Taxes, treaties and tensions

First Nations leaders are fighting for a point-of-sale exemption from Ontario's upcoming harmonized sales tax because they say otherwise it will be another obstruction for Aboriginals to overcome.

Leaders of First Nations communities say the income level of Aboriginals is already low and adding an eight per cent tax to the five per cent GST for everything they buy off-reserve will further reduce their ability to buy goods and services.

“There is already poverty or borderline poverty in communities, and this will affect them. It will affect people’s purchasing power. It will have a ripple effect,” says Grand Chief Randall Phillips of the Association of Iroquois and Allied Indians, which represents about 20,000 status Indians in Ontario.

First Nations leaders say the HST will overburden their communities.

Currently, status Indians in Ontario who present their status card when making a purchase off of reserves, get a point-of-sale exemption of the eight per cent provincial sales tax. This automatically removes the tax at the time of purchase.

First Nations do not have to pay GST on goods bought on-reserve or that are delivered to them on the reserve.  When the GST and PST are harmonized into the HST, the exemption will be administered like the GST, meaning there will be no point-of-sale exemption off reserves.

In other words, where First Nations people in Ontario now pay a five per cent tax (the current GST rate) on goods and services they buy off reserves, starting July 1, that tax will rise to 13 per cent, or an eight per cent increase in the cost of purchases.

“We’re already in a difficult financial situation, why make it worse?” says Cynthia Wesley-Esquimaux of the Factor-Inwentash Faculty of Social Work at the University of Toronto.

Cutting other taxes

The Government of Ontario is planning a series of offsetting income tax reductions for people with lower incomes to ease effects of the new tax. However, Jody Kechego of the Association of Iroquois and Allied Indians says these reductions will not benefit First Nations.

“It will not work because of practical purposes,” said Kechego. “A lot of First Nations don’t file their taxes because they are not required to.”

“We’re already in a difficult financial situation, why make it worse?”

According to a study on the HST by the Canadian Centre for Policy Alternatives, people who tend not to file tax returns will be “significantly worse off as they will derive no benefit from the credits or the personal income tax cuts.”

The effect of the HST on struggling communities has prompted First Nations leaders to fight for an exemption from the tax.

Aboriginals in Ontario want a point of sale exemption on the HST similar to what they currently have for PST.

“First Nations should be exempted completely,” says Wesley-Esquimaux. “There’s not much more they have to do other than acknowledge the exemption.”

No deals from Ottawa

However, officials at the Federal Department of Finance say the tax exemption rules set out in the Indian Act will apply to the HST, which means the exemption will be administered like the GST.

When the HST is phased in, the tax rebate will only apply to purchases made on-reserve or shipped to the reserve.

“We have consulted First Nations, we are open to meeting with them, and we have heard their concerns,” says Jack Aubry from the Department of Finance. “Our policy is consistent across the country. There will be an exemption if the purchase is made on the reserve or if the purchase is delivered to the reserve by the vendor.”

First Nations leaders say the government rushed the legislation through and did not consult with them adequately.

“They never consulted us about the tax and they should have come to us first,” says Phillips. “There is a requirement to sit down and consult with us. We thought the days of systems being imposed on us were over.”

The Right to be Tax Free

No one likes taxes, but for certain groups of First Nations in Canada, the HST does more than just make life more expensive. It affects their rights.