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With the splitting of Indigenous and Northern Affairs Canada (INAC) into two departments, a move announced by the Trudeau Liberals in August, there’ll be one department in charge of negotiations with First Nation communities and another in charge of service delivery. And it will presumably become easier for the negotiating department to focus on signing an increased number of self-governing arrangements with more bands under the Indian Act.

Subsequently, the economic future of First Nations becomes more important. Bands under the oversight of the Indian Act should take steps toward their financial self-sufficiency now, in preparation for eventual self-government.

INAC and its future incarnation should act now to ensure eventual self-reliance. This June, INAC Minister Carolyn Bennett announced that Ottawa was suspending a policy that saw the department claw back federal transfer funds from self-governing First Nations that generate their own funds. The new policy imposed a moratorium for up to three years until Ottawa could negotiate a new fiscal framework with the Indigenous community.

Self-governing groups will be allowed to keep all their transfers — including federal ones. The clawback was part of an effort by Ottawa to encourage these groups to become less reliant on federal transfers. The policy change, however, only applies to groups with self-government agreements. For bands under the Indian Act, it’s much more complicated.

According to INAC, when providing funding to individual bands, it will not consider the “revenue capacity or fiscal capacity” of the First Nation receiving funds.

Simply put, INAC appears to lack any real plan for encouraging Indian Act bands to become self-reliant — unlike self-governing bands that have federal transfers offset by the band’s revenue capacity. It’s fair to ask any community how much they can contribute toward their own governments, programs and services.

A Fraser Institute study in 2016 found that one of the chief benefits of the First Nations Financial Transparency Act, a piece of legislation the current federal government has stopped enforcing, was not the publication of chief and councillor salaries (despite that being very important), but the revelation of own-source revenue streams within Indigenous communities still under the Indian Act.

Most interestingly, more than 100 First Nation communities (of more than 600-plus federally recognized bands) generated more own-source revenues than they received in federal transfers.

This is not a call for “cutting First Nations off’ or for phasing out federal funding. Ottawa should recognize that Indigenous communities control only a small fraction of total lands in Canada, that much of their lands are sub-optimal in location and in nature, and that these communities still face economic hurdles created by the Indian Act. All these problems should be tackled if INAC were to adjust the own-source revenue policies affecting bands under the Indian Act.

But, current policies should encourage these communities to develop their economies and fiscal capacity. Why wait for these communities to sign self-government agreements?

Much has been written and said about the benefits of political independence, but we should also look at economic independence, as both dimensions of independence go hand-in-hand. Not all First Nations are at the same place in generating their own revenue sources. But existing policies should act to encourage their cultivation, whatever the sources are.

Self-taxation by First Nations is still controversial in some Indigenous communities, but taxation is a central feature of any government and creates a relationship of accountability between the governors and the governed. INAC polices should encourage self-taxation.

The default assumption is that Indigenous communities will always be poor and lack any of their own revenue sources. Thus, they will always be dependent on federal transfers. That is certainly not an inspiring or dignifying vision for the future.

Entrenched dependence […]

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