It's important to clarify that only aboriginal people living on reserves receive tax exemptions; most aboriginal people pay the same taxes as other Canadians.
When the tax exemption came into effect under the 1876 Indian Act, First Nations did not have the right to vote, own property or practise many cultural traditions. First Nations did not gain the right to vote in federal elections until 1960.
The Indian Act has made economic development on reserves difficult. Reserve land is held in trust by the federal government for use by status Indians. Because the Indian Act stipulates that reserve lands cannot be seized to enforce payment of a debt, these lands have never been available for use as collateral. The same is true of all real and personal property of aboriginal people or bands on a reserve. Negotiated cash and land settlements will provide First Nations people with the capital they need to begin businesses and create jobs and industries.
Through treaties, First Nations will acquire a land base and establish a government with powers to access revenues, borrow, receive transfers from other governments and levy taxes. The governments of Canada and BC seek to gradually eliminate tax exemptions as First Nations move towards greater economic self sufficiency. For example, under the Nisga'a Treaty transaction taxes such as sales tax were eliminated eight years after the effective date and all other taxes, including incomes tax, will be eliminated in 2012.
Many First Nations in the BC treaty process are reluctant to give up their tax exemption when most other First Nations in Canada will continue to have these exemptions —including those that have signed treaties in the past. Canada, BC and the First Nations Summit are working together to find creative solutions to taxation and other fiscal issues.