35. INDIAN RESERVES AS TAX HAVENS AND PLACES OF PRIVILEGED FISCAL IMMUNITY

It is in the forests of privilege which grew so luxuriantly in France that it is said that the purposes of government most seriously lost their way. Privilege after all, was defined by tax exemption. And the immunity of the nobility and clergy to direct taxes most obviously denied the Royal treasury desperately needed funds…the principle of exemption at the top of society filtered down as necessity of evasion at the bottom…so that many in France perceived their relationship to the state as a kind of fiscal zero-sum game. – Simon Schama, Citizens: A Chronicle of the French Revolution1

The revenue of the state is the state. In effect, all depends upon it, whether for support or for reformation…(it) is the spring of all power, (it) becomes in its administration the sphere of every active virtue…Through the revenue alone the body politic can act in its true genius and character… – Edmund Burke2

Taxes are what we pay for civilized society. – Oliver Wendell Holmes, American Jurist, 1904

Canadians think of tax havens as places where people or businesses illegally hide income in order to avoid paying their proper and fair share of income taxes. Governments spend huge sums of money attempting to crack down on them, and on the taxpayers who illegally use them. Their very existence is harmful to the economic well-being of  countries whose treasuries are victimized by them. As tax lawyer and writer Vern Krishna wrote:3

Canada and other high-tax members of the Organization for Economic Co-operation and Development dislike tax havens because they attract capital, undermine tax bases, and erode domestic spending programs. Still, we have our own tax havens-hundreds of them from ocean to ocean all blessed by the Supreme Court of Canada.

Indian reserves are treaty-based, legal tax havens for aboriginals who derive income from property, real or personal, situated on a reserve in Canada.

Our cash-starved and heavily indebted governments are suffering the unconscionable and debilitating loss of millions of dollars of tax revenue as the result of the illegal sale of Indian-manufactured cigarettes from “smoke shops” situated on reserves, and out of the trunks of cars off-reserve. Law abiding cigarette manufacturers and off-reserve cigarette vendors are being seriously hurt by this activity, while these same timid governments basically stand by and do nothing.

Now, apparently legal marijuana operations are starting up, with even more harmful social and economic consequences.

Reserve gambling casinos, which pay no taxes on their fabulous takes, but derive so much benefit, in fact which derive their very existence and survival from the good graces and patronage of our various Canadian governments and from the Canadian people, further erode our public treasuries.

In 2014-15 the result of these and numerous other tax exemptions enjoyed by Indians and Indian reserve-based commerce was tax losses to Crown treasuries of nearly $1.3 billion, which represents an average benefit of about $2000 for each of Canada’s approximately 637,000 registered Indians.4

And now it appears, in this new Crown sovereignty-eroded, Indian rights-expanding legal environment, that this trend is going to increase and thus worsen what is already a disgraceful and harmful financial and social situation.

As the result of the new, expansive Haida Nation-inspired line of thinking to the effect that Indian treaty rights, and Indian rights generally, are to generously interpreted and applied in the context of the modern times in which we live, and, as the result of recent, fairly generous tax rulings on the part of the Supreme Court in favour of Indians- all supposedly in keeping with the “honour of the Crown” – Indian bands are now, by way of joint venture agreements, offering up to non-Indian businesses their reserves and territories, and the tax-free status that comes with them,  to operate on and in conjunction with.

As the result of Tsilhcot’in, expect Indian bands covered  by that ruling to be offering up large swaths of their “aboriginal title” territories to non-Indian businesses, on rentier terms to be negotiated, as tax-free havens out of which to operate.

Favourable tax treatment is clearly part of the rationale for non-Indian-Indian proposed joint ventures like those involving Indian-owned Eagle Spirit Energy Holdings Ltd. ( See Dancing With Danegeld, above), part of the tax-reducing or tax-avoiding parallel, race-based, economic model emerging across the country, which will tend to shrink more and more the revenue base of the State. It won’t matter that the traditionally otherwise urban, off-reserve business, now operating out of a reserve, will be carrying on a business activity that will have absolutely nothing to do with the “traditional” way of life of the reserve. It’ll be like cigarettes and gambling only on a much bigger and varied scale.

For example, in April, 2010 the Serpent River First Nation announced5 that, in conjunction with an off-reserve private company, it had developed a joint venture plan to build a light bulb factory there. “Over 125 jobs to be created,” read the sub-headline. (Immediate thoughts came to mind of the Music Man coming to River City, but unlike in that fictional case, there was no happy ending. The factory was never built.)

Why would a private company have even thought  of constructing a multi-million dollar manufacturing facility in such an odd, relatively faraway place as the Serpent River reserve? The answer had to relate to substantial tax savings. Under the shelter of the tax-free fiscal environment of this Indian reserve, this private company planned to operate on this reserve so as to pay little or no taxes. It would of course have had to make rentier payments to the  reserve, and provide benefits to it in the form of jobs, for the privilege of sheltering under its tax haven status, but this company’s number crunchers had  no doubt calculated that even after those payments were made and those jobs were provided, because of the tax haven status of the reserve, it still would have been better than operating out of a location in “traditional,” old-fashioned, off-reserve Canada, where every individual and every business must pay their fair share of taxes.

And so, with schemes like this, which are now proliferating across Canada, the treasuries of the surrounding governments, local, provincial and federal, will be depleted and deprived all the more. And so the abilities of our governments to provide all the programs and services we constantly and unthinkingly demand will be further diminished and impaired.

In November 2015 Wahgoshig First Nation, (of Solid Gold Resources wrecking fame), announced that it was “partnering” with a Toronto company, Delshen Therapeutics, to grow medical grade marijuana. Chief Dave Babin announced that his band had “chipped in” two million of the eighteen million dollar cost to set it up. 6 Yes, “chipped in”, like it was extra cash they just had lying around, two million dollars of Canadian taxpayers money! Neither politicians nor the somnolent media will ever dare to  enquire just where this money came from, just how  and why this is such a sweet deal for this company, Delshen Therapeutics, and how much tax revenue the Ontario and federal treasuries will be losing because this cynical, reserve-based operation is taking place on or in conjunction with an Indian band, rather than elsewhere, where country-sustaining tax revenues could be obtained from it.

Phil Fontaine has moved on from being a mere “advisor” to a major law firm, (see Dancing With Danegeld, chapter 26 above), and is now seizing the main chance for himself. He has incorporated his own company to partner with a licensed marijuana producer to grow and sell the drug. The big plan is to “franchise operations on Indigenous land across Canada.” Laughingly, in a cynical attempt to provide some semblance of moral cover for this country-harming scheme, he characterizes this planned, industrial-scale dope-dealing operation as a “major conduit for reconciliation”(!)  What it is is a major conduit for siphoning off tax revenue desperately needed by our governments.

Part of the appeal comes from tax breaks afforded to businesses located on First Nations territories. “There are obvious tax benefits if we establish on a reserve. So we want to take full advantage of that situation,” Mr. Fontaine said. 7

And establish and dope-deal they will, sometimes regardless of and in defiance of the general laws of the land, and paying little or no taxes, for, as the ubiquitous, lean and hungry former AFN Regional Chief Isadore Day said: “First Nations may not feel bound by provincial rules.” 8

Now former Regional Chief Day is following Phil Fontaine’s footsteps into big time Indigenous marijuana operations. He founded “Bimaadzwin”, (the ancient Ojibway word for “drug-dealing”?), his own “cannabis consultancy” business, with the main aim of spearheading the establishment of a separate Indigenous cannabis regulatory regime to enable Indian reserves to license, test and tax cannabis products sold on their “territories”, (which, according to the Supreme Court of Canada, could mean not just their reserves, but, according to Haida Nation and Tsilhcot’in, virtually all of rural and wilderness Canada.) The plan is for them to keep “at least three quarters of any excise taxes” collected. Said Manny Jules, another member of the  Indian Industry elite: “We have to be considered like an 11th province, with our own (excise tax) stamp.” 9

The fictional gangster, Hyman Roth of Godfather II, who imagined an open, Cuban government-supported, tax -free (but not bribery-free) major mafia crime operation operating just offshore from America, would approve. The best of all worlds. With the assistance of its slick, sophisticated, technically-proficient, cosmopolitan-based non-indigenous “partners”, (who in fact would do all the technical and operational heavy lifting), feeding off the mother country, but giving it back little in return.

What is happening here, which is a far cry from what was ever intended by the makers of the old treaties, may be legal, but that doesn’t make it right or fair. What will be happening on Tsilhcot’in created aboriginal title lands, and, if former AFN Regional Chief Day and now “Bimaadzwin” entrepreneur is right, on all Indian reserves, where Indian bands will be taking the position that Crown laws, which presume Crown sovereignty, like the income tax law, are not applicable to them, may be legally logical, but that doesn’t make it right or fair.

No, it’s not right for Indians, while, on the one hand, making ever-increasing demands for more and more funding  on our cash-strapped governments- in effect on already hard-pressed Canadian taxpayers– at the same time, on the other hand, adopting tax haven policies and practices that knowingly and almost intentionally weaken and deplete the treasuries of those very same governments. To the increasing extent that this goes on, non-Indian Canadians have to shoulder an increasing tax load. We have to make up the tax difference lost by these activities. This is not right or fair.

This is more than Indians biting the hands that feed them grants, services and programs. This is Indians biting  off the hands that feed them these things, and that have to finance all Canadians’ services and programs. Non-Indian Canadians are being unfairly burdened by this. The long-past misfortunes and sufferings of Indians shouldn’t  justify forever into the future this unfair behavior towards non-Indian Canadians.

The point was made in Dancing With Danegeld (above), and is worth repeating: The “Crown” is all of us! The Crown, the victim of all this revenue-siphoning, is not some merely abstract, intangible concept that feels no pain and suffers no damage. It’s all of us who feel the pain and suffer the damage.

The state is not an abstract entity, It’s rights and duties are the rights and duties of men. 10

Simon Schama, in Citizens, (above) explains that “privileged fiscal immunity” like this contributed to the near-bankruptcy of the ancien regime French monarchy, and eventually to the French Revolution. That’s how harmful and unhealthy this can be.

Perhaps if this unfair behavior continues then consideration should be given to reducing by the amount of taxes lost or forgone the amount of Canadian taxpayers’ monies flowing to the bands and reserves which engage in this kind of thing.

The general concept- the general idea-  is not so far-fetched. In 2016 the Petroleum Services Association of Canada  petitioned (unsuccessfully of course) the federal government to use equalization payments as leverage to get stonewalling provinces “onside” with pipeline projects. In their submission:

Provinces that hinder (oil and gas) growth and opportunity should not benefit from this lack of support and cooperation. 11

There must be an element of necessity- of obligations- in economic relations. There is none in the economic relations- the economic situation- of Canada’s Indian bands. Some form of sanctions- a downside for them- would encourage more liberal and reasonable behavior on their part. This was proven in South Africa, where economic sanctions contributed to the demise of apartheid.

Canada is in desperate financial straits.  We can no longer afford ourselves. We’re technically bankrupt, maintaining our essentially unsustainable middle-class lifestyle solely on borrowed money. We can no longer afford institutions and practices, legal or illegal, shady or straight, that erode and diminish our tax base. Modern civilization is just too expensive to keep up to allow this to go on much longer. As former federal Finance Minister Michael Wilson stated:

We are living domestically beyond our means and borrowing from the rest of the world to finance this. This is running at a rate triple the current federal government (2016) deficit which, in the view of some, is approaching the upper limit. 12

And, while perhaps a bit off topic, surely we, as Canadians, have more urgent things to think about and  to do other than wrangling over the pieces of an increasingly smaller and precarious pie.

I referred above to New Yorker writer Jonathan Rosen’s comment on the human species’ propensity to destroy our environment, (the dystopian consequences chillingly and dreadfully imagined by David Mitchell in The Bone Clocks, above). The fighting and machinations over power and money described in this essay is a true example of fiddling while Rome burns – of not just rearranging, but fighting over, the deck chairs of the Titanic. Because we humans– all of us, including all Indigenous persons- by way of merely living our scientifically advanced lifestyles, in however “green” a fashion,  are almost deliberately choosing to destroy ourselves –  destroy our species.

Writer Verlyn Klinkenborg, reviewing in The New York Review of Books,13 Elizabeth Kolbert’s The Sixth Extinction: An Unnatural History (above),  writes of humanity now living in the Anthropocene, “…the geological age that begins with direct human influence over the earth’s natural systems, a geological age in which tragically, geological time is all too observable.” She further writes:

Around the globe, species of every kind are dying out, silently, invisibly. At a very conservative estimate, they are dying out a thousand times faster than the rate of extinction before humans arose. At least half the tortoises and turtles, a third of the amphibians, a quarter of the mammals, and an eighth of the birds on the planet face a risk of extinction in the near future…Most important of all, no one knows what the cascading effects of these extinctions- the eventual loss of entire ecosystems, like coral reefs-are likely to be. Will Homo Sapiens become extinct as the extinctions caused by our species mount up? No one knows…As species begin to go down in our presence, we’re not only altering earthly existence now. We’re also altering the very potential for existence…. (italics added)

We are on the verge of experiencing a  real environmental catastrophe, perhaps the end of human life on earth!

People too will vanish with the grasses. 14

It’s on truly profound issues like this, in relation to which  we must all unite to grapple with, and where our minor differences must be forgotten or set aside,  that our national attention should be focused on. Weakening and diminishing Crown sovereignty and the resources of the state greatly and dangerously diminishes our collective ability to do that.

It’s not only a duty, but a privilege, to pay taxes. It means we live in a self-financing democracy, where all taxpayers and others have a direct stake, and a clear and present moral right, to demand a say in how it’ s run. We need to develop new laws, and a new civic ethos, with a view to extending that duty and privilege to our indigenous fellow-Canadians.

The relentless onslaught of new problems caused by our constantly changing, constantly modernizing,  public and private lives profoundly challenge all of us. Our old traditions and values- Indigenous and non-Indigenous- don’t answer. They have not prepared us for the nature and massive scope of the budding social and environmental catastrophes facing us. We look to them for answers but they offer none because these grave new challenges are unprecedented for us all. Only a radically new, joint, common approach will give us all a chance to survive with the basics of the civilization we have painstakingly built remaining intact.

Canadians are all basically in the same financially  and environmentally flimsy and precarious national boat together, being tossed about on increasingly rough and unstable economic and environmental seas. For the sake of our very survival, likening our country, and our planet, as environmentalists properly do, to a large, threatened ship, we have to at least strive to, over the long-term, jettison unnecessary and excess-weight material things -like carbon-based energy for example- that can sink us.

So also we have to strive to jettison those unnecessary and excess-weight abstract things  that impair our collective ability to take maximum, survival-purposed action- things that must be regarded as outdated, to-be-foregone luxuries- things that are basically irrelevant and that impair the mission of survival and repair-  like backward, progress-retarding distinctions based on class, ethnicity or race.

To keep our threatened Canadian national ship buoyantly and safely moving forwards , we’ve got to work together – all of us – as total equals – Indian and non-Indian alike.

Whatever befalls the earth befalls the children of the earth. – Chief Seattle, 1855. 15

  1. Simon Schama. Citizens: A Chronicle of the French Revolution. Random House Inc., 1990.
  2. Edmund Burke. Reflections on the Revolution in France. 
  3. Vern Krishna. Law Times, October 2011.
  4. From Lee Harding, Tax Breaks Don’t Help First Nations, The National Post, July 13, 2017
  5. Espanola Mid-North Monitor, April 2010.
  6. Ontario First Nation to Grow Marijuana– cbc/news/aboriginal-November 27, 2015
  7. Pot pitch getting attention: Fontaine, National Post, July 19, 2017
  8. Gloria Galloway, First Nations demand control over cannabis sales, The Globe and Mail, December 7, 2017
  9. Indigenous groups seek autonomous cannabis taxing.Mike Hager, The Globe & Mail, September 9th, 2019
  10. From the British submission to the Nuremberg Court at the conclusion of  the trial of some of the Holocaust perpetrators. The full quote:

The state is not an abstract entity. Its rights and duties are the rights and duties of men, its actions those of  politicians who should not be able to seek immunity behind the intangible personality of the state.

From East West Street, by Philippe Sands, Alfred A. Knopf, 2016

  1. Lauren Krugel, Group pitches pipeline leverage, Financial Post, September 6, 2016
  2. Michael Wilson,A Canadian “safe haven”, The National Post, September 15, 2016
  3. Verlyn Klinkenborg. “How to Destroy Species, Including Us.”The New York Review of Books, 20 March 2014.
  4. 10th century poet Minamoto No Muneyuki, quoted inClimate, Lapham’s Quarterly, Fall 2019

Quoted in Climate, Lapham’s Quarterly, Fall 2019

By: Peter Best