Appearance before the Standing Committee on Indigenous and Northern Affairs (INAN) - Taxation Revenue and Economic Reconciliation (May 27, 2024)

Logistics

Date: May 27, 2024

Time: 11:00 a.m. – 1:00 p.m.

Location: Room 415, Wellington Building, 197 Sparks Street

Subject: Taxation Revenue and Economic Reconciliation

Appearing

Committee Membership

• MP John Aldag (Liberal Party of Canada LIB – BC) (Chair)
• MP Jaime Battiste (LIB – NS)
• MP Ben Carr (LIB – MB)
• MP Anna Gainey (LIB – QC)
• MP Michael V. McLeod (LIB – NWT)
• MP Marcus Powlowski (LIB – ON)
• 
  MP Jamie Schmale (Conservative Party of Canada CPC – ON) (Vice-Chair)
• MP Eric Melillo (CPC – ON)
• MP Martin Shields (CPC – AB)
• MP Bob Zimmer (CPC – BC)
• 
  MP Sébastien Lemire (Bloq Québecois BQ – QC) (Vice-Chair)
• 
  MP Lori Idlout (New Democratic Party NDP – Nunavut)

Parliamentary Analysis

• MP John Aldag (LIB) (Chair) may ask questions about ensuring that mental wellness services are Indigenous specific and culturally appropriate. He may ask questions about legislation related to the Haida Nation.
• MP Michael V. Mcleod (LIB) will likely ask questions that pertain to communities in his riding of the Northwest Territories, including the correlation between poor housing infrastructure and low school attendance. He may ask questions about indigenous stewardship of lands and the conservation economy as a key component of economic reconciliation.
• MP Marcus Powlowski (LIB) may ask questions about additions to reserve land for First Nations' economy recovery, or on Section 83 of the Indian Act, relating to expanding a First Nation community's taxation powers.
• MP Jaime Battiste (LIB), Parliamentary Secretary to the Minister of Crown-Indigenous Relations, has been a strong advocate for First Nations, Métis, and Inuit issues throughout his career. He may ask questions about urban reserves, and how they could serve as a model for economic reconciliation across Canada.
• MP Ben Carr (LIB), may ask questions about child and family services, as well as the opioid crisis. During officials' appearance on Supps C, he asked about supports for Indigenous education and investments in Churchill, MB. He may ask questions about Indigenous partners leading the way on choices for economic reconciliation.
• MP Anna Gainey (LIB), asked about the state of the Canadian High Arctic Research Station during officials' appearance on Supps C. She may ask questions about how UNDRIP impacts economic reconciliation.
• MP Jaime Schmale (CPC) (Vice-Chair), is also the CPC Critic for Crown-Indigenous Relations and Critic for Indigenous Services. He will likely highlight economic reconciliation in his questions. He may ask questions related to the department's progress on payments for out-of-court settlements. He has asked about departments better measuring outcomes and why increased funding has not lead to better outcomes. He may also ask about the optional first nations research charge, which he raised in House debate on February 29, 2024, referencing that it was developed by the First Nations Tax Commission.
• MP Eric Melillo (CPC), may ask questions about food insecurity and infrastructure gaps in indigenous communities. His questions will likely support an economic reconciliation approach. He may ask why recent PBO and AGO reports show that increased ISC spending has not led to increased departmental results.
• MP Bob Zimmer (CPC) is the CPC Critic for Northern Affairs and Arctic Sovereignty, as well as the Critic for the Canadian Northern Economic Development Agency. He has previously asked for breakdowns of funding for several Specific Claims by community. During officials' appearance on Supps C, he asked about affordability and the carbon tax in the territories. He may ask questions about revenue generation by communities to fund infrastructure projects.
• MP Martin Shields (CPC) may ask questions about food insecurity, and may tie food insecurity to the carbon tax. He has said at committee that the carbon tax disproportionately affects First Nations, Inuit, and Métis, that natural resource projects benefit current and future generations, and has called for the Carbon Tax to be cancelled for First Nations, Inuit and Métis (March 18, 2024).
• MP Sébastien Lemire (BQ) (Vice-Chair), is also the BQ critic for Crown-Indigenous Relations and Northern Affairs. He may ask about capacity building in Indigenous communities, as well as consultations with partners. He may also ask about Québec-specific examples.
• MP Lori Idlout (NDP), the critic of Crown-Indigenous Relations and Northern Affairs, will likely ask questions that pertain to her riding in Nunavut. She will likely be critical about the sunsetting of funding for various ISC programs, including ones for housing, water, and community infrastructure. She will likely highlight the infrastructure gap in Indigenous communities and ask about the correlation between poor housing and health issues. She may also ask about the difficulties in defining economic reconciliation

Recent INAN studies, reports and government responses

• Main Estimates, 2024-25 (last meeting on May 22, 2024)
• Nutrition North Canada (last meeting on May 8, 2024)
• Report 14: "We Belong to the Land" : The Restitution of Land to Indigenous Nations (presented on May 8, 2024)
• Report 13: Braiding Learning and Healing: A Pathway to Improving Graduation Rates and Successful Outcomes for Indigenous Students (presented on May 8, 2024)
• OAG Report 2, Housing in First Nations Communities (last meeting on April 29,2024)
• OAG Report 3, First Nations and Inuit Policing Program (last meeting on April 29,2024)
• Supplementary Estimates (C), 2023-24 (last meeting on March 20, 2024)
• Report 12 – Bill C-53, An Act respecting the recognition of certain Métis governments in Alberta, Ontario and Saskatchewan, to give effect to treaties with those governments and to make consequential amendments to other Acts (presented on February 8, 2024)
• Government Response to Report 11 – Food Security in Northern and Isolated Communities: Ensuring Equitable Access to Adequate and Healthy Food for All (presented on January 29, 2024)
• Government Response to Report 10 – Arctic Security and Sovereignty, and the Emergency Preparedness of Indigenous Communities (presented on October 19, 2023)
• Government Response to Report 9 – Reclaiming, Revitalizing, Maintaining and Strengthening Indigenous Languages in Canada (presented on October 16, 2023)
• C-51 – An Act to give effect to the self-government treaty recognizing the Whitecap Dakota Nation / Wapaha Ska Dakota Oyate and to make consequential amendments to other Acts (last meeting on June 19, 2023)
• Report 8 on Main Estimates 2023-24 (presented on May 30, 2023)
• Report 7 – Bill C-45, An Act to amend the First Nations Fiscal Management Act, to make consequential amendments to other Acts, and to make a clarification relating to another Act (presented on May 12, 2023)
• Government Response to Report 6 – Moving Towards Improving the Health of Indigenous Peoples in Canada: Accessibility and Administration of the Non-Insured Health Benefits Program (presented on April 17, 2023)

Recent Correspondence

• Eric Melillo (CPC): March 4, 2024 – Tragic fire in Cat Lake Cat First Nation that destroyed their nursing station
• Bob Zimmer (CPC): January 29, 2024 – Transfer of parcels on the Summit Lake watershed

In the Media

• Economic reconciliation means no green strings attached | Canada's National Observer: Climate News
• A Fairer Future for Every Generation of Indigenous Peoples | Prime Minister of Canada (pm.gc.ca)
• Indigenous economy surging toward $100B, Indigenous leaders say | CBC News
• Stable funding for Indigenous organizations part of economic reconciliation, says Native Women's Association of Canada CEO | iPolitics
• Exploring the rise of 'economic reconciliation' in Canada | CBC News
• Economic reconciliation 'is everything' to Indigenous people, business leader says | CBC News
• Equity loan guarantees will pave path to economic reconciliation - The Hill Times

Meeting Proceedings

The meeting is scheduled for Monday, May 27, 2024, from 11:00 p.m. – 1:00 p.m..

Finance and Justice Canada will be on the first panel, and ISC and CIRNAC will be on the second panel with CBSA and CRA.

The Chair will call the meeting to order and provide instructions for the meeting proceedings. They will then introduce the witnesses and invite the witnesses to deliver opening remarks (limit of 5 minutes). This will be followed by a Q&A period (details below).

It is recommended that all speakers speak slowly and at an appropriate volume to ensure they are heard by the interpreters. All witnesses are asked to mute their microphones unless they are speaking. A new practice that was recently instituted as a measure to protect interpreters from injury, is that when earpieces are not in use by witnesses, that they be placed on the designated white circles installed on the table.

Following the opening remarks, there will be rounds of questions from Committee members (as listed below). The rounds of questioning will repeat when the second panel commences in the second hour.

Committee members will pose their questions in the following order:

• First round (6 minutes for each Party)
  • Conservative Party of Canada
  • Liberal Party of Canada
  • Bloc Québécois
  • New Democratic Party of Canada
• Second round
  • Conservative Party of Canada (5 minutes)
  • Liberal Party of Canada (5 minutes)
  • Bloc Québécois (2.5 minutes)
  • New Democratic Party of Canada (2.5 minutes)
  • Conservative Party of Canada (5 minutes)
  • Liberal Party of Canada (5 minutes)

The meeting can be watched via ParlVU, however there may be an up to 70-second delay with the webcast.

Other Information for Appearing In-Person

Witnesses should arrive early to allow time for security screening. Screening could take 30 minutes or more for those without a Hill pass.

Key Messages

• Multiple articles in the UN Declaration outline the rights of Indigenous Peoples (UN Declaration) in relation to economic development. They underscore Indigenous Peoples' rights to participate in decision-making, to enjoy of their own means of subsistence and development, and to determine priorities and strategies so they can shape their own economic future.
• CIRNAC continues to implement the UN Declaration and the UN Declaration Act, recognizing self-determination is at the core of economic reconciliation.
• Several departmental initiatives are advancing these interests and rights, including UN Declaration Action Plan Measure Shared Priorities 68, strengthening Indigenous peoples' participation in decision-making through an improved whole-of-government approach to consultation and accommodation. This will lead to more seamless and predictable consultation processes for all involved and will support Indigenous Peoples to meaningfully participate in these processes and take advantage of related economic opportunities.

Background

• Articles 3, 5, 20, 21, 23, 32 and 36 in the United Nations Declaration on the Rights of the Indigenous Peoples outline the rights of Indigenous Peoples in relation to economic development.
• CIRNAC is committed to implementing the UN Declaration and the UN Declaration Act. The department is significantly involved in 30% of the measures in the UN Declaration Act Action Plan 2023-28, many of which directly or indirectly support economic reconciliation.
• For example, Action Plan Measure 86 in the Shared Priorities chapter supports the right of Indigenous peoples to self-determination and food sovereignty according to their own priorities through the provision of long-term and flexible funding to strengthen access to traditional foods and local food systems.
• CIRNAC is providing funding support to 24 Indigenous governments and organizations to strengthen local food systems and support hunting, harvesting and food sharing activities in 112 isolated communities. This initiative was co-developed directly with Indigenous and northern partners and responds to the unique needs of isolated communities to increase physical, mental, cultural, and spiritual wellbeing of members – especially marginalized groups. CIRNAC continues to actively work with these key partners to secure long-term funding opportunities and support self-determination and nation-to-nation relationship building.
• Further, pursuant to section 5 of the UN Declaration Act, CIRNAC is taking measures in consultation and cooperation with Indigenous Peoples to ensure the consistency of laws with the UN Declaration. This means Indigenous partners have an opportunity to contribute to legislation that impacts economic reconciliation, as demonstrated through the co-development of legislative amendments for the First Nations Fiscal Management Act.
• These new amendments support First Nations-led processes for building good governance and financial management practices, which promote socio-economic development and advance economic reconciliation in accordance with the UN Declaration.

Current Status

• Of the 55 Action Plan Measures CIRNAC is significantly involved in, 41 (75%) are currently in progress, reflecting the department's proactive engagement on measures under its purview.
• Engagement with Indigenous Peoples to update the 2011 guidelines for federal officials on the duty to consult began in February 2024. It consists of in-person sessions across Canada, providing an opportunity to discuss practical experiences with consultation and options to improve consultation processes. A second round of engagement to validate new guidelines will be held in 2025. It is anticipated that the renewed federal guidelines will be released in late 2026. While separate from the Action Plan, it will support efforts across several departments.

Program-Level Data

• Program/Investment: Harvesters Support Grant and Community Food Programs Fund
• Funding/Performance Indicator Data: Budget 2024: $96.8 million over three years starting in 2024-25, to support the Harvesters Support Grant and Community Food Program Fund and promote Indigenous communities in implementing culturally appropriate, local solutions to address food insecurity.
• Program/Investment: Engagement to update the 2011 guidelines for federal officials on the duty to consult
• Funding/Performance Indicator Data: This engagement was supported with $11.4M over three years via Budget 2023.

Key Messages

• Many Modern treaties include provisions that enable direct taxation by Indigenous governments or provide for tax sharing arrangements that ultimately increase revenue. This is turn supports self-determination and promotes economic development in Indigenous communities.
• In 2022 as a result of extensive engagement with Indigenous partners, and after carefully considering and assessing its existing federal tax policy approach, Canada changed its approach to the phasing out of section 87 of the Indian Act (tax exemption) as a requirement in Canada's Modern Treaties. This was seen as a significant disincentive to advancing self-government.
• In addition, the tax exemption was again made available for continuation on Indigenous governments' former reserves and on other First Nations reserves in Canada for prospective and existing Modern Treaty beneficiaries who are registered pursuant to the Indian Act.
• As this matter is within the responsibility of the Minister of Finance, I will defer to my colleagues from Finance Canada to respond.

Background

• Many modern treaties address taxation matters, and many self-government arrangements afford taxation powers to self-governments.
• Canada changed its policy regarding the application of the Indian Act S. 87 tax exemption in 2022, allowing it to apply to lands formerly designated as Indian Reserves but which have become Treaty Settlement Lands (previously this exemption was typically 'phased out' over a number years after the treaty came into effect).
• Four modern treaties in British Columbia were amended in 2023 to allow for the re-application of the S. 87 exemption.
• Future modern treaties where some of the lands were formerly Indian Reserves will allow for the continuation of S. 87 on these lands.

Current Status

• Canada continues to work collaboratively with modern treaty and self-government partners to implement an efficient and effective taxation regime across Canada.

Key Messages

• Finance Canada is the government lead on taxation matters.
• The First Nations Fiscal Management Act is an opt-in regime that provides interested First Nations with the institutional support and legislative and regulatory framework that allows participating First Nations to exercise jurisdiction in the areas of financial management, property taxation, local revenue generation and infrastructure, as well as allowing access to financing on capital markets for infrastructure and economic development on a similar basis as other levels of government. By assisting First Nations governments in taking up powers in these key governance areas, the regime supports the Government of Canada's priorities of economic reconciliation and self determination.
• Interested First Nations can choose to become scheduled to the First Nations Fiscal Management Act, and work with the First Nations Tax Commission to institute property taxation on their reserve lands.
• There are no options for a "carbon tax" under the FNFMA – questions on the carbon tax can be directed to Finance Canada.

Background

• First Nations taxing under the FNFMA can also choose to levy other local revenues/taxes, including certain types of business activity taxes (hotel taxes, well drilling taxes), property transfer taxes, and development cost charges. First Nations collect approximately $12 million annually in these other types of taxes.
• First Nations use tax revenues collected to support many programs in their communities, including social programs, band administration, and local services such as waste disposal, police services, and infrastructure. First Nations collecting property taxes under the FNFMA must submit annual Expenditures Laws, which outline how they intend to use their tax revenues.
• CIRNAC and the FNFMA institutions are currently working on several packages of regulatory amendments that will improve the operation of the regime. The amendments include improvements in several key areas related to taxation, including the enforcement of unpaid taxes, and property assessment and assessment appeals.

First Nations Tax Commission:

• The First Nations Tax Commission is a shared governance institution mandated to build fiscal capacity and responsible for the approval of property tax and new local revenue laws of participating First Nations and reconciling the interests of First Nations and taxpayers.
• The Tax Commission publishes the First Nations Gazette – which provides online public access to First Nation legislation, and works with the Tulo Centre for Indigenous Economics, whose mission is to assist First Nations in building legal and administrative frameworks that support economic activities on the lands, and to develop university-accredited curriculum and training programs in the areas of local revenues, economic development, and fiscal and financial governance.

Current Status

• The First Nations Fiscal Management Act has produced significant results since its conception:
  • 364 First Nations scheduled to the Act;
  • 281 First Nations have a Financial Administration Law;
  • 230 First Nations have received a Financial Performance Certificate;
  • 64 First Nations have achieved Financial Management Systems certification;
  • 160 First Nations have a property tax system under the Act, with an estimated total annual tax revenue under the Act of approximately $100 million (as of December 2023); and,
  • Over $2 billion in financing has also been accessed by 87 borrowing First Nations for infrastructure and economic development projects.
• 126 First Nations are currently taxing under the FNFMA, collecting approximately $100 million annually. An additional 34 First Nations have passed taxation laws under the FNFMA, but are not currently taxing.
• The Commission also provides support to the Minister of Crown-Indigenous Relations on taxation matters related to section 83 of the Indian Act. 24 First Nations collect property taxes under s.83, collecting approximately $27M per year.

Key Messages

• The First Nations Tax Commission is a key partner in the advancement of First Nations fiscal jurisdiction and economic reconciliation.
• The Department is always looking for ways to enhance the process for the enactment of by-laws under section 83 of the Indian Act.

Background

• The First Nations Tax Commission reviews and approves fiscal laws of First Nations that exercise taxation jurisdiction under the First Nations Fiscal Management Act.
• Pursuant to a Memorandum of Understanding, the First Nations Tax Commission also provides support to the Minister for the review of fiscal by-laws enacted by First Nations under section 83 of the Indian Act.
• Section 83 fiscal by-laws are related to real property taxation, property assessments, annual expenditures and annual tax rates.
• The First Nations Tax Commission reviews are based on the conformity of the by-laws with the enabling legislation, the Charter of Rights, their fairness, comprehensiveness and compliance with principles of equity and natural justice, their adequacy of notification and appeal procedures, and the potential for liability.
• Fiscal by-law approvals are time-sensitive.

Current Status

• 160 First Nations have taxing by-laws enacted under the First Nations Fiscal Management Act, collecting over $100 million annually and 27 First Nations are taxing under the Indian Act, collecting over $22 million annually.
• Departmental officials are currently discussing options internally and with the First Nations Tax Commission.

Key Messages

• Meaningful, distinctions-based economic reconciliation is consistent with the United Nations Declaration on the Rights of Indigenous Peoples Act (UNDA).
• The Government of Canada is also working with proposals from the National Indigenous Economic Strategy (PDF) (proposed by a large group of partners working in economic development) and the RoadMap Project from the First Nations Financial Management Board.
• Effective reconciliation requires ongoing horizontal collaboration across the federal government. For example:
  • Indigenous Services Canada is the lead on the Government of Canada's Economic Reconciliation Framework. This Framework has three phases: a) developing a policy statement; b) distinctions-based strategies; and c) concrete policy proposals.
  • Finance Canada is the Government of Canada lead on all matters pertaining to taxation; FNTC is working closely with Finance Canada to develop these proposals.
  • Where applicable, CIRNAC to support other key initiatives such as Natural Resources Canada's National Benefit-Sharing Framework (more below).
• Taxes and other fees can represent stable revenues for communities. The First Nations Tax Commission (FNTC) has proposed a number of different local revenue options that could benefit communities.
• Modern Treaty and Self-Governing First Nations tax under tax arrangements with a Province (i.e. Property Tax) or the Department of Finance (i.e. Income Tax, Sales Tax) which supports their community needs. CIRNA is also engaging with interested First Nations to explore options for taxing under the FNFMA.

Background

Current Status

• Taxes: As Finance Canada is the Government of Canada lead on all matters pertaining to taxation, CIRNA's role is limited in this area, however, we continue to engage with FNTC on a regular basis to provide what support we can.
• Specific Claims: As of March 31, 2024, there were 682 claims in the Specific Claims inventory.
• Additions to Reserve: Currently, the total surface area of all reserve land is 9,065,453 acres representing less than 0.37% of Canada's total land mass.
  • 7,940,460 acres are administered under the Indian Act
  • 1,119,805 acres are managed by First Nations under the Framework Agreement on First Nation Land Management/Framework Agreement on First Nation Land Management Act; and,
  • 5,187 acres are managed by self-governing First Nations