Don Indians pay taxes?

• Author: Fenwick, Fred
• Position: Do the banks?

Well it's that time of year again.

Every Canadian sits down with a form and, for the most part, truthfully declares to the Government of Canada exactly how much income they made last year, signs the form, and mails it off with a cheque for part of it. In many countries, the comment would be "Are you nuts?"

No, we're Canadians. And we do pretty much what we're told. What really burns us up is when someone else seems to be getting a better deal that the rest of us. So, do Indians pay taxes? If not, why not?

S. 87 of the Indian Act exempts the lands and the personal property (including wages) of a Band or an individual Indian, situated on a reserve, from taxes. So if you are an Indian receiving your pay on the reserve, you may not be subject to income tax. Yahoo!!

But the Feds are pretty stingy with their exemptions so there are a whole bunch of hoops to jump through. First, the exemption applies to "Indians" not all Aboriginal people. In an earlier column we discussed the differences between Indians, Inuit, Inuvialuit, and Metis people, so I will only note that the exemption applies to a sub set of Aboriginal people, not the whole group.

Next, the property has to be situated on the reserve. Exactly where the property is situated can be a tricky question if you are talking about the property that you have in the debt your employer owes you or income from an investment. The simplest case is if you were an Indian (most likely a Band member, but not necessarily) working for your Band Administration in any of the municipal type functions that modern Band Councils administer; such as office worker, snow plow operator, nurse, or teacher. Less obvious, but still eligible would be employees of a development company owned by the Band that was doing resource development such as oil and gas or agriculture on the reserve. A small owner-managed business like an electrician would also be eligible as long as the work was done and money paid on the reserve.

Those are the obvious ones. As soon as you start to get less Indian and arguably less situated on or connected to a reserve, the tax man starts to want his/her due. Corporations are not Indians so if you were to incorporate your business like many people do for purposes of planning or limited liability, you might destroy your exemption. If you were to do business off the reserve, or your bank was to invest in things off the reserve, it may make you ineligible as well.

So aside from that limited exemption...