In the event you suppose Indigenous folks do not pay tax, suppose once more

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There’s a standard false impression that Indigenous folks in Canada merely don’t pay tax, however that’s typically not true since so as to be exempt from tax, the earnings earned should be located on a reserve.

A current case, determined earlier this month, handled the exemption and the way it’s utilized. The case concerned an worker who’s a Haudenosaunee Iroquois Confederacy Treaty Indian from the Six Nations of Grand River in Ontario who lives on the reserve and works as a clerk at a hospital simply outdoors the reserve. She took the place that the earnings she earned from working on the hospital was exempt from tax.

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The worker is a “Status Indian” throughout the which means of the Indian Act. Beneath the act, the private property of an Indigenous particular person located on a reserve is exempt from tax. Prior jurisprudence has concluded that the employment earnings of such an individual is private property, and so if the taxpayer’s employment earnings from her work on the hospital was located “on a reserve,” it might be exempt from tax.

The aim of the exemption for earnings earned on a reserve, as articulated by the Supreme Courtroom, is to “preserve the entitlement of Indians to their reserve lands and to ensure that the use of their property on their reserve lands (is) not eroded by the ability of governments to tax, or creditors to seize.” Its function is “not to confer a general economic benefit.”

Within the current case, the important thing query was whether or not the worker’s earnings could possibly be thought-about to be earned on a reserve and, in that case, be exempt from tax. A 1991 Supreme Courtroom resolution held that whether or not earnings is located “on a reserve” is set primarily based on whether or not there are ample connecting components to the reserve.

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The court docket set out a two-step take a look at: determine the possibly related connecting components that join the earnings to the reserve, after which analyze these components to find out how a lot weight must be given to every of them.

Prior jurisprudence has established 5 connecting components which can be probably related within the context of figuring out whether or not employment earnings may be stated to have been earned on a reserve: the residence of the employer, the residence of the worker, the placement the place the worker is paid, the placement the place the work is carried out and the character of the companies carried out.

The choose famous that for the reason that central administration and management of the hospital didn’t happen on the Six Nations reserve, this argues for taxation. Alternatively, the worker lives on the reserve, a few 10-minute drive from the hospital, which argues for exemption from taxation. The worker was additionally paid by direct deposit to her checking account on the reserve, which additionally argues for exemption from taxation.

However issues received a bit extra difficult when evaluating the placement of the work and the character of the companies carried out.

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The worker carried out the overwhelming majority of her work on the hospital, which isn’t on the reserve, however on non-public land that was donated to the hospital in 1961. The worker took the place that the hospital land belongs to the Six Nations, having been given to them in 1784 below the Haldimand Proclamation in recognition of their service to the Crown throughout the American Revolution. She stated the proclamation gave the Six Nations all of the land inside six miles of the Grand River, which is a large swath of land described as being “approximately 9,000,000 acres, only five per cent of which is covered by the Six Nations reserve.”

The taxpayer produced a Google Earth map purporting to indicate that the hospital was inside six miles of the reserve, however, primarily based on the distances on the map and the map’s scale, it appeared the hospital might have been positioned about 8.4 miles from the reserve. Nonetheless, the choose felt this was irrelevant since he wasn’t being requested to resolve whether or not the hospital’s land rightfully belongs to the Six Nations, however whether or not the hospital itself is positioned on the reserve.

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The time period “reserve” is outlined within the Indian Act as a “tract of land, the legal title to which is vested in His Majesty, that has been set apart by His Majesty for the use and benefit of a band.” Whereas the choose was prepared, for the aim of the attraction, to simply accept that the hospital is positioned on disputed land, authorized title to the hospital land just isn’t vested in “His Majesty” and concluded it’s nonetheless not positioned on the Six Nations reserve, so the location-of-work issue argues for taxation.

The ultimate issue to be weighed was the character of the companies carried out. The worker’s function was to course of docs’ orders, reply telephones and name bells, do scheduling, order provides, relieve different staff on switchboard duties and transfer beds when required.

The hospital serves the encircling group, together with individuals who stay on the reserve and is certainly one of 5 hospitals within the space. Individuals dwelling on the reserve will typically go to whichever hospital is closest to the place they stay. There was no proof to counsel that the majority of the hospital’s sufferers got here from the reserve. Equally, solely three of the hospital’s roughly 100 staff lived on the reserve.

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The worker was unable to level to something in regards to the nature of the companies she carried out or the operations of the hospital that may in any method join her companies to the reserve. She felt that appreciable weight ought to be given to the truth that the hospital is on disputed land, however the choose famous that this reality “might have been relevant if the nature of (her) work had been closely tied to the reserve.”

Ultimately, the choose gave average weight to the worker’s residence and that of her employer, little weight to the place of cost and important weight to the placement and nature of her work. Based mostly on this, he discovered that the worker’s employment earnings was taxable.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

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