Media.Knet.Ca

In Praise of Taxes: The Link between Taxation and Good Governance in a First Nations Context

http://www.iog.ca/publications/2008_in_praise_taxes.pdf 

Abstract

This paper makes a case for taxation of First Nation communities by their governments. It does so from a governance standpoint, arguing that taxation is a governance issue and introducing tax regimes on reserve would enhance the legitimacy, direction, performance, accountability and fairness of First Nations governments. The paper draws on both fiscal theories of governance and public finance theory, but also on accounts of Aboriginal traditional practices, which suggest the prior existence of a web of accountability and sharing relationships akin to modern taxation.

After presenting the current legislative and attitudinal terrain of First Nations taxation (I), the paper defines the terms it seeks to relate: namely, the tax relationship and five principles of good governance (II). It then addresses the link between taxation, service provision, and democratic governance in countries as varied as Tanzania, Zambia, and Argentina (III). Section IV returns to the First Nations context, drawing parallels to the international literature and describing the experience of taxing First Nations in British Columbia, Saskatchewan and the Yukon. The final section presents policy and research options for both First Nations and the federal government (V).

For further information, please contact:
John Graham, Jodi Bruhn
Institute On Governance
122 Clarence Street
Ottawa, Ontario, Canada K1N 5P6
tel: +1 (613) 562-0090
fax: +1 (613) 562-0097
info@iog.ca

Table of Contents

INTRODUCTION 1

I. THE PRESENT SITUATION 2

A. THE TAX EXEMPTION AND EXISTING LEGISLATION 2
B. A PREVAILING WIND OF RESISTANCE 8
C. A COUNTERING WIND OF ACCEPTANCE 10

II. DEFINING TERMS: TAX RELATIONSHIP, GOVERNANCE PRINCIPLES 13

A. THE TAX RELATIONSHIP 13
B. FIVE GOVERNANCE PRINCIPLES 14

III. THE LINK OF TAXES AND GOVERNANCE: INTERNATIONAL EVIDENCE 16

A. FISCAL THEORIES OF GOVERNANCE 16
B. THE ‘CURSE’ OF NON-TAX REVENUE 18

IV. ENHANCING FIRST NATIONS’ GOVERNANCE THROUGH TAXATION 21

A. IDENTIFYING THE CURSE 21
B. REVERSING IT: A RETURN TO GOVERNANCE PRINCIPLES 24
C. THE EXPERIENCE OF TAXING FIRST NATIONS 26

V. POLICY AND RESEARCH OPTIONS 28

A. CONTINUUM FOR FINANCING FIRST NATIONS GOVERNMENTS 28
B. POLICY AND RESEARCH IMPLICATIONS FOR FIRST NATIONS 34
C. POLICY AND RESEARCH IMPLICATIONS FOR THE FEDERAL GOVERNMENT 37
D. THE JEAN ALLARD PROPOSAL 39

CONCLUSION 41

APPENDIX A: THE RELATIONSHIP OF IOG AND UNDP GOVERNANCE PRINCIPLES 42

APPENDIX B: FEDERAL AND BRITISH COLUMBIA TAX PAYABLE NET BENEFITS 43