1 September 1995 Ministerial Letter 9521838 - INDIANS - EMPLOYMENT INCOME 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.

Principal Issues:

Objections to the Indian Act Exemption for Employment Income Guidelines:

1)lack of consultation
2)unfair and discriminatory

Position TAKEN:

We disagree.

Reasons FOR POSITION TAKEN:

1)Everyone was given opportunity to participate in the development of the Guidelines.

2)the exemption is based on the Indian Act exemption, which concerns the property of an Indian on a reserve

MINISTER/DM'S OFFICE 95-05756M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWERS

September 1, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable David Anderson, Minister of National Revenue, has asked me to respond to your letter of August 2, 1995, which concerns the Indian Act Exemption for Employment Income Guidelines.

Commencing in the summer of 1993, departmental officials undertook an extensive series of meetings with Aboriginal political organizations and tribal councils, consultants and contractors, tax practitioners and other affected individuals. In addition, we received over 250 written submissions. Based on this input and a thorough analysis of the Williams case, guidelines were drafted and distributed in December of 1993 to interested parties. More submissions were received and these were given serious consideration before the final guidelines were issued in June of 1994.

Throughout the process, the submissions helped us to understand the perspective of others and the consultations provided for an exchange of ideas. The guidelines were revised a number of times as a result of this input and I believe that the final version of the guidelines is better and clearer than it otherwise would have been. Significant work has been carried out by departmental officials and I believe the guidelines apply the Williams decision in a fair and liberal manner consistent with the Supreme Court's decision.

On August 11, 1994, Mr. Denis Lefebvre, Assistant Deputy Minister, replied to XXXXXXXXXX of your organization, on some of the same issues you have raised. XXXXXXXXXX suggested that the fourth guideline provide an exception for " XXXXXXXXXX or group dedicated, but not necessarily exclusively dedicated, to the social, cultural or economic development of Indians who for the most part live on or are entitled to live on reserves." Mr. Lefebvre pointed out that a reason for including bands or tribal councils of bands in the fourth guideline is that bands typically have reserves. Thus, when applying the guidance provided by the Supreme Court of Canada in the 1992 Williams case that one needs to consider and weigh the factors which connect an Indian's income to a reserve, the fact that a band has a reserve is considered significant. The guideline extends further to also apply to organizations under the control of a band on a reserve or a tribal council of such bands. Generally, other organizations are not as connected to a reserve.

Mr. Lefebvre also pointed out that where an organization is involved, not only must the organization be connected to a reserve by being controlled by a band or tribal council, it must be dedicated exclusively to the social, cultural, educational, or economic development of Indians and those Indians must for the most part live on reserve. Although there may be a variety of reasons for Indians not living on reserve, it is only the property of an Indian situated on a reserve which is exempt from taxation. Where an Indian is entitled to live on reserve but, for whatever reason does not live there, the Indian's residence does not serve to connect his or her income to a reserve. Nevertheless, Guideline 4 provides for an employee's employment income to be exempt in certain circumstances which are clearly stated in Guideline 4.

Determination of whether the employment income of an employee of an organization is exempt under Guideline 4 does not question the value of the services provided by the organization or the tax status of the organization. An organization may be dedicated to the social, cultural or economic development of aboriginal people, but if those people are not Indians who for the most part live on reserves, there is not a sufficient connection to a reserve to exempt the employment income of its employees.

I trust that I have explained the Department's position and thank you for your comments.

						Yours sincerely, 

						Pierre Gravelle, Q.C.

J.D. Brooks
957-2103
September 1, 1995