Tax Revenue Sharing Agreements in New Brunswick: A Broader Perspective

On March 19, 2021, the Court of Queen’s Bench of New Brunswick released its decision in Kingsclear First Nation, Madawaska First Nation, Tobique First Nation, Woodstock First Nation, Oromocto First Nation, and St. Mary’s First Nation v. The Province of New Brunswick (2021 NBQB 65) (“Wolastoqey First Nations”). The issue presented in this case was whether distinct but very similar tax revenue sharing agreements between the Province of New Brunswick and each of the named Wolastoqey First Nations of New Brunswick required the Province to share, in addition to the revenues from provincial taxes specifically enumerated in the agreements (i.e. HST, Gas & Motive Fuel, Tobacco), tax revenues from the then newly enacted provincial carbon tax. Justice Petrie of the Court of Queen’s Bench determined that, indeed, the terms of the revenue sharing agreements do require the Province to share revenues from the provincial carbon tax with the Wolastoqey First Nations. Shortly after this decision was released, on April 13, 2021, the Province announced its decision to terminate all tax revenue sharing agreements it had with First Nations of New Brunswick.

Subsequent to the announcement, important questions have been raised about the revenue sharing agreements including questions about their purpose, their content, and their social and economic impacts. This article considers one such question: Do First Nations in New Brunswick have a legal obligation, apart from the contractual obligations pursuant to the revenue sharing agreements, to collect and remit New Brunswick provincial taxes? It is suggested here that the question raises complex questions at the intersection of taxation and aboriginal law and that a complete answer must take into account the existence of the tax revenue sharing agreements themselves, including their history, their content and purpose for all parties, and their long-term presence in New Brunswick.

The New Brunswick tax revenue sharing agreements are approximately 27 years old, dating back to 1994. According to the decision in Wolastoqey First Nations:

The initial set of tax revenue sharing agreements provided that, in exchange for each First Nation party’s agreement to collect and remit provincial sales and commodity taxes, the Province would, in return, share 95% of the taxes so collected back with that First Nation.

Since that time, the agreements have evolved. They have grown, for example, to take into account the harmonization of the original New Brunswick provincial sales tax under the Social Services and Education Tax Act (New Brunswick) with the GST to create the blended HST in April, 1997. Subsequent iterations of the agreements have also grown to address other negotiable points including commodity pricing, sales volumes, and the portion of tax revenues to be shared.

Following the introduction in 1991 of the federal GST, the question of the obligation of First Nation owned businesses to collect and remit GST in light of Section 87 of the Indian Act (Canada) has been raised and answered by Canadian courts in the affirmative several times. Section 87 exempts from taxation the interest of an Indian (as defined therein) or a band in reserve lands or surrendered lands. It also exempts from taxation the personal property of an Indian or band situated on a reserve.

In Diome v Her Majesty the Queen (2012 TCC 9), the Tax Court of Canada succinctly summarized a key part of the reasoning that courts have applied to find a legal obligation to collect and remit the GST:

On its face, the judicial reasoning summarized above in relation to collection and remittance of GST should apply analogously at the provincial level to arrive at the same affirmative answer to the tax collection question in New Brunswick. However, it is suggested here that such an analysis would be insufficient to arrive at a conclusion. Rather, a complete answer to the question in New Brunswick must take into account the existence, history, content and the purposes of the agreements themselves.

This perspective was perhaps suggested by the Wolastoqey First Nations decisions when Justice Petrie summarized the issue and queried (in bold below) as follows:

Why have the agreements in the first place? It is not a rhetorical question. Throughout the period from 1994 until now, as the agreements evolved to address new circumstances and factors, two things about the agreements remained constant. They contained reference to the integrity of the provincial tax system in New Brunswick as well as an acknowledgment that the relevant First Nation party claimed an exception from an obligation to collect and remit provincial taxes in New Brunswick.  As noted by Justice Petrie, “These tax collection and sharing agreements were viewed as beneficial to both the Province and the First Nations”.

In Nowegijick v. Her Majesty the Queen, [1983] 1 SCR 29 the Supreme Court of Canada wrote:

Whether there will ever be a judicially provided answer to the question of whether First Nations in New Brunswick have an independent legal obligation to collect provincial taxes remains unknown. However, it is suggested here that a fulsome answer to the tax collection question in New Brunswick requires more than an analogy from the same question as it applies to GST. It requires thorough consideration of the New Brunswick tax revenue sharing agreements in their complete historical and legal context in light of all applicable aboriginal law principles. Any other answer is incomplete.