FREDERICTON (GNB) – The provincial government has invited First Nation chiefs to co-create a modern and sustainable economic partnership. The current tax collection agreements will not be renewed, and as such, the government will not be appealing the recent carbon tax ruling.

“Unfortunately, these outdated provincial tax agreements have proven to be unsustainable and unfair. It is time we come together and fix this for future generations,” said Premier Blaine Higgs.

New Brunswick is the only province in Canada that has provincial sales tax agreements with First Nation communities. The existing tax agreements are independent of treaty rights and were developed almost 30 years ago, before the HST and the carbon tax. These agreements are also independent of other provincial and federal funding.

These tax agreements were originally intended to ensure tax collection was fair for businesses on and off reserve. Under the agreements, for each community, the government refunds 95 per cent of the first $8 million collected in provincial sales tax and 70 per cent on amounts thereafter. In 1997, these refunds amounted to $28,000 annually and have grown at a rapid rate, hitting a peak of $47 million in fiscal 2019-20. Taking into account the exponential growth seen in the last five years, by 2031-2032 the annual amount is estimated to reach $75 million. By that same year it is estimated that a cumulative $1 billion in tax revenue will have been refunded to First Nation communities.

“Our existing arrangement is clearly unsustainable,” saidHiggs. “These agreements do not adhere to our basic principles of taxation. In Canada, we believe that we all pay into programs that we all benefit from, like health, education and other social support services.”

“Under these tax agreements approximately $44 million will be refunded to First Nation communities this year and nearly 40 per cent of that money will go to 2 per cent of the First Nation population. This is not sustainable,” said Higgs.

Additions to Reserve Land and Benefits Guarantees

In 2017, the provincial government renewed existing tax agreements. At that time, the agreements were amended to include a provision that tax benefits would be extended to Additions to Reserve. This provision means that the existing formula which refunds provincial sales tax to First Nation communities would apply to any commercial operations on new reserve land. If businesses relocate or establish on this newly allocated reserve land, up to 95 per cent of the provincial taxes collected could get refunded to the community.

Since 2018, six requested ATRs have been approved. Another seven First Nation communities are awaiting approval for twenty more land parcels, many of which are in prime locations for commercial development, representing 206 hectares (515 acres). This provision significantly erodes the provincial tax base into the foreseeable future – which means less money to invest in programs that benefit all New Brunswickers, said Higgs.

“While our government will not be renewing the current agreements, we are committed to working together on modern economic partnerships,” said Aboriginal Affairs Minister Arlene Dunn. “We envision natural resource revenue sharing and other mutually beneficial projects, including joint partnerships with the federal government on priorities such as housing and economic development. We are out of step with the rest of Canada. We are excited about the potential to work with First Nation communities on projects that will see the whole province rise, and together, we will build important long-term financial security and sustainability for our province.”