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Additions to Reserve Municipal Tax Loss Concerns [First Nations Tax Commission, FNTC]

Fiscal Realities
Year of publication: 

First Nations additions to reserve near urban locations are economically and fiscally
beneficial to First Nations and local governments. They provide First Nations access to
markets and employment and housing opportunities. They can support improved
services and infrastructure. Despite this, some local governments have expressed
concerns about tax loss from urban ATRs.

This paper investigates local government tax loss from possible urban ATRs. Two
methods were used. First, we looked at the tax loss provisions in treaty land
entitlement agreements in Saskatchewan and Manitoba. Second we looked at existing
service agreements in BC to estimate tax loss to local governments from First Nations
located near local governments. Our three findings were as follows:

1. The potential for municipalities to lose property tax revenues when a First Nation
acquires land within a municipality and converts it to reserve status is either zero or
small and where it is small it is more than offset by other fiscal benefits.

2. Local governments in Manitoba and Saskatchewan are compensated by their
provincial and/or federal governments for any reductions in property tax revenue not
made up through service agreements under the TLE framework.

3. Local governments in BC can enter into service agreements with the First Nation and
receive property tax equivalent payment for the services they are selling and achieve
cost savings by not selling services for which the property tax cost is higher.

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