Tax Tales: Justin Bieber & First Nations Tax Surprises

Fun Fact: Justin Bieber Doesn’t Want to Pay Taxes.

Justin Bieber Tax Surprise happened during one of his interviews. “I’m actually part Indian, I think Inuit or something? I have enough Indigenous heritage that in Canada, I can get free gas.”- Justin Bieber, in an interview for Rolling Stone magazine, 2012. Following this statement, he faced swift criticism for using the outdated term “Indian” and was informed that Inuit, who are distinct from First Nations, do not receive free gas (nor do First Nations).

Show Me Your Status Card.

Status Indians who present their status card when purchasing gas on reserve enjoy tax exemption, a benefit that does not extend to gas purchased off-reserve. This tax exemption, however, is not a blanket rule for all First Nations people, dispelling the myth that they don’t pay taxes in Canada. In reality, the tax exemption applies to less than half of all registered status Indians, and even among those eligible, specific living and working scenarios limits the number who can claim it.

Recognition as a status Indian under Section 6 of the Indian Act, established in 1876, opens the door to certain tax exemptions. Initially, the law conferred Indian status on male members of certain bands, their children, and their wives. Subsequent amendments broadened its scope to include women who married non-status men and their children.

“In a lot of cases … First Nations individuals are now becoming mainstream taxpayers.”- Bruce Hurst, accountant, RHN

One example of tax exemption is related to the Goods and Services Tax (GST/HST). The Canada Revenue Agency (CRA) stipulates that goods purchased off a reserve by Indians, Indian bands, and unincorporated band-empowered entities are subject to GST/HST unless the goods are delivered to a reserve by the vendor or the vendor’s agent. However, the GST/HST does not apply to goods bought on a reserve by these entities.

Income tax also sees distinctions. Income earned on a reserve is exempt, regardless of whether the employed status Indian person lives on or off reserve. Conversely, income earned off-reserve is taxed on par with non-Indigenous taxpayers. However, it’s crucial to dispel the myth surrounding widespread tax exemption. Most income, sales, and property tax exemptions are applicable only to status Indians who live or work on a reserve. Given that less than half of all registered status Indians reside on reserve, the actual percentage of those eligible for tax exemptions is significantly less than half of the total registered status Indian population. In fact, it amounts to approximately less than 1% of Canada’s total population.

Taxes and “Indians” under the Constitution Act

It’s noteworthy that all other Indigenous people, including Inuit, Métis, and non-status Indians, are subject to paying taxes on the same footing as non-Indigenous people. A significant development occurred in January 2015 when the Supreme Court of Canada ruled that Métis and non-status Indians are “Indians” under the Constitution Act. While this could imply eligibility for similar tax exemptions, the federal government is still considering its options and potential appeals.

Regarding personal property tax exemption, it has been in existence since before Confederation. The Supreme Court of Canada has clarified that this exemption is linked to the protection of reserve land and property, ensuring that taxes do not erode the use of Indian property on reserves. The Court emphasized that this tax exemption does not aim to address the economic disadvantages of Aboriginal people or bring them economic benefits. Notably, Indian property not situated on a reserve is generally subject to tax, aligning with the taxation of property held by other Canadians.

“We’re paying tax all the time.”- Chief Darcy Bear, Whitecap Dakota First Nation

The tax treatment of First Nations individuals is nuanced, contingent on factors such as the type of income and residence on or off a reserve. Dispelling misconceptions is crucial for understanding the actual scope of tax exemptions available to registered status Indians and recognizing the diverse tax obligations within Indigenous communities.

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