Towards the equality of all Canadian taxpayers

Introduction

The starting point of the intervention of the Canadian Taxpayers Federation (CTF) in the Benoit case is the CTF's belief in the equality of all Canadians, in matters of taxation and in all other matters. The CTF believes that all federal and provincial laws should apply equally to all Canadians, regardless of race or ethnicity or ancestry, period. As stated in the CTF's Application to intervene in this case:

"The fundamental objective of the Federation in this action and in its public activities is to seek to uphold the principle that all Canadian taxpayers should be treated equally before and under the law with the right to the equal protection and equal benefit of the law without discrimination based on race, national or ethnic origin, colour or religion."

Initially the CTF's application to intervene was denied by the trial judge, Federal Court Justice Douglas Campbell. However, the Federal Court of Appeal overturned the trial judge and granted the CTF leave to intervene at trial, as well as in any appeal.

The Court of Appeal noted that the Defendant, Canada, did not raise the issue of whether all Canadians should be treated equally in matters of taxation. The Court of Appeal ruled that the CTF had raised this public interest issue, and that the CTF's intervention would serve the interests of justice.


The controversial "tax assurance"

Signed in 1899, Treaty 8 itself does not say anything about tax, which is a word that did not even exist in the Cree and Dene languages of the Indians who agreed to this treaty. The only taxes in existence in Canada in 1899 were duties on some imported products, and property tax on properties owned in municipalities. After Treaty 8 had been concluded and signed, the Commissioners who negotiated this treaty on behalf of the federal government wrote a report to Clifford Sifton, Superintendent General of Indian Affairs in Ottawa. One very controversial paragraph in this Report reads as follows:

"We assured them that the treaty would not lead to any forced interference with their mode of life, that it did not open the way to the imposition of any tax, and that there was no fear of enforced military service. We showed them that, whether treaty was made or not, they were subject to the law, bound to obey it, and liable to punishment for any infringement of it. We pointed out that the law was designed for the protection of all, and must be respected by all the inhabitant of the country, irrespective of colour or origin; and that, in requiring them to live at peace with white men who came into the country, and not to molest them in person or in property, it only required them to do what white men were required to do as to the Indians."

At trial, the Indian Plaintiffs argued that the Crown promised, and the Indians understood, that they would be exempt from direct taxation in the future.

The Defendant Canada argued that the Crown promised that the treaty would not open the way to the imposition of any tax, meaning that the treaty itself would not be a taxing instrument. Canada argued that the treaty was not a vehicle for paying taxes, and that the Indians understood that they would have to obey all the laws of the land, including the legal obligation to pay any future taxes that might be imposed on all Canadians.

The intervener Alberta argued that the tax assurance applied only to fishing licences: the Crown promised, and the Indians understood, that they would not need to acquire fishing licenses.


A finding of fact: no tax exemption was promised

After considering all of the evidence, including numerous historical documents and the testimony of witnesses, the trial judge found as a fact that there was no common intention to found a promise of a tax exemption (paragraph 181). The trial judge further ruled that a tax exemption promise would have been inconsistent with existing law and with the commissioners' mandate (paragraph 199), and that a tax exemption promise "was, in fact, not made" (paragraph 273). The trial judge concluded that there was no common intention, as between commissioners and aboriginal people, to found a promise of a tax exemption as a term of the Treaty.

The trial judge rejected the Plaintiffs' argument that the Crown had promised a tax exemption. The trial judge also rejected the arguments of Canada and Alberta.

However, the trial judge went on to conclude, on the basis of certain evidence of oral history, that the aboriginal people understood the commissioners to have promised a tax exemption. The question which the trial judge then asked, at paragraph 320, was "who takes responsibility for this misunderstanding?"

The trial judge ruled that the Crown is responsible for this misunderstanding, and this misunderstanding must therefore form the basis of an enforceable treaty right to be exempt from all taxes at all times.


A conclusion not supported by the facts

The CTF agrees with the principal argument of Canada, the Appellant and Defendant in this case. In its written factum submitted to the Federal Court of Appeal, Canada argues that the trial judge erred in concluding that there is a treaty right to be exempt from taxation, because the trial judge found as a fact that in 1899 the federal government commissioners did not promise the Cree and Dene Indians an all-encompassing tax exemption.

The trial judge found that the Indians misunderstood, and that the Crown is now responsible for this misunderstanding. In order to uphold the honour of the Crown, this misunderstanding must form the basis of an enforceable treaty right to a complete tax exemption.

However, the principles of treaty interpretation set out by the Supreme Court of Canada require courts to look at the common intention of the Crown and the Indians, and to consider the interests of both parties. The trial judge, having found the absence of common intention, erred in using the concept of "the honour of the Crown" to create an enforceable treaty right based solely on the misunderstanding of the Indians.

As an intervener in this appeal, the CTF argues that the trial judge erred by:

failing to properly consider the interests of both the Crown and of the Indians;

failing to consider the principles which govern the application of revenue law to Indians;

failing to consider the purpose of aboriginal and treaty rights recognized and affirmed by section 35(1) of the Constitution Act, 1982; and

failing to consider the rights and interests of all Canadian citizens.

The interests of the Crown

The trial judge gave no weight or consideration to the interests of the Crown at the time the tax assurance was made in 1899. But when one considers the interests of the Crown, it is clear that no blanket exemption on taxation would have been made.

In R. v. Sioui, [1990] 1 S.C.R. 1025, the Supreme Court of Canada ruled at page 1069 that a meaningful reconciliation of interests must give weight not just to those of the aboriginal people, but also to the interests of the Crown:

"Even a generous interpretation of the document, such as Bisson J.A.'s interpretation must be realistic and reflect the intention of both parties, not just those of the Hurons. The Court must choose from among the various possible interpretations of the common intention the one which best reconciles the Hurons' interests and those of the conqueror." [Emphasis added]

Despite this guidance, the trial judge limited himself to considering only one interest of the parties: the desire of both the Crown and the Indians to negotiate a successful treaty. At paragraph 332 the trial judge states:

"The value being expressed by Justice Lamer is that reconciliation is required in resolving competing treaty interpretation interests between Aboriginal People and the Crown. In applying this value to the present case, there is no doubt that both the Crown and the Aboriginal People wanted to negotiate a successful treaty; I find that now the primary objective is to attempt to achieve this result by reconciling the interests of both Canada and the Plaintiffs with respect to the interpretation of the tax term found." [Emphasis added]

The trial judge considered only the Crown's interest in concluding a treaty, without regard to other Crown interests which were expressly identified elsewhere in his decision:

The Crown's interest in the Treaty's terms being consistent with and not in excess of the terms concluded in the other treaties made prior to 1899, combined with the fact that no tax exemption had been given in any other treaty (paragraphs 75 and 201);
The Crown's interest in having the general law of the land apply to all residents of Canada. A clear representation was made to the aboriginal people that whether a treaty was concluded or not, the general law of the land would apply to them as it would to all residents of Canada (paragraph 28);
The Crown's interest in limiting its costs arising from the Treaty (paragraph 71); and
The Crown's interest in the Treaty being compatible with the Indian Act (paragraph 71).
At paragraph 201, the trial judge found as a fact that previous treaties did not contain a blanket tax exemption:

"I put weight on Dr. Irwin's opinion that Commissioner Laird would not have promised a tax exemption…it seems correct to me that such a person sent to negotiate a treaty on the part of Canada would not promise what had never been promised before…" [Emphasis added].

Another Crown interest identified by the trial judge was that of having general laws, which apply to all Canadian citizens, be applied also to the aboriginal people, regardless of whether a treaty was concluded or not. At paragraph 28, the trial judge cites from the historical account of Charles Mair, who reported that Commissioner Laird addressed the aboriginal representatives as follows:

"The treaty is a free offer; take it or not; just as you please. If you refuse it there is no harm done; we will not be bad friends on that account. One thing Indians must understand, that if they do not make a treaty they must obey the laws of the land - - that will be just the same whether you make a treaty or not; the laws must be obeyed." [Emphasis added]

This passage demonstrates that the Crown was interested in having Indians be subject to all laws, including revenue laws. This is consistent with a Crown interest in treating all citizens fairly and equally, except where special considerations are necessary to protect Indians "qua Indians" ("as Indians"), or to protect lands granted under treaty.

A further Crown interest which the trial judge identified, but did not take into consideration, is the Crown's interest in limiting the costs arising from the treaty. The trial judge notes at paragraph 71 that:

"Treaty negotiations occurred in light of two secondary objectives: first, the Crown wished to enter into Treaty with Aboriginal People while limiting its own costs, and, second, it wished to ensure that the terms of the Treaty remained compatible with the Indian Act." [Emphasis added].

In light of the Crown's clear goal of limiting its costs, it would not make any sense for the Crown to forever prevent itself from imposing tax on Treaty 8 Indians who would someday work in the mainstream commercial economy.

As the trial judge noted at paragraph 71, one of the objectives of the treaty negotiation was to "ensure that the terms of the Treaty remained compatible with the Indian Act." The interests of the Crown would not be served, therefore, by a treaty term which exceeded or contradicted the terms of legislation dealing with the same issue.

In 1899, the Indian Act addressed the issue of tax exemptions, and clearly limited the exemption to the real or personal property of an Indian situated on a reserve. Indeed, section 64 of the Indian Act in force in 1899 contemplated that outside the reserve, aboriginals would be treated equally with other citizens:

"64. No Indian or non-treaty Indian shall be liable to be taxed for any real or personal property, unless he holds real estate under lease or in fee simple, or personal property, outside of the reserve or special reserve, in which case he shall be liable to be taxed for such real or personal property at the same rate as other persons in the locality in which it is situated." [Emphasis added].

A purported treaty term which exempts Indians from tax for all time and in every situation is clearly not compatible with the provision of the Indian Act which addresses this topic. The trial judge erred by ignoring the implications of this Crown objective when he tried to give meaning to the tax assurance that was given.


The interests of the Indians

The trial judge discussed the Indians' goals and interests at paragraphs 82 to 96 of his decision. Alberta's witness Dr. Ens testified that the Indians were concerned about cultural and economic survival, and preserving their hunting and fishing rights and way of life. The Plaintiffs' witness Dr. Irwin testified that the Indians' goals were liberty, autonomy, independence, and preserving their ability to support themselves and to move around. At paragraph 192, the trial judge summarizes the Aboriginal interest in the words of Keenooshayo: "The Indian loves his way of living and his free life."

The trial judge held that "there was a mix of concerns" involving both the pursuit of autonomy and economic and cultural survival. But absent from this "mix of concerns" is any evidence of an Indian interest in being exempt from taxes while living and working in Canada's mainstream society and economy. The Plaintiff Indians in this case presented no evidence at trial that the Treaty 8 Indians were seeking or expecting the right to be exempt from taxes while owning property outside of Reserves.

In light of the need to interpret aboriginal and treaty rights under s. 35(1) of the Constitution Act in a purposive manner (discussed in greater detail below) what purpose would be served by granting the descendants of Treaty 8 Indians a tax exemption while participating in the mainstream commercial economy?

The Crown's intention was that Treaty 8 Indians should be treated equally with other Canadians in all respects, except for matters relating to reserves and to traditional activities such as hunting, fishing and trapping.

Using a misunderstanding as the basis for a blanket exemption from taxation is inconsistent with the interests of the Crown, and with the interests of the Indians, in 1899. The Indian Act in force in 1899 already provided exemptions regarded as necessary to Indian Status.


Revenue laws apply to all Canadians

The Supreme Court of Canada held in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, that general laws, including revenue laws, should apply to Indians, unless those laws purport to affect them "qua Indians." In Nowegijick, Dickson C.J. held at page 36:

"Indians are citizens and, in affairs of life not governed by treaties or the Indian Act, they are subject to all the responsibilities, including payment of taxes, of other Canadian citizens." [Emphasis added].

In other words, aboriginal people will be considered full members of Canadian society with all that that entails, unless the Indian Act, a treaty right, or other aboriginal rights are called into play to affect their "Indian-ness."

Historically, the purpose of tax exemptions for Indians was to shield them from exploitation, and to protect their treaty entitlements such as Reserve lands. In Mitchell v. Peguis Band, [1990] 2 S.C.R. 85, the Supreme Court of Canada held at page 131 that Indian Act exemptions from taxation, and protection from civil process, were for the object of protecting the reserve lands obtained through the treaty process:

"…the historical record makes it clear that ss. 87 and 89 of the Indian Act, the sections to which the deeming provision of s. 90 applies, constitute part of a legislative "package" which bears the impress of an obligation to native peoples which the Crown has recognized at least since the signing of the Royal Proclamation of 1763. From that time on, the Crown has always acknowledged that it is honour-bound to shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians, i.e. their land base and the chattels on that land base." [Emphasis added].

The honour of the Crown, therefore, is involved in the protection of the Indians' land base, and their status as Indians. Therefore the honour of the Crown does not require the Crown to extend a perpetual and all-encompassing tax exemption to the descendants of the Treaty 8 Indians. Doing so goes beyond any concept of protecting the Treaty 8 people from laws which affect them "qua Indians," or otherwise impact their treaty entitlements.

The trial judge has ignored the principles set out by the Supreme Court of Canada that Indians should not be deemed to have special status or privileges once they have entered the commercial mainstream. LaForest J. stated in Mitchell:

"When Indian bands enter the commercial mainstream, it is to be expected that they will have occasion, from time to time, to enter into purely commercial agreements with the provincial Crowns in the same way as with private interests. The provincial Crowns are, after all, important players in the market-place. If, then, an Indian band enters into a normal business transaction, be it with a provincial Crown, or a private corporation, and acquires personal property, be it in the form of chattels or debt obligations, how is one to characterize the property concerned? To my mind, it makes no sense to compare it with the property that enures to Indians pursuant to treaties and their ancillary agreements. Indians have a plenary entitlement to their treaty property; it is owed to them qua Indians. Personal property acquired by Indians in normal business dealings is clearly different; it is simply property anyone else might have acquired, and I can see no reason why in those circumstances Indians should not be treated in the same way as other people.
…..

I think it can be seen that any interpretation of s. 90(1)(b) that sees the purpose of that section as extending beyond that of preventing non-natives from interfering with property that ensures to Indians as a result of the Crown's obligations under treaties and ancillary agreements, gives a novel and unprecedented extension to the protections that have up to now been conferred by the Crown on the property of Indians. Property acquired pursuant to agreements with a provincial Crown and an Indian band will fall to be protected, regardless of situs, simply because it has been acquired by an Indian as opposed to a non-native citizen. The question whether the property has its paramount location on reserve lands, or is property to which Indians have an entitlement qua Indians will be irrelevant. As I see it, if Parliament had intended to cast aside these traditional constraints on the Crown's obligations to protect the property of Indians, it would have expressed this in the clearest of terms. I am loathe to conclude that this result can be made to rest on the strength of a supposed ambiguity in s. 90(1)(b), which, as I have suggested above, can only arguably be an ambiguity if one turns a blind eye to compelling historical and textual arguments." [Emphasis added]

In the same way, the Federal Court of Appeal in Shilling v. MNR, [2001] 4 F.C. 364 (C.A.) also noted the distinction to be made where taxation applies to aboriginals in the "commercial mainstream" as opposed to those employed in activities "integral to the life on the reserve."

The trial judge's declaration of an exemption from tax "at any time for any reason" goes well beyond what LaForest J. in Mitchell described as the traditional Crown obligations to protect the property of Indians. Any tax exemption, to be valid, must be specifically linked to the objective of protecting Indian reserve lands, and other property or rights bargained for under the Treaty, or otherwise related to "their ability to maintain a traditional way of life in the lands reserved for their use."

The passage from Mitchell, quoted above, shows that the reasonable interpretation of the tax assurance is one which is consistent with protecting the aboriginal people's "entitlements" under the treaty. Accordingly, any exemption from taxation which may exist does not extend to Treaty 8 beneficiaries participating in the commercial mainstream of Canada, while residing off reserve.


The purpose of aboriginal and treaty rights

Aboriginal and treaty rights, which are recognized and affirmed in section 35(1) of the Constitution Act, should be interpreted according to their purpose, which is the preservation of aspects of traditional aboriginal culture. In R. v. Sparrow, [1990] 1 S.C.R. 1075, the Supreme Court of Canada held at page 1106:

The approach to be taken with respect to interpreting the meaning of s. 35(1) is derived from general principles of constitutional interpretation, principles relating to aboriginal rights, and the purposes behind the constitutional provision itself.
. . . .
The nature of s. 35(1) itself suggests that it be construed in a purposive way.

When the trial judge declared that the descendants of the Treaty 8 Indians do not have to pay any taxes at any time for any reason, he failed to consider the purpose of aboriginal and treaty rights. An asserted treaty right, to be valid and enforceable, should advance or preserve aboriginal culture. In interpreting treaties, courts should apply a purposive interpretation, with a view to protecting the interests of aboriginals "qua Indians" (as Indians) and with a view to preserving aspects of aboriginal culture and identity. Being exempt from taxation while living in Canadian society and working in the commercial mainstream economy has nothing to do with preserving aboriginal culture or identity.


Rights are not absolute

In R. v. Badger, [1996] 1 S.C.R. 771, the Supreme Court of Canada stated at page 814 that aboriginal and treaty rights are not absolute, and may be overridden:

". . . Indian and treaty rights are like all other rights recognized by our legal system. The exercise of rights by an individual or group is limited by the rights of others. Rights do not exist in a vacuum and the exercise of any right involves a balancing with the interests and values involved in the rights of others."

In the same way, the Supreme Court of Canada in R. v. Sparrow, [1990] 1 S.C.R. 1075, held at page 1107 that "rights that are recognized and affirmed are not absolute," and set out a test by which the infringement of aboriginal rights can be justified.


Fairness for all

As all Canadian citizens share in an equal entitlement to benefit from government programs and services, it follows that all Canadians citizens ought also to share in an equal obligation to contribute to those programs and services through their taxes.

When one group of people receiving government programs and services is exempted from taxation, it necessarily follows that all Canadians who do not belong to this exempted group are required to pay higher taxes, or more taxes, which is manifestly unfair.

Indians who earn money in and from Canada's mainstream commercial economy, and who benefit from government programs and services, ought not to be exempted from joining their fellow citizens in contributing to those same programs and services. Therefore, all Canadian taxpayers in the mainstream commercial economy should be treated equally. The legislative objective of taxation equality should inform the meaning to be given to any alleged treaty term.

In summary, the decision of the trial judge is not consistent with the principles of aboriginal law, constitutional law, and treaty interpretation as set out by the Supreme Court of Canada. Nor did the trial judge consider principles of fairness, and that rights are not absolute.


Implications for Canada if this decision is not overturned

If the Benoit decision is not overturned on appeal, some individuals will enjoy a tax advantage over their fellow Canadian citizens, based on their ancestry.

In practice, a total tax exemption (as granted by the trial judge) would mean descendants of the Treaty 8 Indians would pay no personal income tax (federal or provincial), no GST, no provincial sales tax, no fuel tax, and no taxes on alcohol, tobacco, property, or anything else.

In regards to the mainstream commercial economy, federal officials warn that chaos will result if the trial decision is not reversed. As commercial importers of gas, descendants of the Treaty 8 Indians could avoid the 10 cents/litre federal fuel tax, easily undercutting any competition. They could sell cigarettes at $12.35 per carton less than competitors.

Operating a business as a sole proprietor, a descendant of the Treaty 8 Indians would not pay tax on his business profits, giving him a huge advantage over non-Indian businessmen. The 6.1% federal customs duty imposed on cars from countries other than the U.S. would not have to be paid by a descendant of the Treaty 8 Indian, who could sell Asian and European cars for 6.1% less than other car dealerships. Descendants of the Treaty 8 Indians can exercise this "right" to an all-time, all-place tax exemption throughout Canada - not just in the Treaty 8 area which covers northern Alberta and parts of B.C., Saskatchewan and the Northwest Territories.

Two neighbours, living side by side, both benefit from schools, hospitals, roads, bridges, a sewage system, garbage collection, airports, national defense, universities, clean drinking water, etc. When one of those two neighbours is not required to pay any tax, tensions will inevitably arise.

Not only is a tax exemption based on ancestry unfair, but it won't help Indians to succeed in the broader Canadian economy. Canada's federal and provincial governments already spend approximately $10 billion per year on aboriginal programs, which seems to do little to improve the terrible social and economic conditions which exist on many reserves.

Tax exemptions which already exist on Indian reserves have not solved these problems. Why would extending a tax exemption to the descendants of Treaty 8 Indians off-reserve do anything but further segregate them from Canadian society?

In short, if the Benoit decision is not overturned, it will in fact create a significant advantage for the descendants of the Treaty 8 Indians over all other Canadians - both aboriginal and non-aboriginal - who are not descended from the Treaty 8 Indians.

Enjoying a tax exemption while living and working in the commercial mainstream economy has nothing to do with preserving aboriginal culture. Thinking of a native lawyer in Edmonton, or a native accountant in Toronto, or a native banker in Calgary, or a native doctor in Halifax - why should any of these individuals be exempt from taxation?

All Canadians have access to federal and provincial government programs: those who are descended from the Treaty 8 Indians, and those who are not. Therefore, it is manifestly unfair if one group of Canadians can be exempted, on the basis of ancestry, from the responsibility of contributing to those programs.

Further, the exemption of one group of people necessarily means that all other Canadians must pay more taxes, which is unfair.


Treaty rights, not ancestry?

The trial judge stated, at paragraphs 363 and 368, that this case has nothing to do with race or ancestry, because this case concerns treaty rights.

The trial judge ignores the fact that an individual, in order to claim and exercise a treaty right, must be able to demonstrate that she or he is descended from the Treaty 8 Indians. Treaty rights cannot be bought or sold or earned. Instead, they are passed down through ancestry, from generation to generation. With few exceptions, treaty rights are based entirely on ancestry. This means that a treaty right to be exempt from tax is also, in fact, a right to be exempt from tax that is based on ancestry.

Treaty rights are based on ancestry, and the tax exemption granted by the trial judge will be conferred to people - or withheld from people - on the basis of their ancestry.

Therefore, saying "this concerns treaty rights, not ancestry" is like saying "this concerns vehicles, not cars."


The big picture

Even if the Federal Court of Appeal, and potentially the Supreme Court of Canada, rule that the trial judge decided the Benoit case incorrectly, much work remains to be done before the goal of taxpayer equality is achieved.

If the trial judge's decision in Benoit is overturned, this will be a positive development for all Canadian taxpayers. But the reversal of this divisive and destructive decision would be merely a milestone in the long journey towards the equality of all Canadian citizens.

To this end, the CTF launched the Centre for Aboriginal Policy Change (the Centre) earlier this year. The Centre's purpose is to monitor, research and offer alternatives to current aboriginal policy, and to analyze the impacts of court decisions. The Centre's guiding principles are: support for individual property rights, equality, self-sufficiency, and democratic and financial accountability.

The Centre's five-fold mandate is:

1. Demand Accountability for Money Spent: Billions of tax dollars are spent by governments each year - with little accountability - in a seemingly futile attempt to help improve conditions for Canada's aboriginal people;

2. Thoroughly Examine Proposed New Treaties: New treaties being signed along the lines of the Nisga'a template will cost taxpayers untold billions of dollars. In addition, existing treaties are being reopened. Land ownership and resources in Canada are increasingly becoming a Pandora's Box;

3. Support the Equality of Individuals: Commercial fishing, hunting, paying tax and voting are increasingly being assigned on the basis of racial ancestry;

4. Track Government Policies and Court Developments: Aboriginal-related legislation and court decisions have significant long-term ramifications for all Canadian taxpayers; and

5. Offer Positive Alternatives: Efforts to watchdog and critique are of little value without providing positive, proactive alternatives to the status quo.

In addition to fulfilling its mandate, the Centre will publish a minimum of one position paper each year, make presentations to government committees and legislative hearings, and be available for media comment.

Aboriginal issues are a growing area of public policy. Billions of tax dollars are spent each year of which little seems to be properly accounted for or find its way to people it is intended to help. The implication of treaties, in particular, will change the landscape of Canada for all time. The Centre is dedicated solely to examining current aboriginal policy and court decisions from the perspective of those - native and non-native - who will pay the bill: the taxpayers.

Link to Candian Taxpayers Federation Web site