A fair fiscal relationship means supporting Indigenous governments to pursue tax jurisdiction that advances self-determination. Indigenous jurisdiction over their own taxation helps build stronger fiscal relationships by generating important revenues for Indigenous community priorities. This is an important part of reconciliation.
Today, the Department of Finance launched consultations on the Budget 2024 commitment to establish an opt-in framework for interested Indigenous governments to impose their own Fuel, Alcohol, Cannabis, Tobacco, and Vaping (FACT) value-added sales taxes. Expanding opt-in tax jurisdiction would enable Indigenous governments to better exercise their tax jurisdiction with more flexibility.
The draft legislative proposals would enable Indigenous governments to enact a value-added sales tax, under their own laws, on FACT products within their reserves or settlement lands. The FACT sales tax would work in a similar manner to the existing First Nations Goods and Services Tax (FNGST), including by applying at the same five per cent GST rate, but would be limited to FACT products. The draft legislative proposals also include other proposed amendments to the First Nations Goods and Services Tax Act to streamline administration of taxes under that Act.
The federal government is also encouraging Indigenous governments to indicate their interest in being listed on Schedule 3 as part of the tabling of the legislation. Being listed on Schedule 3 would be an enabling step towards the implementation of a FACT sales tax, but would not result in the immediate application of the FACT tax, nor obligate Canada or listed Indigenous governments to negotiate a tax administration agreement.
