Higgs government pulls out of gas-tax sharing with First Nations

The New Brunswick government is pulling out of tax-sharing agreements with 13 Mi'kmaq and Wolastoqey First Nations, invoking its right to terminate some of the deals as early as this July.

Those agreements, which date back to 1994 and were last renewed in 2017, have fuelled economic growth in some Indigenous communities, particularly those that have built large gas retailers on reserve land.

The deals allow the First Nations to keep 95 per cent of on-reserve gas tax revenue up to $8 million and 70 per cent of amounts beyond that.

But Premier Blaine Higgs called the tax agreements outdated, "unsustainable and unfair" Tuesday, arguingthey violate the principle that all Canadians pay the cost of government programs that benefit everyone.

He called it "a two-tier tax system" that deprived schools, hospitals and other public services of much-needed funding.

"Our province can't afford to ignore it any longer," he said.

Agreements expected to increase to $75M

The province said the agreements directed $28,000 of provincial revenue to reserves in 1996-97, an amount that grew to $47 million in 2019-2020. It estimated this would increase to $75 million a decade from now.

"The sky's the limit," Higgs said. "We are not a province with an economy that can withstand these kinds of agreements."

Briefing documents said the original deals were designed to be "fair for businesses on and off reserve," but over time they've proven inequitable. Non-reserve gas retailers have complained for years that the deals put them at a competitive disadvantage.

Madawaska Maliseet First Nation Chief Patricia Bernard said she was "floored" by the announcement, which chiefs learned of during a brief conference call with Finance Minister Ernie Steeves after a media briefing was already underway.

She said the chiefs weren't even given the chance to ask questions. Bernard found out some of the details during her interview with CBC News.

"I'm totally shocked," she said. "I knew that the relationship between the province and the First Nations has been horrible, but this is deplorable."

Aboriginal Affairs Minister Arlene Dunn said the brief call was "not the approach that one would want to take with respect to notifying First Nations."

"I guess you have to take into consideration: Who do you call first? Who do you have a conversation with? Those are all things that we have to, I guess, manage quite well."

Chief George Ginnish of Natoaganeg First Nation said Mi'kmaq chiefs have been asking to talk to the Higgs government about the tax agreements since 2018.

"The way we are being treated by this government is completely disrespectful," he said.

In pulling out of the agreements, Higgs called on First Nations chiefs to negotiate "a modern and sustainable economic partnership."

That call, and the cancellation of the agreements, come in the context of a fraught relationship between the premier and First Nations chiefs on issues ranging from systemic racism to shale gas development.

Last month, Court of Queen's Bench Justice Richard Petrie ruled that the gas-tax agreements extend to about $5 million in carbon tax revenue. Higgs said that decision won't be appealed, though its financial impact will now only last until the deals end.

The province said agreements with six Wolastoqey First Nations as well as Eel Ground First Nation are subject to review this year, and they'll be given notice the deals will end a year from now.

Bernard said she believes those agreements can only expire in January 2023.

Six Mi'kmaq First Nations have agreements that allow the province to give 90 days notice it is pulling out. It wasgiving that notice Tuesday.

Higgs said on-reserve retailers will now be expected to operate like any other business, collecting tax revenue on behalf of the province and remitting it.

But Bernard said band chiefs and councils will now look at whether to "assume our own jurisdiction" by creating their own tax, gaming and alcohol commissions.

That will put nearby non-reserve businesses in an even worse competitive position, she said.

"If we create our own tax regime on reserve, and we say, 'we're not going to charge 10 per cent provincial, tax, we're going to charge five per cent,' well, where are you going to go buy your couch?"

Calvin Grant, the owner of Murray's Truck Stop and Convenience Store in Woodstock and one of the retailers who opposed the tax agreements, said it was too early for him to comment on the announcement.

At Madawaska Maliseet First Nation, the band government uses the tax revenue to supplement inadequate federal funding for health, education and social programs, Bernard said.

Those are programs the province refuses to subsidize even while it moves to grab the band's retail tax revenue.

"If there's money to be made, the province assumes jurisdiction," she said. "If there's money to be spent, well, then that's federal jurisdiction. And they do this all the time."

Dunnsaid there are models for business co-operation from other provinces that could benefit First Nations in New Brunswick,such as loans for bands that invest in oil and gas projects or resource sharing agreements in the forestry and mining sectors.

She said the opportunities are "tremendous" and eventually this decision should "improve the relationship" between the Higgs government and Indigenous people. "We can make this better."

The legal implications of the cancellation are unclear.

Avoiding potential court battles

In 2016, Bernard told CBC News the province struck the deals to avoid potential court battles.

"The key component here is: without those agreements, do the First Nations have the legal authority to not charge the tax, and will that be even worse for [off-reserve] gas stations?" she said.

But later that year, the Supreme Court of Canada refused to hear an appeal of a Quebec ruling that said that province can force First Nations gas stations to collect sales tax and remit it to the government.

• Court sides with First Nations in dispute with N.B. government over carbon-tax sharing

Higgs said Tuesday the gas-tax agreements are independent of aboriginal and treaty rights protected by the Constitution.

"This is a commercial agreement and it was done for a commercial reason," he said.

Higgs has long been preoccupied with the gas-tax agreements and launched a review of them as finance minister in 2014, shortly before the provincial election in which the Progressive Conservative government lost power.

The review was never finished, and the Brian Gallant Liberals renewed the agreements three years later.

The province said Tuesday that those 2017 renewals expanded the agreements to cover any new land added to reserves. Six additions to reserve land have been approved since 2018, raising the possibility more businesses will relocate there, costing the province tax revenue.

Just this week the MadawaskaMaliseet First Nation signed a land-claim agreement with Ottawa that would let it add 783 hectares anywhere in the province to its reserve land.

Higgs said such expansions raise the prospect of new reserve land in cities where First Nations businesses could set up at a tax advantage next door to existing companies, "creating division."

The premier singled out Madawaska Maliseet First Nations, pointing to revenue figures showing it will get 40 per cent of all the revenue from the gas-tax agreements this year, despite having only two per cent of the province's Indigenous population.

Bernard said it's true the band has prospered relative to other reserves, but that's no reason for the province to impose its idea of equity.

"He finds it very difficult to envision a community that can be successful and [he] is now using that to penalize other communities that struggle with poverty and with food security," she said.

"I can't help but take it personally. I know that Higgs does not like to see that success."