Analysis of the positive tax law affecting First Nations in the context of Canadian tax policy
Oliphant, Joel J.
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Section 87 of the 'Indian Act'1 contains a tax exemption for 'Indians' and 'bands' insofar as their property is located on a reserve. This thesis explores the historical origins, justification, and the scope of the 'Indian Act' tax exemption, and considers its effect on Canadian tax policy. For any tax system to operate fairly and efficiently, all citizens within the subject jurisdiction must be chargeable to tax at a 'pro rata' rate. This idea is borne out within the Canadian tax system itself, which uses domicile to determine whether an individual should be required to bear a horizontally and vertically equitable tax burden. Having said that, there is an historical and legal rationale for exempting reserve-based Indians from the tax structure, whereby reserved lands are treated as extra-territorial entities, separate from Canada for tax purposes. At present, band councils are not legally entitled to levy a tax on their reserve residents, and until such time as First Nations are in a position to 'self-govern', without relying solely upon federal transfer payments, Canada's tax system can never be truly equitable or efficient. 1The 'Indian Act', RSC 1985, c. I-5.