Thank you, Mr. Chair and honourable members of the committee.

Good morning, and thank you for having us here.

Thank you for the opportunity to appear today concerning the committee’s study examining tax revenues on first nation lands and how they might be placed under the control of first nations themselves, or better directed to increase resources available to first nations.

In our capacity as officials from the tax policy branch of the Department of Finance, we provide analysis, research and advice to the Minister of Finance on the Government of Canada's tax policy agenda.

In the area of indigenous tax policy, we are responsible for the negotiation and implementation of tax-related arrangements with interested indigenous groups and the day-to-day operations of these arrangements. We'd be happy to discuss the current government policies and priorities related to indigenous tax jurisdiction; however, we are not going to be in a position to speculate about future government policy.

Part of a fair fiscal relationship means supporting indigenous tax jurisdiction in a way that advances self-determination while also generating important revenues for community priorities. The federal government encourages and works with interested indigenous governments to exercise direct tax powers. Taxation by indigenous governments can help strengthen self-reliance while promoting good governance and political accountability between these governments and their citizens. It also makes the tax landscape in Canada more uniform.

Today, we have over 50 sales and personal income tax administration agreements with indigenous governments across Canada, which delivered about $70 million in revenues to those taxing governments in the last fiscal year.

I will speak briefly about a few of the key tax jurisdiction frameworks.

First is the first nations goods and services tax, also known as the FNGST, facilitated under the First Nations Goods and Services Tax Act. The FNGST is a tool that enables indigenous governments to voluntarily impose a broad-based value-added tax on their own lands under their own laws within their reserve or settlement lands. This tax is fully harmonized with the federal GST or, in the case of the harmonized provinces, the federal component of the harmonized sales tax.

Interested groups can choose to implement the tax when it is right for them through negotiated tax administration agreements between the federal government and interested indigenous governments.

Generally, everyone—that is, members of the indigenous community as well as non-members—will pay the FNGST where it applies. The rules of the FNGST are aligned with the GST. The FNGST is administered by the Canada Revenue Agency free of charge. Indigenous governments can use the revenues received through this framework as they see fit.

I'd like to stress that, in this way, the exercise of tax powers can be an important means for indigenous governments to generate their own independent revenues. Indigenous government tax revenues are not federal transfer funds or Indian monies under the Indian Act. Accordingly, indigenous governments have the discretion to apply tax revenues to their own priorities. The FNGST Act also facilitates the imposition of provincial-type direct taxes between willing provinces and territories and indigenous governments.

Second, and building on the principles of the FNGST framework, budget 2024 proposes to provide additional flexibility to indigenous governments seeking to exercise tax jurisdiction on their lands.

Specifically, it is proposed that indigenous governments would be able to enact a value-added sales tax, under their own laws, on only fuel, alcohol, cannabis, tobacco, and/or vaping products, referred to as the “FACT products”, within their reserves or settlement lands.

The proposed FACT sales tax would be analogous to the FNGST, including applying at the same 5% GST rate, but would be limited to fuel, alcohol, cannabis, tobacco and vaping products. For some communities, taxing these goods may be preferable to taxing the broad base of goods under the FNGST.

I'd like to acknowledge that the development of the proposed framework has been the result of extensive engagement with and work by indigenous partners since we began this process in 2022. In the near term, the focus will be on finalizing the relevant legislation to enable the FACT framework as well as to continue working with indigenous communities interested in implementing this new tool.

In addition to these value-added frameworks, the government has several personal income tax arrangements in place with self-governing indigenous groups, and remains open to negotiating more agreements along with facilitating similar arrangements between interested indigenous governments and provincial and territorial governments.

For the most part, the existing tools for indigenous jurisdiction are focused on direct taxation, where revenues raised on the indigenous lands are linked to incidence within those lands—that is, the tax is ultimately borne by the individuals living or consuming on those lands.

In conclusion, the federal government remains committed to negotiating mutually beneficial tax agreements with interested indigenous governments.

These tax arrangements can support self-determination through revenues that indigenous governments can invest in whatever matters most to their communities.

Again, thank you for the invitation to appear here today. I am here with two colleagues, Adam and Jack. We will appreciate any questions or discussion to come.

Thank you.