Section 87 Indian Act
The Indian Act in Canada, is the principal statute dealing with status Indians, their bands and the system of Indian reserves. The Act is wide raning in scope including resource development, governance, fiscal management and many other major policies. It is still regarded as one of the primary documents which rules how the Government of Canada interacts with first nations and their members. Section 87 is one of the most important policies enacted via the Indian Act regarding tax exemption.
Under an appropriate connecting factors test and a further principled approach to Section 87 of the Indian Act, Indians’ property can be exempt from taxation. Currently, the statutory tax exemption for Indians are determined in respect
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of the following two property named in part (1), and the S.87 currently reads as follows: (1). Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83 and section 5 of the First Nations Fiscal Management Act, the following property is exempt from taxation: (a) the interest of an Indian or a band in reserve lands or surrendered lands; and (b) the personal property of an Indian or a band situated on a reserve.
(2)No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.
(3) No succession duty, inheritance tax or estate duty is payable on the death of any Indian in respect of any property mentioned in paragraphs (1)(a) or (b) or the succession thereto if the property passes to an Indian, nor shall any such property be taken into account in determining the duty payable under the Dominion Succession Duty Act, chapter 89 of the Revised Statutes of Canada, 1952, or the tax payable under the Estate Tax Act, chapter E-9 of the Revised Statutes of Canada, 1970, on or in respect of other property passing to an Indian.
2. Practical Effects on Income
Under section 87, income earned on a reserve is tax exempt1. Although on its face it seems like unambiguous provision in practice the application can be quite complex. This section applies to all sources of income as stated in the Income Tax Act. There are many outside factors to consider when deciding if income was earned on a reserve2. Common law precedents, and Canada Revenue Agency (CRA) guidelines have defined application of this section the following
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ways: 2.1 Employment Income The CRA outlines four major guidelines that outline when the Indian Act Exemption qualifies3. However, these are not all encompassing and exceptions do exist. § The first guideline states that if over 90% of work duties are carried out on reserve than employment income is tax exempt. § When the employer and employee are residents on the reserve § If 50% of work duties are carried out on reserve and employer or employee are residents § Finally, the employer is a resident of the reserve and is an aboriginal band or organization. And the employee’s duties are carried out for the benefit of Aboriginals. 2.2 Investment Income Interest and investment income are tax-exempt if earned on a reserve. This means the financial institution where interest is earned must be located on the reserve4. Dividend, royalty, and rental income must come from on reserve sources and businesses resident on the reserve. 2.3 Business Income Business income is tax exempt only if income-earning activities of the business occur on a reserve. There are many connecting factors that determine if business income is earned on reserve5. These factors are: § Whether or not you live on a reserve § Whether you maintain an office on a reserve or take business orders from a location on a reserve § Whether your books and records are kept on a reserve § Whether your administrative, clerical, or accounting activities take place on a reserve It is important to note that only Status Indians are eligible for this exemption.
Furthermore, there are many First Nations who have lost this eligilbility through negotiated self-government treaties.
3.1 Revenue Canada’s New Policy
The new policy introduced by Revenue Canada says that that those working for an on-reserve employer is no longer except from income tax. * The policy, introduced in 1995 as an amendment, at the time has affected over 3000 aboriginal citizens and faced much resistance and protest. There were no more modifications on this aspect since.
3.2 Misconceptions
Contrary to common belief, First Nation members are not exempt from taxes, but depending on what kind of business it is, who the employer is, and where it is situated, they may be eligible for some exceptions. There is a widespread misunderstanding because the Canadian government’s takeover of land, that First Nations community is exempt from provincial taxes because they are at a disadvantaged position. However, there is much to be investigated than making general
assumptions.* 4. Historical development and relevant cases 4.1 The Nowegijick Principle The Nowegijick Principle stated that “Treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favor of the Indians.”6The Supreme Court of Canada held that the taxpayer, a status Indian work off the reserve while receive salary from the company head office located on reserve, exempt from taxation. Under the section 87 of the Indian Act, salary and wages are personal properties7. Any ambiguity in the interpretation of Treaties and statutes should be resolved to accommodate aboriginal understanding of words and concept8. 4.2 Pilfold Estate v. The Queen, 2014 The court considers all factors related to the income include the formal legal structure through which the income is received. The taxpayer operates a fishing business through four private corporations and argues that his income came from property located on a reserve because the company’s books and records were situated on a reserve. The court rejects the argument and demonstrates the evidence that the activities involved in the business, the business management, fishing, sales, equipment, and customers were outside the reserve9. 4.3 Williams v. The Queen, 1992 MR. Wiliams is a status Indian who had been employed by an Indian band on a reserve. According to Nowegijick principle, he is qualifiied for tax exemption since all of his duties of employment were carried out on the reserve and he was paid at there.The issue was whether unemployment insurance benefits received by Mr. Williams after termination of employment were taxable. Pursuant to Nowegijick, the benefits would arguably be taxable because the payer, the Crown, is not situated ona reserve.[Maclagan p. 1508] The Supreme Court of Canada allowed the taxpayer’s appeal and adopted a“connecting factors” test to determine the situs of income. The court held that in order to decide whether or not the income of an Indian was subject to tax, it was necessary to first determine the purpose of the exemption from taxation in section 87. Furthermore, the court held that it was always necessary to keep in mind the nature of the benefits in question, and the manner in which the taxation fell upon such benefits. Its tough... Works Cited 1. http://publications.gc.ca/Collection-R/LoPBdP/MR/mr130-e.htm www.grantthornton.ca/.../Tax_victory_for_status_Indians_November_2... 3. http://www.cra-arc.gc.ca/brgnls/gdlns-eng.html 4. http://www.cra-arc.gc.ca/brgnls/stts-eng.html#hdng3 5. http://www.cra-arc.gc.ca/brgnls/stts-eng.html#hdng3 http://www.millerthomson.com/en/publications/communiques-and-updates/aboriginal-law-update/october-2013/the-indian-act-tax-exemption-commercial http://www.turtleisland.org/news/exemption.pdf http://www.lawnow.org/indian-act-exemption-taxation/ http://publications.gc.ca/Collection-R/LoPBdP/MR/mr130-e.htm http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDAQFjAC&url=http%3A%2F%2Fpi.library.yorku.ca%2Fojs%2Findex.php%2Fsclr%2Farticle%2Fdownload%2F34643%2F31503&ei=FllQVLzbMqTLmwW31oHwCw&usg=AFQjCNGpSTau0Avp6z-jfbdJfOpWURavlg&sig2=soiiD-JFMyfOY5cGt5OUQA https://www.ctf.ca/ctfweb/Documents/PDF/2000ctj/2000ctj5_maclagan.pdf http://www.indigenousbar.ca/cases/mitchellpeg.htm http://taxinterpretations.com/?page_id=1820" \l "section-87 Section 87 of the Indian Act: Recent Developments in the Taxation of Investment Income [pdf]
The failure of the Bureau of Indian Affairs to manage this trust fund properly led to legislation and lawsuits in the 1990s and early 2000s to force the government to properly account for the revenues collected. The aim of the act was to encourage American Indians to take up agriculture and adopt the habits of civilized life and ultimately.... ... middle of paper ... ...upon the survey of the lands so as to conform thereto; and patents. shall be issued to them for such lands in the manner and with the restrictions as provided herein.
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This paper supports Thomas Flanagan's argument against Native sovereignty in Canada; through an evaluation of the meanings of sovereignty it is clear that Native sovereignty can not coexist with Canadian sovereignty. Flanagan outlines two main interpretations of sovereignty. Through an analysis of these ideas it is clear that Native Sovereignty in Canada can not coexist with Canadian sovereignty.
Fleras, Augie. “Aboriginal Peoples in Canada: Repairing the Relationship.” Chapter 7 of Unequal Relations: An Introduction to Race, Ethnic and Aboriginal Dynamics in Canada. 6th ed. Toronto: Pearson, 2010. 162-210. Print.
Since the Indian immigrants were part of the British Empire they should have been able to enter Canada, just like they were able to enter Uganda and Malaya. In 1906, the prime minister of Canada Wilfrid Laurier had said “if an immigrant arrives in good faith and with every intention of becoming a Canadian, then he must be treated on equal grounds, as it would be outrageous to act with discrimination against such a person for reasons of faith, place of birth, or origins.” What Laurier said in
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Our Indian legislation generally rests on the principle, that the aborigines are to be kept in a condition of tutelage and treated as wards or children of the State. …the true interests of the aborigines and of the State alike require...
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