1 June 1994 Ministerial Letter 9409978 - INDIANS - GUIDELINES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

ADM'S OFFICE (3) ADM 94-03535M

RETURN TO RULINGS, ROOM 303, MET. BLDG.

AUTHOR
SUBJECT OR CORPORATE FILE

June 1, 1994

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of March 28, 1994, wherein you expressed concerns regarding the application of the draft Indian Act Exemption for Employment Income Detailed Guidelines (the "Guidelines") to Indians employed by your organization. I apologize for the delay in replying.

You indicate in your letter that, after having reviewed the Guidelines, you have concluded that natives working for your organization are not exempt from tax, but that they would be exempt if they were performing their duties on behalf of a band or tribal council.

Under Guideline 2, where the employment duties of Indians are performed entirely off a reserve, the employment income earned will be tax-exempt if the employer is resident on a reserve and the Indian lives on a reserve, except where it can reasonably be considered that one of the main purposes for the existence of the employment relationship is to establish a connecting factor between the income in question and a reserve. Indians working for your organization would not be exempt from tax under Guideline 2 if the only factor connecting the employment income to a reserve is the residence of the employee leasing agency which employs the Indians. This factor is not, by itself, sufficient to bring the employment income within the exemption.

If the employer were an Indian band or a tribal council, since your organization provides services to XXXXXXXXXX it is unlikely that Guideline 4 would apply since, under these circumstances, there is not sufficient connection to a reserve to provide an exemption. The purpose of this type of employment relationship may be questionable because, as you have noted, bands and tribal councils have not historically offered these services for off reserve Indians.

In your letter, you indicate that your organization was not consulted with respect to the development of the Guidelines. We note, however, that, in a letter dated April 30, 1993, addressed to

XXXXXXXXXX

Mr. Pierre Gravelle, Deputy Minister of Revenue Canada, Customs, Excise and Taxation, invited your organization to participate in the consultation process by providing information regarding particular employment situations which the Department should consider in developing the Guidelines. We have not received any previous input from your organization in this respect.

You referred to the June 30, 1993 letter written by the Right Honourable Jean Chrétien, while Leader of the Opposition, in which he expressed concerns about the previous Government's interpretation of the Supreme Court of Canada's decision in the Williams case and the lack of consultations with Aboriginal organizations in formulating guidelines based on that decision.

Over the course of the summer (after the June 30 letter), departmental officials did undertake an extensive series of meetings with Aboriginal political organizations and tribal councils, consultants and contractors, tax practitioners and other affected individuals. In addition, they received over 250 written submissions. Based on this input and a thorough analysis of the case, guidelines were drafted.

The Prime Minister is aware of the fact that these draft Guidelines were issued. He is now satisfied that significant work has been carried out by departmental officials and that the proposed guidelines apply the Williams decision in a fair and liberal manner consistent with the Supreme Court decision.

As mentioned in the letter accompanying these Guidelines, we gave those who wished to comment up to the end of March 1994 to provide us with their input. We will consider scenarios such as yours in our deliberations on finalizing the Guidelines. Once all of the submissions are reviewed and analyzed, the final version of the Guidelines will be distributed.

I trust that these comments will be of assistance.

		Yours sincerely,

		Denis Lefebvre
		Assistant Deputy Minister
		Legislative and Intergovernmental
		  Affairs Branch

C. Chouinard
957-2098
May 27, 1994
940997