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Citation: 2003TCC68
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Date: 20030307
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Docket: 2002-76(IT)I
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BETWEEN:
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ALEXANDER AKIWENZIE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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AMENDED REASONS FOR JUDGMENT
Miller J.
[1] As a status
Indian, Mr. Akiwenzie claimed deductions from his income of
$26,397.88 and $29,007.00 in 1997 and 1998, respectively. These
amounts, according to Mr. Akiwenzie, represent the 45 per cent of
his employment income which is personal property of an Indian
situated on a reserve within the meaning of the Indian
Act. The Minister disallowed the deductions on the basis that
these amounts were part of Mr. Akiwenzie's employment income
from his job with the Department of Indian Affairs and Northern
Development (DIAND), no portion of which constituted personal
property of an Indian situated on a reserve. Mr. Akiwenzie
appeals the Minister's assessments in the informal
procedure.
[2] The issue is
whether all or any part of Mr. Akiwenzie's income from his
employment with DIAND is exempt from tax pursuant to subsection
87(1) of the Indian Act, which exempts the personal
property of an Indian situated on a reserve. Although this case
is not entirely on all fours with those few cases in which the
Appellants have been successful on a finding that employment
income is situated on a reserve, an analysis of the factors
connecting Mr. Akiwenzie's employment income to reserves
leads me to the same conclusion. His employment income is
personal property situated on a reserve.
Facts
[3] Mr. Akiwenzie was
born on the Reserve at Cape Croker, Anishnabe. He made it very
clear from the outset that all he has done throughout his life is
to benefit Indians on a Reserve. In his opening remarks he
stated:
Everything that I have been doing to today,
even inside the Department of Indian Affairs was dealing directly
with all Indians. All Indians, not just the Chippewa Nation, and
not for my family as Quazies, or not for myself as an
individual.
Everything I have done since I have been 15
to 53 has been done for Indian people on a national level, from
coast to coast.
You can see on the C.V. as well that I am a
War Chief with the Nation of Warriors across Canada, and I still
hold that position while I am inside the Department of Indian
Affairs.
[Transcript page 13 lines 9 to 20]
[4] His approach to
life was equally clear and passionate: "I am a First
Nation", "I live Indian", "I have not given
up my rights even though I work for the Indian Affairs".
[5] Mr. Akiwenzie has
been bestowed considerable honours to speak on behalf of Indian
people at a national level. He is a spiritual leader in his
community. It was vividly evident in his testimony that he fears
that the Chippewa, the Crees and all nations are jumping into a
North American melting pot and in so doing, disappearing. His
life has been dedicated to the restoration of pride to the Indian
people and to the Reserves. He was involved at Wounded Knee,
Gustafson Lake, at Ipperwash. He married a Mohawk woman from
Akwasasne, and in the years in question, lived on a Mohawk
reserve. His children attend school on the Akwasasne Reserve. I
would describe Mr. Akiwenzie as an active, extremely
well-connected leader in Indian affairs nationally. I say all
this to establish the context of Mr. Akiwenzie's
employment.
[6] Mr. Akiwenzie has
worked for the Canadian Government for 20 years, starting as an
Education Social Counsellor with DIAND. In that role he educated
Aboriginal students, many of whom have since become chiefs in
their communities. He then went to serve as an advisor to the
Director General for Policy Coordination at DIAND. His primary
job in that capacity was to go to the Yukon and investigate why
it was so hard to relocate Indians of a certain community. Before
going to the Yukon, he was involved in constitutional talks as a
political advisor for the Native Council of Canada.
[7] He remained in
the Yukon for seven years, becoming Associate Director for Lands,
Revenues and Trust. On his return to Ottawa, he described his
sole responsibility was to bring the Indian people to the table.
This was firstly in connection with an environmental project
called the Buffalo Point Initiative. Indeed, he brought the
former Chief of the Assembly of First Nations,
Phil Fontaine, to the table. As Mr. Akiwenzie put it,
"Indian people would finally have a say inside the
Department of Indian Affairs".
[8] In all his
positions to that point, Mr. Akiwenzie confirmed that he worked
on reserves, though it was unclear the percentage of time
physically on reserves. He was adamant, however, that it all
entailed dealing with Aboriginal people on the reserves:
In my mind I spent all the time on my
reserve, because I'm dealing all the time with Indian people
from the reserve.
[9] Around this time
in 1996 to 1997, Mr. Akiwenzie started also working on what he
called TEK: Traditional Ecological Knowledge of Aboriginal
people. Mr. Akiwenzie described TEK as the way Indians think, and
that is what the government wanted to know. He was to bring
Aboriginal people, the right people, to the table. It was then
for them to determine if they would give TEK to the government.
According to Mr. Akiwenzie, it was not up to him to write his own
report about what TEK meant.
[10] The Associate Deputy
Minister was interested in Mr. Akiwenzie's views. A new job
description for Mr. Akiwenzie was prepared by the Department
Manager, First Nations Relations and Partnership Consultants.
This entitled Mr. Akiwenzie to PM-6 status, with the
accompanying salary. According to Mr. Akiwenzie, and
confirmed by his Manager, Mr. Ryan, the job description was
written to obtain the PM-6 standing, though bore little
resemblance to what Mr. Akiwenzie actually did. For example, it
referred to writing reports which was not something Mr. Akiwenzie
ever did.
[11] This was in 1998. Mr.
Akiwenzie was to go and develop relationships with the Indian
communities - 634 of them. He indicated that, during this time,
he met with people from 480 of those reserves. As National War
Chief in Canada, he would have connections with every one of
those reserves. He got people who previously would not deal with
DIAND to come to meetings. It was also around this time, late
1997 and early 1998, that steps were being taken to form the
Joint Initiative. The Department's objective for the
Joint Initiative was to develop a plan to move greater control of
current land and trust service responsibilities to First Nations.
The First Nations objective was to protect and advance the
interests of First Nations. Mr. Akiwenzie described the Joint
Initiative as "sort of like coming to the Treaty table
again"[1].
Twenty-one business lines, as Mr. Akiwenzie called them,
were identified by the Joint Initiative for focussing the review
of the Indian Act. While there was some preliminary work
on the Joint Initiative, as early as 1997, it formally was
established later in 1998. Mr. Akiwenzie testified that the
government said that they were not moving fast enough on this
initiative so they forced change through the Band Governance
Act. Mr. Akiwenzie clearly regretted this move as he felt the
Joint Initiative was ready to work to change the Indian
Act.
[12] Mr. Akiwenzie
estimated his time physically spent on reserves during the period
in question, not taking into account his personal life living on
a reserve, was approximately 20 per cent of his working time. The
balance of his work, primarily from his office in Hull, was
dealing directly with Native communities and their leaders. He
commuted from his reserve to work, though acknowledged that
approximately 15 nights per year he was required to stay
over.
[13] Mr. Akiwenzie
submitted documents describing the history of DIAND and its
mandate, rules and responsibilities. Mr. Akiwenzie's
assessment was that DIAND was not fulfilling its obligations to
First Nations people. He concluded his examination-in-chief with
the following comment:
So, I just wanted to say that I hope you
understand that I am an Indian first, and I'm an Indian
always. ... I am an Indian man, and traditionally, I have never
stopped working for Aboriginal people, that you guys call status
Indians on reserve.
(Transcript page 106, lines 9 to 14.)
[14] Mr. Hugh Ryan
testified for the Crown. He was Mr. Akiwenzie's direct
supervisor during 1997 and 1998. He described Mr. Akiwenzie's
role of building partnerships for DIAND, due to his ability to
communicate with Aboriginal communities. He indicated that a
non-Indian could not have provided the services Mr. Akiwenzie
provided - "It would have never worked".[2] He regarded Mr.
Akiwenzie's input as "absolutely unique".[3]
[15] Mr. Ryan also
confirmed Mr. Akiwenzie's written job description was to
achieve a certain level within the government, more than
accurately describing his job. He further confirmed Mr. Akiwenzie
was on the road a lot visiting Aboriginal leaders.[4]
Appellant's Arguments
[16] The Appellant started
his argument describing the framework of what he called the
three-part test set out in the Supreme Court of Canada's
decision in Williams v. Canada[5] in determining whether personal
property is situated on a reserve. It is necessary to weigh
connecting factors and analyze them in light of:
(i) the purpose of the Indian
Act exemption;
(ii) the type of property; and
(iii) the incidence of tax on the
property.
[17] He noted that
Williams dealt with unemployment insurance benefits rather
than employment income and, therefore, different factors may be
relevant in determining whether taxing employment income would
erode the entitlement of the Indian qua Indian on a
reserve. Mr. Reynolds described Mr. Akiwenzie as having a
fiduciary obligation on the part of the Crown towards First
Nations people, and that fiduciary obligation cloaks the
relationship and distinguishes this case from cases such as
Diabo[6] and Monias.[7] Further, Mr. Reynolds
maintains that Mr. Akiwenzie's position was not in the
commercial mainstream, as has been found in other cases. Mr.
Akiwenzie's position was unique.
[18] Mr. Reynolds explored
the meaning of "Indian qua Indian".
Mr. Akiwenzie, he argues, is effectively establishing a
relationship which is Indian qua Indian, wherever he goes,
be it his home reserve or any reserve across the country. Indian
qua Indian is not to be limited to the Indian who is
earning income on the reserve, exercising his lifestyle and
rights as an Indian on that particular reserve. Mr. Akiwenzie is,
in his role with DIAND, effectively implementing on the ground
the Indianess component. He is preserving, advocating and trying
to protect the integrity of reserves as economic units, as social
units and as political units and as First Nations. Mr. Reynolds
quotes Justice Linden's comments in the Folster
decision[8] as a
good summary of the law in this area:
Over the years, Courts have tried to fashion
a simple, bright-line rule for determining whether an
Indian's personal property is "situated on a
reserve". These efforts have proved less than satisfactory.
Although this condition appears simple enough to apply, it is a
difficult one to apply in the context of intangible property such
as wages and other forms of income. The reason for the difficulty
is that the application of a situs rule to an aspect of
property which has no physical or local existence is bound to be
notional and risks being arbitrary...[9]
The history and purpose of section 87 were fully explored in
Mitchell
v. Peguis Indian Band. In that case, La Forest J. traced
the history of section 87 back to an 1850 statute which provided,
essentially, that no taxes were to be levied upon an Indian
residing on unceded or reserve lands. The exemption did not take
the shape of the present-day provision, however, until The
Indian Act 1876. Section 64 of that Act provided:[10]
64. No Indian or non-treaty Indian shall be liable to
be taxed for any real or personal property, unless he holds real
estate under lease or in fee simple, or personal property,
outside of the reserve or special reserve, in which case he shall
be liable to be taxed for such real or personal property at the
same rate as other persons in the locality in which it is
situate.
La Forest J. highlighted the fact that, in this section,
"Indians holding lands or personal property in their own
right outside the reserve hold that property on the same basis as
all other similarly situated property holders". This
specific condition, although not included in section 87, provides
some historical insight into what the tax exemption was
originally designed to achieve, and, consequently, into the
contours of its current application, as will be more fully
developed below.
La Forest J. justified the historical evolution of this
legislative policy on the basis that it was a protective device
designed to respond to the negative effects on our First Nation
peoples of the assertion of British sovereignty over what is now
Canada....
[19] In reviewing the circumstances of this
case, Mr. Reynolds notes that Mr. Akiwenzie lives on a
Mohawk reserve, his wife's, not his. His employer is
headquartered in Hull, Québec. Twenty per cent of Mr.
Akiwenzie's work was on reserves, but 100 per cent of his
work was specific to reserves. Mr. Reynolds discounts the
principles that the income must be attributable to a specific
reserve, claiming it is the nature of the work which should be
given more weight.
[20] Mr. Reynolds concludes his argument by
addressing the nature of the employer, DIAND. He suggests that
the Department sets itself apart by its mandate to fulfil the
Government's lawful obligations to Aboriginal peoples arising
from treaties. It is not consumer and commercial relations. It is
not Treasury Board. It is not labour. It is a fiduciary
fulfilling obligations to the First Nations people, and that was
at the heart of Mr. Akiwenzie's role with the Government.
Respondent's Position
[21] Ms. Malone indicated at the outset that
it is Canada Customs and Revenue Agency's policy to grant a
tax exemption on an apportionment basis for the number of days a
person was actually physically working on a reserve. In
Mr. Akiwenzie's case, this has been estimated by the
Crown at 15 per cent, so only 85 per cent of his salary,
according to Ms. Malone is at issue. The Respondent agrees that
the only issue in this case is whether Mr. Akiwenzie's
employment income is situated on a reserve.
[22] Ms. Malone also relies on comments from
the Mitchell v. Peguis Indian Band[11] case to set the context
for her argument. Specifically Justice La Forest's
statement:
... But I would reiterate that in the absence of a discernible
nexus between the property concerned and the occupancy of reserve
lands by the owner of that property, the protections and
privileges of ss. 87 and 89 have no application.
I draw attention to these decisions by way of emphasizing once
again that one must guard against ascribing an overly broad
purpose to ss. 87 and 89. These provisions are not
intended to confer privileges on Indians in respect of any
property they may acquire and possess, wherever situated. Rather,
their purpose is simply to insulate the property interests of
Indians in their reserve lands from the intrusions and
interference of the larger society so as to ensure that Indians
are not dispossessed of their entitlements. ...
When Indian bands enter the commercial mainstream, it is to be
expected that they will have occasion, from time to time, to
enter into purely commercial agreements with the provincial
Crowns in the same way as with private interests. The
provincial Crowns are, after all, important players in the
marketplace. If, then, an Indian band enters into a
normal business transaction, be it with a provincial Crown, or a
private corporation, and acquires personal property, be it in the
form of chattels or debt obligations, how is one to characterize
the property concerned? To my mind, it makes no sense
to compare it with the property that enures to Indians pursuant
to treaties and their ancillary agreements. Indians
have a plenary entitlement to their treaty property; it is owed
to them qua Indians. Personal property acquired by
Indians in normal business dealings is clearly different; it is
simply property anyone else might have acquired, and I can see no
reason why in those circumstances Indians should not be treated
in the same way as other people.
[23] The Respondent contends that Mr.
Akiwenzie was indeed in the commercial mainstream as also
stipulated in the Federal Court of Appeal decision in Shilling
v. M.N.R:[12]
However, in the context of determining the location of
intangible property for the purpose of section 87,
"commercial mainstream" is to be contrasted with
"integral to the life of a reserve": Folster,
supra, at paragraph 14. There is no doubt that, if Ms. Shilling
had been an employee of AHT, her employment income would not have
been exempt from income tax. The purpose of the tax exemption in
paragraph 87(1)(b) is not to address the general
economically disadvantaged position of Indians in Canada.
[24] Ms. Malone went on to
suggest that Shilling stands for the proposition that the
work has to be linked to a specific reserve, and no such link
exists with Mr. Akiwenzie. His work is directed to
benefiting Indians generally, but it is not integral to the life
of a particular reserve. This is distinguished from the
Folster case where the work was in the hospital near a
reserve to care for people on a specific reserve. Just because
Mr. Akiwenzie's work benefits Indians does not take it
outside the commercial mainstream.
[25] The Respondent argues
there is no discernible nexus between the employment income and
the occupancy of reserve lands by the Appellant as required by La
Forest J. in Mitchell v. Peguis Indian Band. While he
lives on the reserve, he does not perform work on this particular
reserve. Most of his time is spent in the office in Hull, and
while the work focuses on Indian affairs, it does not provide
benefits to Indians residing on any reserve to which the
Appellant's income can be connected.
[26] The Respondent goes on
to review the connecting factors to be given weight:
(i) residence
of the Appellant, which the Respondent acknowledges was on a
reserve;
(ii) residence
of the employer, which the Respondent puts in Hull;
(iii) where the work
is performed, which the Respondent states is primarily in Hull;
and
(iv) the nature of
employment and the circumstances surrounding it.
With respect to this last factor the
Respondent suggests that the benefit to the Native community is
not an independent free-standing connective factor, but is more a
standard by which to evaluate the nature of the employment.
Benefit to Indians is simply not enough. It needs to be connected
to a specific reserve. She relies on the following passage from
the Federal Court of Appeal decision in Monias:[13]
That the work from which employment income is earned benefits
Indians on reserves, and indeed may be integral to maintaining
the reserves as viable social units, is not in itself sufficient
to situate the employment income there. It is not the policy of
paragraph 87(1)(b) to provide a tax subsidy for services
provided to and for the benefit of reserves. Rather, it is to
protect from erosion by taxation the property of individual
Indians that they acquire, hold and use on a reserve, although in
the case of an intangible, such as employment income, it is the
situs of its acquisition that is particularly
important.
By enacting paragraph 87(1)(b) Parliament made an
important exception to the principle that those similarly
situated should be treated in the same way for tax purposes.
However, the paragraph cannot be read as exempting from income
tax Indians' employment income that was not clearly earned in
circumstances that link its acquisition to a reserve as an
economic base.
[27] The reserve has to be
seen as the economic base from which employment income is
derived. And if the work is not related to a specific reserve, it
should not be given so much weight.
[28] Ms. Malone concludes
that Mr. Akiwenzie earned his income in the commercial
mainstream, not qua Indian on a reserve and, therefore,
should not benefit from the protection that the Indian Act
confers on the reserve system.
Analysis
[29] The only issue in this
case is the situs of Mr. Akiwenzie's employment
income. If I find it is situated on a reserve then the interplay
of section 87 of the Indian Act and paragraph
8(1)(a) of the Income Tax Act kicks in to exempt
such employment income from taxation, as Mr. Akiwenzie meets all
other criteria of these provisions, which read:
Indian Act
87(1) Notwithstanding any
other Act of Parliament or any Act of the legislature of a
province, but subject to section 83, the following property is
exempt from taxation, namely,
(a) the interest
of an Indian or a band in reserve lands or surrendered lands;
and
(b) the personal
property of an Indian or a band situated on a reserve.
87(2) No Indian or band is
subject to taxation in respect of the ownership, occupation,
possession or use of any property mentioned in paragraph
(1)(a) or (b) or is otherwise subject to taxation
in respect of any such property.
Income Tax Act
81(1) There shall not be
included in computing the income of a taxpayer for a taxation
year,
(a) an amount
that is declared to be exempt from income tax by any other
enactment of Parliament, other than an amount received or
receivable by an individual that is exempt by virtue of a
provision contained in a tax convention or agreement with another
country that has the force of law in Canada;
[30] There is certainly no
dearth of authorities on the issue of the situs of
employment income for purposes of claiming the section 87
exemption. The connecting factors' test has been applied on
several occasions by the Federal Court of Appeal and a uniform
means of analysis appears to have evolved. While I do not wish to
provide an exhaustive review of the precedents to which I am
bound, I do wish to highlight how I perceive the principles to
have evolved from the Supreme Court of Canada's establishment
of the connecting factors test in the Williams case,
through several Federal Court of Appeal decisions dealing more
specifically with employment income, as opposed to unemployment
insurance benefits.
[31] In Williams,
the connecting factors test was created to provide a principled
approach to the determination of the situs of personal
property for purposes of the application of section 87. The
difficulty of course is the many locations to be considered -
being the employers', the employees', where payment was
made, where the work was carried out and where the employment
income was used, amongst others. It is necessary to identify the
relevant connecting factors in light of the purpose of the
section 87 exemption, the type of property and the nature of the
tax. It is then necessary to determine if taxing such property
erodes the entitlement of an Indian qua Indian on a
reserve. The Court in Williams emphasized that the test as
just summarized pertained to unemployment insurance benefits. It
was up to subsequent decisions to apply these principles to cases
involving employment income - no such case has been heard as yet
by the Supreme Court of Canada, as they have refused leave to
appeal in three of the Federal Court of Appeal decisions I am
about to review.
[32] The first Federal
Court of Appeal decision subsequent to Williams which I
will review was the Folster case. Acknowledging the
Williams requirement to put the review of connecting
factors in context of the purpose of the exemption, Justice
Linden adopted Justice La Forest's explanation of the purpose
(as stated in Mitchell) as being an effort to preserve the
traditional way of life in Indian communities by protecting
property held by Indians qua Indians on a reserve. He went
on to summarize his understanding of the test as follows:
... It must be recalled that the connecting factors test is
simply a way for courts to apply the situs principle in a
principled way, by bringing some structure to the inquiry. It is
an inquiry which has, as its basic question: having regard for
the legislative purpose for which the section 87 tax exemption
was enacted, where does it make the most sense to locate
the situs of the personal property at issue? The test is
no more magic than that.
[33] Interestingly, he placed the emphasis
in employment income cases on the nature of the employment
itself:
In my view, having regard for the legislative purpose of the
tax exemption and the type of personal property in question, the
analysis must focus on the nature of the appellant's
employment and the circumstances surrounding it. The type of
personal property at issue, employment income, is such that its
character cannot be appreciated without reference to the
circumstances in which it was earned. Just as the situs of
unemployment insurance benefits must be determined with reference
to its qualifying employment, an inquiry into the location of
employment income is equally dependent upon an examination of all
the circumstances giving rise to that employment.
... In my view, when the personal property at issue is
employment income, it makes sense to consider the main purpose,
duties and functions of the underlying employment; specifically,
with a view to determining whether that employment was aimed at
providing benefits to Indians on reserves.
[34] Folster was distinguished on its
facts by the Federal Court of Appeal decision in Desnomie v.
The Queen.[14] The Court in Desnomie limits the significance
of the nature of employment by requiring some connection to a
particular reserve. The Court stated:
... There is no doubt the nature of the appellant's
work is related to assisting reserve Indians when they move off
the reserve. There is also no doubt that his employer is an
Indian organization. The problem is that these considerations do
not connect the appellant's employment income to any
particular reserve. Even if it could be argued that the section
87 exemption applies when the property of an Indian is located on
a reserve other than his own, in this case the nature of the
employer and employment alone do not identify a specific reserve
to which the appellant's property can be connected.
Therefore, these considerations do not help to locate his
employment income.
[35] Though later the Court's decision
was refined somewhat by the following statement:
In close cases, such as Folster, special circumstances
of the employment may assist in determining the situs of
the employment income. However, where all other possible
connecting factors would not situate the employment income on a
reserve, it is highly unlikely that the special circumstances of
the employment alone would be such as to tip the balance the
other way.
[36] The Federal Court of Appeal had another
opportunity in the Shilling case to address this issue. It
appears the Court is leaning towards a necessary link to a
reserve as it states:
Whether intangible property is located on a reserve depends on
an examination of factors connecting the property to a
reserve.
[37] However, this does not confirm that the
link must beto the Appellant's own reserve, neither does it
suggest that there cannot be a connection to more than one
reserve. Indeed, the Court goes on to address this issue as
follows:
[42] We would note that the head office of NLS was
located on the Six Nations reserve. There is no evidence that NLS
had any connection to the Rama Band of which Ms. Shilling was a
member. We acknowledge that paragraph 87(1)(b) refers to
personal property of an Indian that is situated on "a
reserve" and not "the reserve" of the
Indian in question. The Trial Judge inferred (at paragraph 73)
from this that an Indian's property situated on any
reserve is eligible for the tax exemption conferred under
paragraph 87(1)(b). However, we are not convinced that
this meaning is compelled by the language of paragraph
87(1)(b), although we recognize that the personal property
of an Indian may attract the benefits of section 87, even when,
like Ms. Shilling, its owner does not reside on a reserve.
[43] In Desnomie v. Canada (2000), 186 D.L.R.
(4th) 718 (F.C.A.), at paragraph 21, it was doubted whether
section 87 applies to personal property located on a reserve
other than the taxpayer's own reserve. These doubts are
reinforced by a passage in Leonard v. R. in Right of British
Columbia (1984), 52 B.C.L.R. 389 (C.A.), at page 395, where
Macfarlane J.A. seems to have taken the more restrictive view of
the scope of section 87:
It is a reasonable interpretation of the section to say that a
tax exemption on the personal property of an Indian will
be confined to the place where the holder of such property is
expected to have it, namely on the lands which an Indian occupies
as an Indian, the reserve. [Emphasis added to the word
"the".]
This passage is quoted with approval by La Forest J. in
Mitchell, supra, at page 132.
[44] While this is an important issue, in light of the
factual gaps in the record in the case before us that prevent the
location of the employer from being considered a significant
factor, it is not necessary to decide how the words "a
reserve" should be interpreted.
[38] This appears to leave the door open,
just, for the determination of this issue.
[39] Shilling also confirms the
emphasis given by the Folster case to the nature of the
work performed by the employee and the circumstances surrounding
it, and adopts the language of Folster cited earlier in my
decision at paragraph 33. The Shilling judgment concludes
with commentary concerning the meaning of "commercial
mainstream" and states "in the context of determining
the location of intangible property for the purpose of section 87
"commercial mainstream" is to be contrasted with
"integral to a life of a reserve"".
[40] The most recent
application in the Federal Court of Appeal is the decision of
Monias. In the Monias decision,
Justice Evans' preliminary comments are insightful as to
how limiting the availability of section 87 is to employment
income. He stated the following:[15]
... the more limited and specific purpose of section 87 is to
protect reserve lands, and Indians' personal property on a
reserve, from erosion, so that the bands are able to sustain
themselves on the reserves as economic and social units. Hence,
it is fully consistent with legislative policy to apply section
87 to income that is earned by Indians who reside on a reserve
from work that is performed on a reserve.
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... to stretch the benefit of paragraph 87(1)(b)
beyond its limited rationale would be likely to produce
incoherent and ad hoc decisions.
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It is for this reason, in my view, that this Court appears to
have upheld a section 87 claim in respect of employment income
when its situs was in dispute in only two cases, Canada
v. Folster, [1997]
3 F.C. 269 (C.A.); and Amos v. Canada, [2000]
3 C.N.L.R. 1 (F.C.A.). In Folster, supra, the
only factor that did not connect the employment income to the
reserve was the place where the employees worked, which was then,
by happenstance, just off reserve. Similarly, in Amos,
supra, while the employees did not work on the reserve,
part of the employer's business was conducted on contiguous
reserve land that it had leased from the band with the
expectation that employment opportunities for band members would
be created in the business. In both Folster, supra,
and Amos, supra, the employees lived on the reserve
adjacent to where they worked.
...
Further, in my opinion, the protection of reserve lands from
erosion by tax lies closer to the core of section 87 than does
the protection of items of individually owned personal property
while they are situated on a reserve.
...
By enacting paragraph 87(1)(b) Parliament made an
important exception to the principle that those similarly
situated should be treated in the same way for tax purposes.
However, the paragraph cannot be read as exempting from income
tax Indians' employment income that was not clearly earned in
circumstances that link its acquisition to a reserve as an
economic base.
[41] These principles set a restrictive
rather than expansive tone for the application of the connecting
factors test, though do not, I suggest, go so far as to propose
that Indians who do not live on a reserve or Indians who do not
physically perform all their work on the same reserve on which
they live, need not apply. This would render the connecting
factors test somewhat redundant. Justice Evans does introduce,
however, the concept of a requisite linking of the employment
income to a reserve as an economic base. The connecting factors
test should be considered in that light.
[42] Can employment income derived from the
Government of Canada be linked to a reserve as an economic base?
This is a very difficult and perhaps circuitous issue when
consideration is given to who funds reserves. What is really
meant by a reserve as an economic base? The Federal Court of
Appeal found in Folster that an Indian working at a
hospital, which treated status Indians whose care was funded by
Health and Welfare Canada was exempt from taxation. Such
employment income, derived as it was indirectly from the
Government of Canada, must have been linked to the reserve as an
economic base. I will further address this particular issue in
reviewing the connecting factor of the nature of employment.
[43] I am bound by these principles which
limit the application of section 87 in employment income
cases to income earned by Indians who reside on a reserve from
employment that was earned in circumstances linking its
acquisition to a reserve as an economic base. Mr. Akiwenzie
resides on a reserve and works part of his time on reserves. Does
the fact that not all of his time is spent working on the reserve
on which he resides make him part of the commercial mainstream,
and deem his work not to be integral to the life of a reserve? To
answer this question, I must carefully weigh all connecting
factors. Given the Federal Court of Appeal's direction, Mr.
Akiwenzie can only succeed if I find strong evidence that the
connecting factors point convincingly to his employment income
being situated on a reserve as an economic base.
[44] The connecting factors to review
are:
(i) residence of Appellant;
(ii) location and nature of
employer; and
(iii) nature of employment and special
circumstances surrounding employment.
Residence
[45] Mr. Akiwenzie lived on a Mohawk
reserve, Akwasasne, though he is Chippewa. His children attend
school on the reserve. Though he spent more than a few nights
staying over in Ottawa, I am satisfied his personal life was on
the reserve. But more than that, his life was Indian. This is
a man who was recognized in the Indian community across
Canada, and would be welcomed on any reserve in the land, and
was. Indeed, that is why he had the job he had at DIAND. The
point is that, yes, he lived on a reserve, but his life was not
bound ultimately to that one reserve. His life started on a
different reserve and his job exposed him to hundreds of
reserves, or perhaps it is better stated that he exposed his job
to hundreds of reserves.
[46] I attach considerable weight to his
residence, and also acknowledge a more extensive connection to
the reserve system generally than what is just afforded to
someone who simply "lives on a reserve". So, what makes
sense in reviewing this factor is that Mr. Akiwenzie's life
is Indian. He and his family reside on a reserve. The personal
property, the employment income, is, I would suggest, as with any
family, consumed on the family on the reserve. This factor cannot
be determinative, but it can and does provide a meaningful
backdrop in weighing the other factors to determine whether Mr.
Akiwenzie's life is in the commercial mainstream or more
centered on reserves.
Location and nature of employer
[47] The employer is the Government of
Canada, specifically DIAND. In Monias, the Federal Court
of Appeal had the following to say about this factor:[16]
The location of the employer has been regarded as a connecting
factor under the analysis mandated by Williams, supra.
However, in the absence of some evidence of the scope of the
employer's activities on the reserve, or some benefit flowing
to a reserve from the presence of the employer, it is not a
factor to which much weight is apt to be assigned: Shilling,
supra, at paragraph 35. ...
Do we have any evidence of the scope of the employer's
activities on the reserve? We certainly have evidence that Mr.
Akiwenzie, as just one employee of this department spent 15 to 20
per cent of his time physically on reserves. He also testified
that the presence of Government Indian agents on reserves was
pervasive and influential. Further, the Appellant submitted a
lengthy document describing the Department's fiduciary
obligations to Indians on reserves. This is not an employer
engaged in commercial logging, or running a public hospital on or
near a reserve. This is an employer with as broad a mandate as
can be imagined in dealing with Indians on reserves.
[48] As difficult as it is to attempt to
establish a situs of a Government Department, I am not
prepared to dismiss this factor as irrelevant. Indeed, I believe
it is critical. This employer worked with reserves, worked on
reserves and worked for reserves. The raison d'être of
the Lands and Trusts Branch was the life of Indians on reserves.
Its tentacles reached across the country from the Yukon to
Newfoundland. It is inadequate and inaccurate to place its sole
situs for the purpose of this connecting factor as an
office building in Hull.
[49] Mr. Ryan testified that the heart and
soul of the Department was the area in which Mr. Akiwenzie worked
- Lands and Trusts. Its business was reserves. Just by way of
example, a document put out by Indian and Northern Affairs,
Canada, describing the Joint Initiative in which Mr. Akiwenzie
was involved listed the following as objectives for the Land
Management aspect of the Initiative:
(i) to manage land related
statutory duties under the Indian Act;
(ii) to transfer land management
services to First Nations; and
(iii) to develop First Nations land
management capacity.
This is indicative of the employer's intimate relationship
with the reserve system. To suggest that reserves cannot at least
in part be considered the situs of such a department, puts
too narrow a definition on situs for this purpose. I weigh
this factor, in combination with Mr. Akiwenzie's residence,
as supportive of establishing the necessary nexus between
employment income and reserves. These two factors are not
sufficient, however, as reliance on them alone would entitle
every Indian working at DIAND, who lives on a reserve, to qualify
for the exemption. The exemption is not that broad and this would
not be in accordance with the purpose behind the exemption, being
to shield Indians from the efforts of non-Indians to dispossess
them of property, that is, lands and chattels, held qua
Indian; put another way, echoing the statements in the
Folster's case, to preserve the traditional way of
life in Indian communities by protecting property held by Indian
qua Indian on a reserve.
Nature of employment and special circumstances
[50] What will differentiate one from
another at DIAND will be the nature of what the Indian's work
entails. Judge Lamarre found in the Barry Ace case that
the Indians employed with DIAND, who did not reside on reserves,
earned their employment income in the commercial mainstream. It
did not make sense that they would qualify.
[51] Given that the type of property with
which we are dealing, employment income, is not readily
susceptible to pigeon-holing to a particular situs; given
Mr. Akiwenzie lives on a reserve; given DIAND's
situs includes reserves, it comes down to the nature and
circumstances of Mr. Akiwenzie's employment which must tip
the balance one way or another. This is in line with the
suggestion in both the Shilling case and Folster
case that this factor is indeed the most critical in the
analysis. With what was Mr. Akiwenzie's employment intimately
connected? As was indicated by the Federal Court of Appeal in
Shilling, services provided by the employee create the
entitlement; if employed on a reserve that suggests the income is
earned as an Indian qua Indian; if employed off reserve
that suggests the individual acquires employment income in the
commercial mainstream. But here we have an individual who earned
part of his income while physically on reserves, which the Crown
is prepared to exempt, and earned part while working physically
off reserves, albeit with an employer with the characteristics I
have previously described. So what governs? Do I follow the
Crown's approach and find Mr. Akiwenzie's work was partly
in the commercial mainstream and partly integral to the life of a
reserve? I am not satisfied that that does indeed make the most
sense, when the nature and special circumstances of Mr.
Akiwenzie's employment is fully reviewed.
[52] Judge Sobier in Brant v. M.N.R.[17]stated:
... If an Indian chooses to work for an employer off a
reserve, then income earned in the general commercial mainstream,
in the day to day "affairs of life" off the reserve
lands, is not personal property exempt from taxation pursuant to
section 87 of the Indian Act.
That case likewise dealt with a Government employee. His
reference to an Indian choosing to work for an employer off a
reserve needs further scrutiny, however, in Mr. Akiwenzie's
case. Mr. Akiwenzie chose to dedicate his life to improving the
lot of Indians on reserves - restoring their pride. He chose to
do this through an employer who had a fiduciary obligation to
Indians. This was not, I would suggest, a choice to enter the
commercial mainstream. It was a deliberate choice to pursue the
avenue most likely to have a positive impact on Indians. To work
from within, though never considering himself as truly being part
of within. This was just not a commercial mainstream type of
job.
[53] Notwithstanding his written job
description, which was simply created to improve his standing,
Mr. Akiwenzie did not write reports. His job, during the years in
issue, was to bring leaders of the Indian communities to the
table. Mr. Ryan confirmed that only Mr. Akiwenzie could do
this. As an Indian, he not only had all the right connections
within that community, he had the communication skills necessary
to pull it all together. And why did DIAND want these
opportunities to access Indian leaders? Firstly, in connection
with the environment on the Buffalo Point project; latterly in
connection with the Government's need for TEK -Traditional
Ecological Knowledge, an euphemism, I would suggest, for getting
inside an Indian's head. As Mr. Akiwenzie said, it was not up
to him to tell DIAND how Indians thought, but if he got the
leaders together and they determined it would be in Indians'
best interest to divulge that sort of information, then so be it.
And he did get them together.
[54] From working with TEK, Mr. Akiwenzie
moved into the Joint Initiative. This was how the Government
described that initiative:
The
time seemed right to try a new approach. The federal
Government's response to the RCAP report - Gathering Strength
- established a commitment for a renewed partnership
between Canada and First Nations. First Nations, of course, have
known for some time the status quo was not working. All
these factors created a climate for change. Since the Land Trust
service sector affects all First Nations, it seems a logical
place to start.
Through this initiative, the AFN hopes to develop a process
that promotes the inclusion of First Nations and policy and
program development to ensure that program changes address the
needs and priorities of First Nations.
[55] The Joint Initiative was a great hope
for Mr. Akiwenzie, regrettably, one which ultimately did not
proceed. But to Mr. Akiwenzie, it was a chance for Indians to be
heard on how Indians wished to have their future unfold. It was
about the future of life on a reserve. Mr. Akiwenzie had a unique
position - only he could do what he did. What he did was at the
very heart of Indian life - the Canadian Government First Nations
Partnership. He may indeed be the only Indian employee at DIAND
of whom that can be said.
[56] There are special circumstances
surrounding this employment as it was unique in putting DIAND in
such close contact to the decision makers in the Indian
communities, with a common goal of addressing change.
[57] What makes the most sense in a review
of this connecting factor is that Mr. Akiwenzie has
established a strong connection between his employment income and
reserves. His employment was anything but caught up in a
commercial mainstream: his duties were integral to the future of
reserves. Everything he did he did as an Indian qua
Indian, be it fighting for Indian rights, raising a family on the
reserve, restoring pride in Indians on reserves or working
through the only agency in Canada for which he might truly be in
a position to integrally affect the lives of Indians on reserves.
His office could have just as readily been on a reserve as in
Hull: there was no "commercial mainstream" as
such that required duties to be performed from an office in
Hull.
[58] Returning now to the principles gleaned
from the Monias case, I must address whether this
connecting factor does establish a necessary link with the
reserve as an economic base. This is possible if I can justify an
interpretation of section 87 of the Indian Act, and of the
recent Federal Court of Appeal cases, as encompassing a nexus
between employment income and the reserve system generally, for
although Mr. Akiwenzie resided on a reserve, his employment
income is only connected to that reserve by his personal
expenditures. His true connection as far as determining the
situs of his employment income is to each and every
reserve in Canada.
[59] From a policy perspective, I believe it
would not be contrary to the purpose of section 87, as defined by
Justice La Forest, to allow Mr. Akiwenzie, given his exceptional
circumstances, to receive this exemption. This does require a
reading in section 87 of the use of the term "properties
situated on a reserve" to mean situated on more than one
reserve. I can easily imagine a situation where an Indian
physically works on three or four reserves and perhaps resides on
a fifth. Is his exemption precluded because his connection is to
more than one reserve? I think not. He has no less of a
connection with a reserve simply because he had contact
with 480 reserves. The connection must be established with each
and every reserve, but need not be limited to just one.
Certainly, Mr. Akiwenzie might have a slightly stronger
connection to the reserve on which he resides, as presumably more
of his personal property, his employment income, would be spent
there, but that does not deny his connection to all the other
reserves. For only as a whole did they constitute the economic
base required by the Federal Court of Appeal decision in
Monias. Mr. Akiwenzie is funded by the Government of
Canada to gain access to the Indian community to obtain their
knowledge, their input and ultimately their consensus on what the
reserve system is now and should be in the future. In this
respect, the reserve system generally does indeed serve as an
economic base for Mr. Akiwenzie's employment income. It is
not so different from the hospital employee paid from government
funds directed towards the care of Indians.
[60] While Mr. Akiwenzie's residence and
the residence of the Lands and Trusts Department of the Indian
Northern Affairs are relevant, it is the nature and special
circumstances of Mr. Akiwenzie's employment that sway me to
find that he derived his employment income as an Indian
qua Indian. It is personal property situated on a reserve.
He is, therefore, entitled to the protection of that employment
income in the very hands of the entity providing it - the
Government of Canada.
[61] For the foregoing reasons I allow the
appeal and refer the matter back to the Minister for
reconsideration and reassessment on the basis that
Mr. Akiwenzie's employment income is personal property
situate on a reserve and exempt from taxation. Mr. Akiwenzie is
entitled to costs of $200.
Signed at Ottawa, Ontario, this 7th day of
March, 2003.
J.T.C.C.
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