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Aboriginal taxation

There are some common misconceptions that Canada’s Aboriginal Peoples don’t pay taxes. While it’s true that some earnings and transactions on reserve lands are tax-exempt, aboriginals don’t live tax-free and aboriginal governments can impose direct taxes on reserve or settlement lands.

In general, Aboriginal Peoples pay the same taxes as other Canadians, aside from some limited exceptions detailed in the Indian Act.

Section 87 of the Act says the personal property of a Status Indian (see: Who’s a “status Indian” and what does it mean?) living on a reserve is tax-exempt. This includes income earned on reserves, with some exceptions.

Aboriginals who live or work off-reserve – approximately 60 per cent of all Canada’s Aboriginal Peoples, according to Statistics Canada – pays both federal and provincial tax.

Goods purchased on reserves are also tax-exempt, although aboriginal governments can impose their own taxes.

Aboriginal government tax powers

The federal government allows aboriginal governments to negotiate for taxation powers in order to generate revenues for their communities and because of a belief that a government makes more interested and responsible monetary decisions when the funds come from its own constituents instead of money transferred from elsewhere.

Both the Indian Act and the First Nations Fiscal Management Act (FNFMA) empower aboriginal governments to enact certain taxes on their lands. This includes real property tax, sales tax, income tax and certain provincial-type commodity taxes like a Goods and Services Tax.

Tax powers aren’t automatic or uniform for aboriginal governments. They are a typical component of negotiations for aboriginal self-government and the powers can vary greatly from one community to the next.

Aboriginal taxes do not automatically displace federal or provincial taxes. However, an aboriginal government can apply to have those taxes reduced or removed on the corresponding lands where their own taxes are imposed.

 

Read more:

Fact sheet: taxation by aboriginal governments: https://www.aadnc-aandc.gc.ca/eng/1100100016434/1100100016435

About the First Nations Fiscal Management Act: https://www.aadnc-aandc.gc.ca/eng/1393512745390/1393512934976

The Indian Act: http://laws-lois.justice.gc.ca/eng/acts/i-5/FullText.html