Government consults on Budget 2024 commitment to expand opt-in tax jurisdiction for Indigenous governments

by ahnationtalk on July 15, 202444 Views

A fair fiscal relationship means supporting Indigenous governments to pursue tax jurisdiction that advances self-determination. Indigenous jurisdiction over their own taxation helps build stronger fiscal relationships by generating important revenues for Indigenous community priorities. This is an important part of reconciliation.

Today, the Department of Finance launched consultations on the Budget 2024 commitment to establish an opt-in framework for interested Indigenous governments to impose their own Fuel, Alcohol, Cannabis, Tobacco, and Vaping (FACT) value-added sales taxes. Expanding opt-in tax jurisdiction would enable Indigenous governments to better exercise their tax jurisdiction with more flexibility.

The draft legislative proposals would enable Indigenous governments to enact a value-added sales tax, under their own laws, on FACT products within their reserves or settlement lands. The FACT sales tax would work in a similar manner to the existing First Nations Goods and Services Tax (FNGST), including by applying at the same five per cent GST rate, but would be limited to FACT products. The draft legislative proposals also include other proposed amendments to the First Nations Goods and Services Tax Act to streamline administration of taxes under that Act.

The federal government is also encouraging Indigenous governments to indicate their interest in being listed on Schedule 3 as part of the tabling of the legislation. Being listed on Schedule 3 would be an enabling step towards the implementation of a FACT sales tax, but would not result in the immediate application of the FACT tax, nor obligate Canada or listed Indigenous governments to negotiate a tax administration agreement.

Indigenous governments, organizations, and associations, as well as all Canadians, are invited to share feedback on these draft legislative proposals, as well as interest in being listed on Schedule 3, by emailing FACT-CACT@fin.gc.ca by August 30, 2024.

Quick facts

Over the past thirty years, laws enacted in Canada to give Indigenous governments the ability to impose direct taxes within their reserves or settlement lands have benefitted Indigenous communities.
- Existing Indigenous government taxes include value-added sales taxes, personal income taxes, real property taxes, and certain provincial-type commodity taxes.
- Indigenous tax powers are generally provided through specific legislation, such as the federal First Nations Goods and Services Tax Act, or in the legislation that gives effect to modern treaties, comprehensive lands claims, or self-government agreements.
Under the FACT framework, Indigenous governments would have the choice to levy FACT sales taxes and would have the flexibility to choose any, or all, of the FACT products they wish to tax.
- These taxes would be implemented through negotiated tax administration agreements between the federal government and interested Indigenous governments.
- FACT sales taxes would apply to all persons buying the taxed FACT products sold on the lands of Indigenous governments that opt-in. On products for which an Indigenous FACT sales tax applies, the federal GST or federal component of HST would not apply.
Budget 2022 announced the federal government’s intention to engage with interested Indigenous governments and organizations on a framework for the negotiation of agreements that would support interested Indigenous governments to implement a FACT sales tax within their reserves or settlement lands.
- From August 9, 2022, to June 30, 2023, the Department of Finance held a first phase of consultations to hear from interested Indigenous governments and organizations, through the Engagement on Framework Development for Fuel, Alcohol, Cannabis and Tobacco Sales Tax Arrangements with Interested Indigenous Governments
Following this first phase of extensive engagement with Indigenous organizations and interested Indigenous communities, Budget 2024 announced the federal government’s intention to bring forward legislation for an opt-in FACT sales tax framework.

Government consults on Budget 2024 commitment to expand opt-in tax jurisdiction for Indigenous governments

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