This article was published in the New Brunswick Telegraph-Journal on February 25, 2017. You can find it here 

The government makes it hard to do business in New Brunswick. High taxes and cumbersome red tape holds businesses back. But the decision to re-affirm special tax deals for First Nation businesses while heaping tax increases on others breaks the government’s responsibility to ensure that every businesses has the same opportunity to succeed. 

New Brunswick is the only province in Canada that allows First Nation bands to keep 95 per cent of all tobacco, HST and gasoline tax they collect on sales to non-aboriginals, sending just 5 per cent to the government. This deal means that two businesses could be just a few meters apart, yet one gets this huge tax advantage because it’s located on a First Nations reserve, while the other one selling the same products has a narrower profit margin.

Recently the provincial government altered the agreement with six Maliseet First Nation bands to get an accommodation agreement with the bands regarding the Sission Mine. The new deal allows the Band to keep the 95-5 arrangement until tax revenues reach $8 million then it goes to 70-30. 

The change to a 70-30 share is an improvement, but the deal on the whole is unfair.

This year the government projects it will lose $54 million on these special tax deals. That number has grown 76% from 2011-12 when the government lost about $30 million. This represents one of the fastest growing costs on the Treasury in the entire provincial budget.

The previous agreement the province had with the Maliseet had a provision that the agreement could be cancelled with 90 days’ notice. Former Finance Minister and now PC Leader Blaine Higgs wrote to the First Nations bands informing them of the cancellation of the agreements just days before the 2014 election, only to have that decision rescinded when the Liberals came to power.

These new agreements are now 10 years long and can only be reviewed after five years. First Nations bands have made it clear they are expanding their own enterprises to take advantage of their special status. By the time these agreements are up, finding a solution to this problem is going to be much harder to do since the stakes and dollars will also be much higher. The longer these tax deals exist, the bigger the problem becomes. 

The new tax deals include a provision that allows the government to withhold paying First Nation bands these taxes if they are undercutting their competitors’ prices.

But this threat of lost money is hollow. In the previous agreement, a provision was included to prevent using the tax agreements as a competitive advantage, but was never acted upon. There is no reason to hope it will be enforced this time around either.

The government will only be allowed to review the books of a First Nation business with respect to the tax deals if reasonable notice and justification are given. But even if they could review First Nation businesses’ books whenever they wanted, it would be very difficult to establish whether bands are using the tax agreements to undercut off reserve businesses.

Gas is the easiest to enforce because the prices are regulated and businesses post their prices for all to see. But what about something like groceries where potato chips are sold at different prices in different stores. Did a customer get a lower price because the business does not have to give the government the HST or did they just get a really good deal?

The time has come for the provincial government to stop negotiating with First Nation bands over these special tax deals. Instead, they should treat every business owner the same, and cancel these agreements.

Running a business in New Brunswick is tough enough, the last thing the government should be doing is making it harder.

Kevin Lacey is the Atlantic Director with the Canadian Taxpayers Federation