The First Nations Summit Fiscal Relations Secretariat was formed to support First Nations that are preparing to negotiate the tax and fiscal components of a Treaty. Essentially, the fiscal relationship that is negotiated as part of Treaty arrangements will determine a First Nation’s access to capital, whether it is able to receive its fair share of funding and the extent to which it is able enjoy the benefits of any jurisdiction, land or settlement cash.

Some of the major issues include:

	Tax treatment of: (a) First Nation individuals; (b) First Nation corporations
	Tax revenues available to First Nation governments
	Revenue caps
	OSR policy
	Determining transfer amounts

The First Nations Summit has been participating in the tripartite Fiscal Relations Working Group (FRWG) with Canada and British Columbia. The objective was to develop fiscal options that could be considered by the parties in the BC Treaty Process. Three fiscal options were developed at the FRWG:

1. The Incremental Jurisdiction Option (IJO)
2. The Flexible Fiscal Option (FFO)
3. The Local Jurisdiction Option. (LJO)

The flexible fiscal option most closely resembles current federal policy. Tax and fiscal provisions in current AIPs would easily accommodate the flexible fiscal option. They would not as easily accommodate the other fiscal options developed at the FRWG.

The Fiscal Relations Secretariat conducted detailed analysis of these three fiscal options. The analysis questions the ability of current federal policy to enable First Nations to maintain funding levels, exercise their authority, and facilitate economic growth. Based on analysis of the fiscal options, the following are some of the risks that have been identified with the flexible fiscal option, or current federal policy:

	Transfers are politically vulnerable to future cutbacks. Creates a system in which all “agreed-upon programs and services” are jointly funded;
	Transferred revenue jurisdiction is more vulnerable to future cutbacks. Many parameters of revenue sharing arrangements could be adjusted reducing transparency and making them more vulnerable to policy change;
	First Nation independence is jeopardized. Does not transfer sufficient control of programs and services (because of joint funding), which reduces decision-making power and ability of First Nation to respond to economic development opportunities;
	Transfers political liability for declining funding to First Nations. The federal government can reduce funding for services and leave First Nation governments to pay the political price; and,
	Does not support economic growth. Does not guarantee First Nations will retain the benefits of growth, nor does it provide proper access to capital or independence to attract investment. Economic growth should be used to help close the ‘comparability gap’. Without economic growth, First Nations will have to rely on transfers, which have not been effective at promoting comparability in the past.

First Nations should be aware of these risks in the tax and fiscal components of treaties. Supporting alternative fiscal options, such as an incremental jurisdiction model, can mitigate these risks to some extent.

Policy change is required in order to create an improved fiscal relationship that better meets all parties’ interests. In order to make policy change the following next steps should be taken:

	The Fiscal Relations Secretariat should work with First Nations to review this report and begin working with the Fiscal Arrangements User Model.
	All First Nations and especially the lead tables should work together to present common messaging on areas where policy change is required.
	The First Nations Summit should work together with other First Nation organizations, such as the Assembly of First Nations, to lobby for policy change.

<< back to top