affairs minister Arlene Dunn said the province is seeking to find new revenue-sharing agreements with First Nations but didn’t presuppose what forms those could take.

“We want to co-create a new co-operation and economic development partnership, one that supports a path to self-determination and self-sufficiency,” Dunn said.

“It’s time for a new relationship, consistent on a government-to-government approach.”

Ken Coates, the Canada research chair in regional innovation at the University of Saskatchewan, says a new partnership could very well be beneficial, but the government needs to work towards building trust with suggestions on what that could look like.

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“How quickly can you show good faith and get back out there with the First Nations and say ‘let’s go and do something better,'” he said.

The province says that the current arrangement is unsustainable and will continue to cut into the government’s tax base, impacting the ability to offer other services. Proceeds from the agreement started out relatively small, just $28,000 in the first year, but have grown to $44 million in the past year.

The government says that figure is projected to grow to $75 million over the next decade.

Coates says that the situation is, in some respects, a collision of governments both looking to capture a piece of the pie of tax revenues. One way around that: grow the pie. In other areas of the country that includes resource development, gaming revenues and housing development.

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But when looking towards new opportunities, Coates said it’s important to ensure Indigenous peoples get the first kick at the can.

“The future is recognizing that you shouldn’t be fighting over a small pie, you work collaboratively to develop a bigger pie,” he said. “You have to make sure that Indigenous folks have their own revenue coming out of that.”

“This is success for everybody and that’s the point. When these communities flourish it’s not just the First Nations, it’s all the local business people, it’s the nearby communities.”

How revenues from resource development are shared is one possibility the government highlighted as a path forward and something Indigenous leaders are keen to address.

Tobique Chief Ross Perley said the allotment of tree harvesting on Crown land is top of mind as is the damning of the Saint John River, or the Wolastoq, from which the Wolastoqey people take their name.

Right now First Nations are allowed just five per cent of the yearly cut on Crown land.

“These are inequities that we felt the tax agreement kind of balanced, but now without it, those are issues we are going to have to tackle,” Perley said.

There are concerns over whether the government is willing to negotiate in good faith. The relationship with the Higgs government and Indigenous leaders has been strained, partly due to the government’s refusal to heed requests for an inquiry into systemic racism against Indigenous people and partly due to a perceived lack of willingness to address other issues.

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Ward says that Mi’kmaq chiefs have been looking to speak to the government about resource sharing for years and have consistently been rebuffed by the Higgs government.

For now, the ball appears to be in the court of Indigenous leaders, with the government asking them to come to the table.

“We’ll be available … for meetings at any time and we’ll look for the First Nations to reach out in that regard to initiate discussions on the bigger picture and the future together in our province and how we build on that going forward,” Higgs said Tuesday.

That involves a level of risk on the part of the government, Palmater says, noting that according to the Supreme Court of Canada William decision, Indigenous People’s have full rights to all unceded territories.

“First Nations have every right to say ‘the trees belong to us, all of the resources on top of and underneath the ground belong to us, they’ve never been ceded or surrendered,” she said. “That means that the First Nations are the exclusive owners of that territory, which means they have the exclusive right to use those lands, to benefit from those lands and resources.”

“They could effectively flip that relationship, where we’re the ones that are going to get the 95 per cent benefit from that cut and New Brunswick, if you want your five per cent, you better come to the table and start negotiating.”

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Many of the agreements with Mi’kmaq First Nations are set to expire in July, leaving little time for negotiations. The Wolastoqey agreements require a year’s notice of termination, which the province gave on Tuesday. However, the Wolastoqey Nation say the review period doesn’t start until Jan. 30, 2022 and are calling on the government to halt until then.

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