Economies prior to the late 20th Century
The Indian Act does not apply to Inuit and Métis persons. It applies only to descendants of First Nations who continue to have legal “Status” under the Indian Act.
The federal government maintains the Status registry, deciding by its own rules who is Indian enough for Status benefits.
How can Status be lost?
For many years, roughly 1830-1960, it was the aim of the Canadian government to reduce the official number of “Status Indians” or “Registered Indians” either by removing Status from women who married non-Status men, or by replacing Status with regular Canadian citizenship in a process known as Enfranchisement.
A man who became enfranchised would cause his wife and children to lose their Status also. A portion of the band’s assets were to be transferred to him. Enfranchisement was automatic if a person became a doctor, lawyer, or Christian minister, or if he (or she) otherwise earned a university degree. Leaving the reserve to fight for Canada in WWI or WWII could also require or result in a loss of Indian Status. Anyone living outside Canada for more than 5 years without permission was enfranchised.
Since 1869, Status women who married anyone other than a Status man lost their status, but white women who married Status men became Status women.
In 1951, a restriction for men was added to the Indian Act: if the man’s mother had been non-Status, and if his wife was non-Status, then the husband’s status would not be enough to give his child status after age of 21. This new rule was not retroactive; it only applied to children whose parents married after the amendment was passed. Note that the sex discrimination was not eliminated. If a woman married out, she and her children lost Status immediately. If a man married out, and his son also married out, the grandchildren would lose Status after age 21.
One important consequence of losing Status is that, depending on the Band’s wishes, the person might lose their right to live on reserve. Federal funding has been in proportion to the number of Status people living on reserve, and non-Status residents are sometimes resented for using the scarce resources on reserve.
After years of Indigenous litigation against the government, in Canada and before the United Nations, the federal government was forced to undo this sex discrimination with Bills C-31 (1985) and S-31 (2017, in force 2019). These pieces of legislation amend the Indian Act so that:
- There is no more enfranchisement. A Status person can never lose their status.
- Status women who married non-Status men after 1951 (Bill C-31) or 1869-1951 (Bill S-31) regain their Status. This affects the status of their descendants.
- Children born after 1951 to a Status parent and a non-Status parent have Status, but it is only half-Status in the sense that, if they also marry a non-Status person when they become adults, their children will have no Status. This is the “second generation cut-off rule.”
So, after 1951 there was a first-generation cut-off rule for women and a second-generation cut-off for men. After Bill C-31 (1985) there is a second-generation cut-off rule for both men and women.
Because of Bill C-31, more than 114,000 people successfully reclaimed their Status between 1985 and 2000.
The Parliamentary Budget Office (2017) estimates that about 300,000 new persons will be registered with Status because of Bill S-31.
It is expected that, at most, only 2% of new S-31 registrants will move to a reserve. Bands with their own membership rules can decide whether they want to accept new members or not. In any case, people with Status are eligible to receive health and education benefits which we discuss in Chapter 17.
The government’s hesitation over Bill S-31 has been attributed to concerns about money.
As just mentioned, a Band can deprive Status persons of band membership, which means that a Band can have criteria which deny certain people the privilege of living on reserve, owning property on reserve, sharing in Band assets, and voting in Band elections and referenda.
(Children do have the right to live with their parents or guardians on reserve, whether the children are members of the Band or not.)
For example, a Band can remove membership privileges from a Status person who marries a non-Status person. This is happening in the Kanien’kehá:ka Band of Kahnawake (Quebec).
As of May 2018, About 43% of bands maintain their own membership list.
Economic Rights Associated with Status:
A great deal of misinformation exists regarding the rights of Status persons. For example, it is believed that Status people on reserve get free housing, and that Status people off-reserve get free education. The reality is more complex.
Bands receive funding from federal and provincial or territorial governments for housing, education, and health care. However, as we will discuss later in this book, that money apparently does not suffice. The housing, educational achievement, physical health, and dental health of Status persons on reserve is well below average compared with Canadians generally. There is supplementary health and dental care available to Status people living off-reserve, but their health and dental outcomes are also below-average. Bands receive money for post-secondary education for their members whether on or off-reserve, but not all post-secondary students receive funding.
In Chapter 17 we will consider how the government allocates money to Indigenous people, and whether it is sufficient, well targeted, and well spent.
Once a year, each Status Indian is eligible to receive money from the federal government. Don’t hold your breath – these payments are in the five-dollar range. There was never any promise in the Treaties that the annual payments would be adjusted for inflation!
In 2021, the government of Ontario was appealing a recent court victory by First Nations who signed the Robinson-Huron Treaty of 1850. According to the text of this treaty, the First Nations gave up control of a very mineral rich area of Ontario, north of Lake Huron, where the nickel mines of Sudbury are located. In return, the Bands would be entitled to reserves, fishing rights, and hunting rights, and a roughly $2 per person annual payment which could increase based on the income generated by resource extraction. The payment was indeed increased to $4 in 1874, at which level it remains to this day (August 2020).
“The said William Benjamin Robinson, on behalf of Her Majesty, who desires to deal liberally and justly with all her subjects, further promises and agrees, that should the Territory hereby ceded by the parties of the second part at any future period produce such an amount as will enable the Government of this Province, without incurring loss, to increase the annuity hereby secured to them, then and in that case the same shall be augmented from time to time, provided that the amount paid to each individual shall not exceed the sum of one pound Provincial Currency in any one year, or such further sum as Her Majesty may be graciously pleased to order; and provided further that the number of Indians entitled to the benefit of this treaty shall amount to two-thirds of their present number, which is fourteen hundred and twenty-two, to entitle them to claim the full benefit thereof.”
This treaty and its sister treaty, the Robinson-Superior Treaty, set the precedent of an “annuity clause” in which the Crown agreed to pay annuities perpetually in relation to the revenues made by resource extraction on the land in question. The eventual decision in this court case will have implications for other treaties which have annuity clauses.
Status persons are rumored to pay no taxes. The reality is more complex. Sales tax, excise tax, and income tax may need to be paid. Status persons must pay GST (the federal sales tax) on goods purchased off-reserve which are not intended for life on a reserve. They must pay PST as well, except in Ontario.
As Loft (2019) details, Courts have generally allowed Band-owned corporations to pay no sales tax if profits are going to community purposes. Otherwise, incorporated Band-owned businesses with sales over $30,000 must pay GST and PST.
What about taxes on gasoline, cigarettes, cannabis, and alcohol? For these items, “excise taxes” are supposed to be paid. The excise tax is charged to the producer when the item is sold. Neither Status nor non-Status customers need to be charged the excise tax.
It is not always clear whether this excise tax has indeed been paid by producers supplying Bands. Some Bands, like the Kanien’kehá:ka of the Bay of Quinte, Tyendinaga, have treaties which they believe exempt them from any and all taxes.
In most cases, the revenue collected by the federal government from excise taxes is not shared with Bands. However, the province of Ontario does share a portion of its tax revenues with Bands who are monitoring sales and enforcing regulations regarding production, packaging, and advertising. Even when revenues are shared, First Nations may object to sales and excise taxes because these taxes are imposed upon them in violation of their sovereignty and jurisdiction; because they force the Band to act as an arm of an outside government; and because they reduce the price advantage that reserves can offer to off-reserve customers.The issue of taxes on tobacco and other sensitive goods is complicated by the geographic position of the Akwesasne, a reserve which straddles the Canada:US border.
According to the 1794 Jay Treaty between Britain and the United States, which was never actually passed by the British Parliament, First Nations are permitted to enter the US freely and bring personal items across the border without paying tax.
This was intended to preserve Britain’s access to fur. Today, Canadians with at least 50% Indigenous ancestry are allowed to cross the US Border, live, and work in the United States. The Canadian government no longer wants anyone to bring goods into Canada duty free, and the Supreme Court has ruled that duty-free border crossing is not an Aboriginal Right.
However, there is no customs station between the Canadian and America side of Akwesasne. A quick internet news search confirms that goods and even human beings have been smuggled through Akwesasne.
The Indian Act has always exempted band members who live on reserve from paying income tax. At the time the Indian Act was first issued, 1876, Canadian citizens did not pay income tax. Canadians began to pay federal income tax in 1917. Stacia Loft (2019) has a cynical explanation for why Status persons were exempted from income tax under the Indian Act:
“The government did not expect or intend that Indians would earn an income from the commercial mainstream…”
But more benign explanations exist, such as wanting to protect reserve land from seizure for non-payment of taxes, respecting First Nations autonomy, wanting to support income and enterprise on reserve, and not complicating transfers to reserves with tax collection from reserves.
Today, Status persons pay no income tax on income earned on reserve, but they must pay income tax on any income earned off reserve that is not related to maintaining Indigenous culture. This includes business income.
Again, Band-owned corporations pay no income if profits are going to the community. Otherwise incorporated Band-owned businesses with sales over $30,000 must pay income tax.
The National Indigenous Economic Development Board (2019; p. 63) has noted that the fact that corporations are not income tax exempt disincentivizes band members or bands from incorporating their businesses, which may impede growth.
It’s also likely that, at the margin of deciding whether or not to join the mainstream economy, the income tax exemption encourages businesses, individuals, and families to stay on the reserve.
Is it unfair that Status persons and unincorporated businesses pay no taxes on reserve income? According to Canada’s Income Tax Act section 149, the following do not have to pay income taxes either:
- Employees or officers of governments other than Canada who are required to reside in Canada, and the members of their families
Crown Corporations (businesses owned by the federal or provincial governments)
Registered Amateur Athletic Organizations
Organization of Universities and Colleges in Canada
Some Housing Corporations
Non-profit Research Corporations
Mutual Insurance Corporations
Pension Trusts and Corporations
Active military and police personnel receive large income tax exemptions
Stacia Loft argues that, since First Nations’ original territories were much larger than reserves; since reserves were harmful to First Nations; and since they could not make a livelihood on reserve but rather had to leave the reserve to prosper; for these reasons income tax exemption should apply not only on reserve but anywhere Status persons go / have had to go.
Ultimately, Loft believes that First Nations should be exempt of all taxes for four reasons: sovereignty; jurisdiction deriving from that sovereignty; their title to lands in which to exercise that sovereignty; and the fiduciary obligation of the Crown to protect Indigenous interests.
Regarding sovereignty, the federal government under Justin Trudeau has promised a Nation-to-Nation relationship with First Nations; clearly, one Nation does not tax another Nation. Regarding jurisdiction, a sovereign nation should decide on its own tax scheme.
Regarding title to lands, the amount of compensation owed to First Nations for the last two hundred years, compounded by interest, must by far exceed the amount of income taxes that could be collected.
Meanwhile, Treaties pertaining to the limited amount of land that is reserve land have typically assumed zero taxation of First Nations.
- The first Euro-Indigenous Treaty, the Two-Row Wampum (1664), famously depicts two Nations moving independently in all respects. This was extended to the British with the Covenant Chain Treaty (1744). The Treaty of Niagara (1764) was negotiated independently with 25 First Nations in the same spirit.
- The Royal Proclamation of 1763 set forth that trade between Indigenous and non-Indigenous should be free and open, aside from any regulations made, such as the prohibition on purchasing land from First Nations.
- Treaty 3.5 of 1793 specified that Kanien’kehá:ka settlers could enjoy “undisturbed possession and enjoyment” of their territories in Brantford and Tyendinaga, and would be free of rents, fines, and services.
The United Province of Canada passed an 1850 Declaration guaranteeing general tax exemption for Status persons living on reserves or traditional territories not (yet) ceded to the Crown.
The tenor of historic treaties suggest that exemptions were intended not just for income tax but for on-reserve sales tax, excise taxes, and import tariffs as well.
Flanagan (2019) suggests that the income-tax-free status of reserves can assist them in promoting business development, much like tax-fee enterprise zones in China and other countries.
On the other hand, if it can be shown that tax revenues are being collected in order to purchase public goods which benefit First Nations, an argument could be made for them. The absence of federal income tax collection on reserve likely reduces the federal government’s sense of responsibility to provide public goods to reserve communities.
So far, we have discussed federal and provincial taxation of First Nations. First Nations can also tax their own members. We will discuss this in Chapter 28.
In our next chapter, we’ll take a look at Casinos and Cannabis, two industries that some First Nations have been involved in, both legally and illegally (from the point of view of contemporaneous Canadian law).
- Wolf Collar (2020), p. 33 ↵
- Parliamentary Budget Office (2017) ↵
- Parliamentary Budget Office (2017) ↵
- Parliamentary Budget Office (2017) ↵
- Assembly of First Nations (AFN) (2020) ↵
- Crown Representative (1964) ↵
- According to Loft (2019), these concerns were expressed at the 2018 Annual General Meeting of the AIAI (Association of Iroquois and Allied Nations) ↵
- Sutherland (2017) ↵