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Key Victory in Tax Exemption for First Nations

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The Indian Act’s fate may be hanging in the balance, but section 87 of the law was called into play on July 22 with a Supreme Court decision upholding the tax exemptions of two First Nations citizens who had earned interest income from off-reserve sources but held on-reserve accounts.

“It is probably the most important decision involving Native fiscal rights in Canada over the last 150 years, since the adoption of the Indian Act,” Huron-Wendat Nation Chief Konrad Sioui told the Globe and Mail.

He was one of many aboriginal leaders hailing the decisions on Bastien Estate v. Canada and Dubé v. Canada, involving Rolland Bastien (Huron?Wendat Nation, Wendake Reserve, Quebec) and Alexandre Dubé (Attikamek, Obedjiwan Reserve). Both had deposited interest income into accounts at Casse Populaire (credit union) branches, the former on the Wendake reserve and the latter on the Mashteuiatsch reserve in the early 2000s.

Revenue Canada held that since the interest was earned in off-reserve investments, it was taxable. Both men challenged their respective assessments, and each lost before the Tax Court of Canada, rulings that the Federal Court of Appeals upheld.

Both kept going (Bastien's estate saw the case through, as he died six years ago), challenging rulings that the Chiefs of Ontario (COO) said were based on an “assimilationist approach [that] promotes the idea that First Nations that participate in the ‘mainstream economy’ lose their entitlements as ‘Indians’ and that the right to tax exemption is limited to the ‘Indian way of life.’ ”

The COO and the Assembly of First Nations (AFN) were designated as intervenors in the cases, as were the Huron?Wendat Nation (in Bastien's case), Assembly of Manitoba Chiefs, Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority and the Union of Nova Scotia Indians.

“The maintenance of the principle that First Nations lands and property should not be subject to the tax jurisdiction of other governments is an important victory for First Nations peoples and their governments,” stated Regional Chief Angus Toulouse in the COO media release, adding that it was a question of respecting First Nations sovereignty.

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“Tax jurisdiction and revenue is a significant economic tool that can support First Nations economic growth and self-sufficiency,” Toulouse said. “Reconciling First Nations’ and Canada’s tax jurisdiction is consistent with the direction from the Supreme Court of Canada on other cases and should be a priority for resolution.”

This “significant message from the Supreme Court of Canada" is that “the Indian Act isn't trying to stick Indians in the 1800s," Victoria-based lawyer Robert Janes told the Canadian Press of the decision. "I think it will create another incentive for investment on reserve, and to develop on-reserve properties."

Two dissenting judges on the Dubé case objected because he did not live full-time on the reserve, saying it was “impossible to identify a sufficient concrete connection with the reserve in this appeal,” the court’s decision said. “To grant the exemption in such circumstances would be tantamount to turning the reserve into a tax haven for Indians engaged in unspecified for-profit activities off the reserve.”

In an interview with the Financial Post, Sioui said it was the first time that Indian status has paid off for aboriginals in a court case since the 1983 Nowegijick Supreme Court decision, which said an aboriginal's earnings off-reserve were tax-free if the employer was based on a reserve.

AFN National Chief Shawn A-in-chut Atleo called the decision a matter of economic security as well as sovereignty.

“Today’s decision is good for all Canadians because it means First Nations can use their rights to build their economies and strengthen their citizens and communities,” he said in a statement. “In both cases, the individuals were doing business and generating income that contributed to the local economy. These decisions foster economic development for all First Nations that will help alleviate the poor conditions and low employment prevalent in too many of our communities. First Nations will be able to build their communities and contribute significantly to the surrounding communities and the national economy.”

Here are the full Bastien and Dubé decisions.