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Truth and Reconciliation has yet to penetrate Canada Revenue Agency

Truth and Reconciliation has yet to penetrate Canada Revenue Agency

The discoveries of mass graves on the sites of former Indian Residential Schools is a reminder of a terrible injustice that started in the late 1800’s and persisted into the 1970’s. But we don’t have to go back that far to uncover another injustice against first nations persons that is still going on.

Months after his election in 2015, Prime Minister Trudeau told an Assembly of First Nations gathering, “What’s needed is nothing less than a total renewal of the relationship between Canada and First Nations peoples…It is time for a…nation-to-nation relationship.” With regard to the current legislative framework governing Aboriginal affairs he pledged, “Where measures are found to be in conflict with your rights, where they are inconsistent with the principles of good governance, or where they simply make no public policy sense, we will rescind them.” In 2016 Trudeau ended a cabinet retreat by saying, “our government will not rest until we make life better for indigenous people right across this country.”

Trudeau’s  sunny message has not penetrated the ranks of the Canada Revenue Agency where a campaign of aggressive and punitive tax collection against Aboriginals, mostly elderly, low-income women, has been underway for several years. The women had all claimed tax exempt status under Section 87 of the Indian Act which exempts income earned on a reserve from taxation. A few examples of CRA collections practices include:

Crushing penalties on elderly, mostly female aboriginals

Garnishing the CPP of a 64-year old Thunder Bay woman over a tax bill of $112,000. She is living on her Old Age Security cheque of $500 per month and is currently on sick leave from job at the Native Friendship Centre in Thunder Bay. She has a mortgage on her home.

A Windsor woman took a second mortgage on her house to satisfy a $62,000 bill–$52,000 of it interest.

A 65 year-old woman in Winnipeg who worked 25 years as a social worker with very at risk young people and who has had a recent cancer diagnosis has exhausted her savings and is living on CPP and will soon be getting her first OAS cheque.  CRA has advised her that she will be garnisheed roughly $500 per month from her government pensions.

A Dryden women’s original debt was $2,000, but now has risen to $21,000 with interest and penalties. She was forced to declare bankruptcy in 2013. She says Revenue Canada even went to her bank to try to broker a bank loan to pay off her debt.

A Sault Ste. Marie woman who has been blind since 2002 owes Revenue Canada approximately $70,000. Revenue Canada is clawing back all of her rebates—GST, child tax credit, CPP disability credit, income tax refunds. Her husband is also in trouble, owing about $25000 because he used her unused tax credits. His part time wages total about $900 every two weeks but he is now being garnisheed. They estimate it will take 12-13 years to pay off their debt.

 A Northwestern Ontario woman owes $123,000, half of which is interest. She is currently receiving a disability pension of $1,200 per month and $800 from CPP of which CRA is threatening to claw back half.

Typical of a threatening CRA letter to an elderly First Nations Woman

How it happened

The history of the tax dispute goes back more than two decades. The women were all employees of Native Leasing Services-an employment agency based on the Six Nation Reserve near Brantford, Ontario. The agency provided staffing for Native friendship centres, health clinics and drop-in centres in urban areas but because of the agency’s location on a reserve, the employees claimed tax exempt status under section 87 of the Indian Act which exempts property from taxation that is generated on a reserve. For years Canada Revenue allowed the Native Leasing claim but in the mid 1990’s, cherry-picking language from a tax ruling that it actually lost; CRA implemented new policies to deny the exemption. First though, in response to a protest from Native Leasing, CRA agreed to submit to four test cases in the courts, during which time collections were suspended but interest and penalties continued to accrue. In the ensuing years, the cases wound their way through a number of appeals that upheld the CRA position, until 2009 when the last of the test cases came to an end as the Supreme Court refused to hear the matter. Since then the CRA has been aggressively pursuing collections.

Inconsistent application of rules

Letter from Native Leasing to the Prime Minister

Some might well say that, given the court rulings, these Aboriginal women, should just pay up. But there are some legitimate arguments against the CRA actions, especially in light of Justin Trudeau’s recent comments about repealing measures that fly in the face of good policy. First of all there is the historical question of what lawmakers had in mind when they first exempted Indigenous persons on reserves from taxation, in the Indian Act of 1876. Back then, virtually all Natives lived on reserves—the migration to cities didn’t begin until after the Second World War. The argument could be made that the government of the day never viewed indigenous people as a potential source of tax revenue. This Native Leasing claim was pursued in good faith with a firm belief that it involved a fundamental native right and was not simply for the purpose of shirking a responsibility to pay taxes. Secondly the CRA policy is not being applied uniformly. There are other agencies providing essentially the same services as Native Leasing that are not being harassed. Indeed there is a CRA paper trail obtained through court disclosure that suggests Native Leasing Services is being singled out because NLS founder Roger Obansawin, now in ill-health, was an outspoken and very public critic of CRA, staging protests in the 1990’s against the agency’s policies. With appeals exhausted, Native Leasing has applied for a remission order, removing the tax debts—something that is within the power of the Minister of National Revenue. There is a precedent with the recent revelations that CRA has been cutting side deals reducing the liability of wealthy persons who evaded taxes by establishing offshore holding companies. Finally there is the issue of collectability—most of the 3,000 persons affected by the collections policy will never be able to pay off the sums claimed by CRA.  All the threatening letters and phone calls accomplish is to increase the desperation in people who are already in most cases financially challenged. Consider the optics of clawing back government pensions and forcing elderly people into bankruptcy in the face of the new government’s stated objectives of reconciliation. The question is this. Does it make any sense for a government which announced an $8 Billion infusion of funds to improve conditions for Aboriginal persons on the one hand, to be clawing back OAS pensions from a group that is predominantly composed of elderly low-income women? This collections policy seems to be one that, paraphrasing the words of the Prime Minister, makes no sense and ought to be rescinded.

View Comment (1)
  • Thanks for your view on issue. You have asked hard questions.

    It is not fair, just or even equitable policy, for any human being. Thru the ages people have risen up and small gains made are always slowly taken away.

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