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Income Tax Legislation

At the Annual Meeting of the National Indian Brotherhood in August, 1972, at Edmonton, the Brotherhood unanimously took the position that it is a basic right of Indian people to be exempt from taxation.

The Federal and Provincial Governments were informed, but no positive steps have been taken, particularly the Federal Government, to implement the resolution of the National Indian Brotherhood. The result being that Indian people who refuse to pay taxes are being reassessed and prosecuted.

The relevant sections of the Indian Act are Sections 87 and 90. These sections are subject to interpretation and the interpretation placed upon the sections by the Department of National Revenue has changed somewhat over the years. Subsequent to 1967 a significant change has taken place in the thinking of the Department of National Revenue about the taxing of the Income of Indian people.

It is abundantly clear that the legislation as it presently exists can be interpreted so that the wishes of the Indian people can be met, however, failing in that a change in legislation would be necessary to clearly reflect the basic right of Indian people as expressed in the resolution of the National Indian Brotherhood.

Section 87 of the Indian Act specifically exempts from taxation "personal property of an Indian or a Band situated on the reserve". Section 90 of the Indian Act says that "for the purposes of Section 87 personal property purchased by the Government by Indian money or by money appropriated from Parliament for the use and benefit of the Indians or monies given to the Indian under a Treaty or Agreement between the Band and the Government shall be deemed always to be situated on a reserve.

It can be clearly shown and there has never been any argument made that income is personal property within the meaning of the terms used in Section 87 and 90 of the Income Tax Act. The basic problem with these sections is the situs or the location of the Income of the Indian person, I.E., whether the income is located on a reserve or off of a reserve.

The matter can be put in to perspective if the topic is broken down into four headings and each one explained briefly:

(1) Indian domiciled and having their principal place of residence on reservations and have made their income from employers also domiciled on Indian reservations.

(2) Indian people employed by Indian organizations, Government organizations, Education Institutions, the purpose of the employment being strictly for the benefit of Indian people. These people however need not have their principal place of residence or domicile on a reservation nor do they have the offices of their agencies or companies located on

First Nations Leaders With The Queens' Representatives
First Nations Leaders with the Queens' Representatives

Income Tax Legislation

Indian reservations.

(3) Indian people employed by companies or organizations off of the reservation, such companies having no connection with Indians or Indian reservations however the Indians themselves are resident and domiciled on Indian reservations.

(4) Indian people living off of the reserve and employed by organizations other than Indian oriented organizations and having their domicile and place of residence off of the reserve.

With regard to category number one, there has never been any difficulty with the Department of National Revenue. It has always been clear from the section and from the policy of the Department that the transaction took place on the reserve and is clearly within Section 87.

Difficulties arise with regard to the category of persons mentioned in Section 2. The interpretation of the Department of National Revenue as set out in their Interpretations Bulletin - 62, dated August 18th, 1972 is that the location of the income is at the place where the services are performed.

Thus, the physical presence of a person would have to be on the reservation before he would be exempt from taxation.


It has been the consistent policy of the Department when dealing with Indian organizations that the amount of income subject to taxation should be directly related to the amount of time the person spends on the reserve. Thus, as a field worker for the Federation of Saskatchewan Indians could establish that 80% of his time was spent working on reservations then 80% of his income would not be subject to taxation under the provisions of the Income Tax Act.

It is the submission of the Federation of Saskatchewan Indians that a broader interpretation of location of income should be adopted inasmuch as the total purpose of organization such as the Federation of Saskatchewan Indians is to work for the benefit and improvement of Indian people throughout the Province and throughout the Dominion of Canada.

It is equally as important to have capable people in your organization working in offices in cities to further your aim, as in many cases it is to have people physically on reservations communicating directly with Indian people.

If the direct results of the employment can be related directly back to Indian people on Indian reserve communities it is our submission that the income should be personal property situated on a reserve for the purposes of the Income Tax Act.

It should again be reiterated at this point that to achieve this end it would not be necessary to change legislation and all that would be necessary would be to change the policy of the Department of National Revenue.

There is a further group of people under the second heading that are perhaps in a somewhat different position than people working with Indian organizations, specifically those Indian people employed at residential schools.

In Saskatchewan, these schools, are in all instances located on Crown land and these people are paid out of Federal money. Since approximately 1969 these people have been subject to taxation. Prior to that time it was the policy of the Department of National Revenue to treat these people as exempt from taxation.

It is our submission that people employed in such situations fall clearly in the jurisdiction of Section 90 and that the income that they received from their employment is personal property from "money appropriated by Parliament for the use and benefit of Indians" or "personal property given to Indians or to a Band under a Treaty or Agreement between a Band and Her Majesty".

This type of property by virtue of Section 90 shall be deemed always to be situated on a reserve. It is beyond question that the payment of these people is made from money appropriated by Parliament and also it is clear that under the Treaties made with the Indians, education was guaranteed to Indian people.

The particular circumstances of category number three are presently before the courts at the insistence of the Department of National Revenue. A very substantial brief was presented to the Government on January 15th, 1971 regarding the tax liability of the Caughnawaga Band members. This brief was directed to the Honourable H.W. Gray who was Minister of National Revenue at that time and a subsequent reply from him and his Department rejected this argument.

The Treaties

Even before 1870 Plains Indians knew whites wanted their lands. They knew of the experience of the American West, of broken treaties and of Indian wars. Plains Indians were, therefore, uneasy about the incoming settlement. The Federal government was warned by various Indian leaders not to send settlers "until a clear understanding has been arrived at, as to what our relations are to be in the time to come."

A delegation of Manitoba Indians prompted negotiations or treaty numbers 1 and 2. Mr. W.M. Simpson was appointed treaty commissioner. Early negotiations revealed that whether or not the treaty with the government was accepted or not, white settlement was inevitable.

The result was hardly a "negotiation" of treaty. Leaders were issued an ultimatum in effect, i.e., either reject the treaty and have your lands taken by whites, or accept treaty formally cede your lands, and have your land settled by whites.

Minor concessions only were the result of the treaty "negotiations". For example, at the time of signing treaty number 3, the leaders were able to negotiate for more land for reserves (from 160 acres per family of five to 1 square mile per family of five) and higher annuities. Yet the Indians were not in an equal bargaining position with the government. In addition to the "take or leave it" attitude regarding treaty by the Federal government, the buffalo were gone and, therefore, the Indians were starving. Under these conditions chiefs more readily accepted treaty than would otherwise have been the case.

After the signing of treaties number 1 and 2, dissatisfaction on the part of the Indians was apparent. The Indian culture follows the oral tradition that holds verbal promises to be as binding as written promises. During negotiations verbal promises were made, but these promises were not formally made part of the treaty. To alleviate the dissatisfaction caused by this misunderstanding, these verbal promises were formally made part of the treaties by an order in Council in 1875. This precedent is important, in that it is clear legislative recognition of the fact that the verbal promises made are considered as substantive as the written terms of the agreement itself.

Quoted from a paper prepared by the Rights and Treaty Research Division of the F.S.I.

The substance of the argument is that income from employment should be regarded for the purposes of the Income Tax Act as situated at the residence and principal domicile of the employee. It is clear from this point of view that persons living on a reserve and having their principal residence on a reserve would not be subject to taxation on income which they earn off of the reserve.

The group of persons mentioned in item four pose a particularly difficult type of problem and would require a moral commitment on the part of the Government to deal fairly with the Indian people under the terms of the Treaties as they were understood by Indian people at the times of the signing.

Income taxation was unknown at the time of Treaty signing and in particular, Income Tax Act was unknown in Canada until 1917. It is most interesting to note with regard to this that Taxation is in fact, mentioned as a specific issue during the negotiating of Treaty Number 8. Refer to a letter dated September 22nd, 1899 directed to the Honourable Clifford Sifton and signed by his Treaty Commissioners David Laird, J.H. Rost and J.A.J. McKenna. This letter may be found in reprints of Treaty Number 8 available at the Queen's Printer, catalogue number C I 72-0866. The above mentioned letter contains the following sentences which I will quote:

"There was expressed at every point the fear that the making of the Treaty would be followed by the curtailment of the hunting and fishing privileges, and many were impressed with the notion that the Treaty would lead to taxation and enforced military service."

"We assured them that the Treaty would not lead to any forced interference with their mode of life, that it did not open the way to the imposition of any tax, and that there was no fear of enforced military service."

It can be seen clearly therefore from the negotiations at least with regard to Treaty Number 8, that the matter was discussed, that promises were given to the Indian people and that these promises were not incorporated in the terms of the Treaty. We submit that it can be inferred from the specific methods of taxation in this particular Treaty that in all likelihood that the matter was discussed in previous negotiations of Treaties of the Indians of the Plains.

To accomodate this particular group of people significant changes would be necessary in the Indian Act and the Income Tax Act to give effect to the promises made in Treaty negotiations.