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July 25, 2021

First nations entitled to tax break on investments, top court rules

It’s fair to say that some Canadians find it troubling that First Nations citizens don’t pay much in the way of taxes. Well, now those folks are really going feel hard done by.

Court In a decision aboriginal leaders are hailing as a major affirmation of Indian status rights, the Supreme Court of Canada has ruled that a Huron business man who invested in term deposits at a credit union located on his Quebec reserve doesn’t owe any tax on the interest he earned on his investments.

The landmark decision overturned lower-court rulings claiming that the estate of the late Rolland Bastien was required to pay taxes on the passive investment income he earned from the sale his longstanding moccasin business.

Section 87 of the federal Indian Act dictates that income earned by natives working on-reserve isn’t taxable. However, income earned off-reserve is taxable.

The lower courts felt that the interest revenue was not closely connected to the reserve and therefore not tax exempt. In this case, however, the top court ruled that Bastien really had no control over where his savings would be invested and should, therefore, be free from tax.

A controversial decision? For some, yes. Here's the Canadian Taxpayers Association’s take on these sorts of rulings, for instance: “Income - not race or ancestry - is the only valid basis for a tax exemption. Unfortunately, that's not the case in Canada. Aboriginal tax exemptions create an inequality within the tax system. Therefore, the federal government must phase-out the exemption.”

Should those that do pay taxes feel that this set of rules is somehow unfair? No, says former diplomat Daniel Wilson in a recent editorial.

Complaining about tax policy is only one of many ways in which the right wing in Canada is seeking to assimilate First Nations into the mainstream and exploit resources on or near their lands, he maintains.

Here’s his argument: You be the judge.

Does this and other tax-related issues strike you as unfair or divisive? Or do you view this as merely one more reparation payment for the decisions of prior generations?

By Gordon Powers, MSN Money

* Follow Gordon on Twitter here.



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...