2 February 1994 Internal T.I. 9318067 F - Indian - Jay Treaty

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

February 2, 1994

Attention:  J. Robinson

XXXXXXXXXX

We are writing to you in reply to your memorandum of June 8, 1993 in which you queried the taxability of a person named XXXXXXXXXX (the "client").

Facts

1.     The client is a status Indian who does not reside on a reserve.

2.     XXXXXXXXXX We assume that the employer XXXXXXXXXX is not resident on a reserve.

3.     XXXXXXXXXX  the client's work location was not on a reserve.

The client claims that the Jay Treaty exempts from tax income earned by status Indians within certain distances of waterways.

Our Comments:

The Jay Treaty is the name generally used for the Treaty of Amity, Commerce and Navigation, between His Britannic Majesty and the United States of America, signed on November 19, 1794. The effect of the Jay Treaty was considered by the Supreme Court of Canada in the case of Louis Francis v. Her Majesty the Queen (56 DTC 1077), which concerned customs duty, excise tax and sales tax. It was concluded that the Jay Treaty was not a Treaty of Peace and accordingly it would have to be implemented or sanctioned by legislation in order for the rights and privileges under the treaty to be enforceable in Canada. However, there is no statutory confirmation in Canada giving effect to the Jay Treaty. The Jay Treaty was recently considered by the Court of Appeal for Ontario in the 1993 case of Regina v. Vincent (12 OR (3d) 427), which concerned the levying of duties on goods imported to Canada. It was concluded that the Francis case continues to prevail even after the enactment of the Constitution Act, 1982. Subsection 35(1) of the Constitution Act recognized and affirmed "existing aboriginal and treaty rights of the aboriginal peoples of Canada". However, that Act did not create treaty rights which previously did not exist. It was also noted by Lacourcière, J.A. in the case that the Canadian courts have always interpreted the word "treaty", when it deals with aboriginals, as meaning a treaty between the Crown and the Indians.

Since the Jay Treaty was an international treaty between Great Britain and the United States of America, it was not a treaty envisaged by subsection 35(1) of the Constitution Act.

In summary, the Jay Treaty has no effect on the taxation of Indians.

Accordingly, we have not attempted to locate a copy of the treaty.

The client's only recourse is to rely on provisions of the Indian Act in order to seek exemption from taxation on his income. The effect of the Indian Act was considered by the Supreme Court of Canada in the Glenn Williams case (92 DTC 6320). It was concluded that, in order to determine whether income of a status Indian could be considered to be property of an Indian on a reserve and thus exempt from tax, one must consider and weigh all the factors (the "connecting factors") which link the income to a reserve. In general terms, the Department has concluded that employment income for duties performed entirely off a reserve will be exempt only in the situation where the employer resides on a reserve and the Indian lives on the reserve. Accordingly, the client's employment income from the employer for work performed at XXXXXXXXXX is not exempt from tax.

R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch