A leading voice on First Nations finances wants the federal government to surrender taxation powers over cannabis to band councils, arguing Indigenous peoples should get a cut of the billions of dollars in revenue expected from legalization.

Manny Jules, chief commissioner of the First Nations Tax Commission, is urging senators to amend Bill C-45, the government's pot bill, to hand taxing authority to First Nations governments so they can impose their own levy on cannabis manufactured and sold on reserves.

The federal Liberal government reached a deal with the provinces to divide up the excise duty collected on the sale of cannabis — a 75-25 split in favour of the provinces, owing to the costs they will incur with legal pot.

First Nations say their governments also will face new challenges from legal cannabis, but they stand to gain nothing from Ottawa's plan.

Under Jules' proposal, Ottawa and the provinces would cede ground to First Nations to collect taxes and provide some much-needed revenue to their cash-strapped communities.

The funds could be used to develop cannabis-related laws and regulations on reserve, fund campaigns to educate young people about the dangers of the drug or bolster First Nations police forces, Jules said.

Jules said that despite the prime minister's talk of a new nation-to-nation approach with Indigenous peoples, very little consultation on revenue-sharing happened before the legislation was rolled out, leaving a legal "dog's breakfast" on reserves across the country.

"I think that people are very disappointed that we weren't considered early on," said Jules, the former chief of a band near Kamloops, B.C. "The challenges [First Nations] face are even larger than those of the provincial governments."

Through an "orderly approach," First Nations communities could avoid some of the pitfalls they've faced with the sale of tobacco, Jules told the Senate Aboriginal peoples committee.

Many "grey marketeers" have used First Nations territory to process, manufacture and sell tobacco products tax-free, he said, which has led to the loss of billions of dollars in revenue for First Nations governments.

'You're going to have problems'

"Where there's no law you're going to have problems," he said. "If the legislation proceeds as-is ... there are going to be immediate problems within our communities just over simple things, like the regulatory regimes on how cannabis retailers would operate on a reserve."

Conservative Nunavut Sen. Dennis Patterson, currently on a cross-territorial tour soliciting feedback from Inuit on the push to legalize cannabis, said most members of the Senate's Aboriginal peoples committee are looking at Jules' proposal with "enthusiasm."

"The general flavour is positive," he said in a phone interview with CBC News from Resolute Bay, Nunavut. "I can't speak for the committee as a whole, but I'm certainly going to be encouraging them [to make an amendment to the bill].

"I'm frankly amazed that a government committed to developing a new nation-to-nation relationship, and a new fiscal relationship specifically, with Indigenous peoples overlooked this obvious opportunity to reach out to First Nations who want to opt in."

When asked about allegations of insufficient consultation, a Finance Canada spokesman said all stakeholders, including Indigenous communities, were invited to submit feedback on the proposed cannabis excise duty framework last fall.

While they're not specific to the cannabis duty, the government has been in discussions about tax revenues more generally with the Assembly of First Nations and self-governing Indigenous communities, the spokesman said.

"The government is considering the perspectives heard to date and is committed to ensuring that its policies in respect of tax arrangements with Indigenous governments are consistent with the principles underlying reconciliation and a renewed fiscal relationship," the spokesman said.

Sen. Dennis Patterson says he's enthusiastic about getting Indigenous communities a share of cannabis tax revenue. (Sima Sahar Zerehi/CBC)

Beyond the tax issue, the 148-page Bill C-45 is silent on the role Indigenous communities will play under the new legal framework. In fact, the word "Aboriginal" is mentioned only once in the "definitions" section of the bill.

Justice Minister Jody Wilson-Raybould and Health Minister Ginette Petitpas Taylor have said bureaucrats will consult with Indigenous communities when drafting regulations after the bill is passed — a promise that offers little comfort as legalization fast approaches.

Independent Manitoba Sen. Mary Jane McCallum said she met with two grand chiefs in her home province recently and they're completely in the dark about how the legislation will apply to First Nations governments.

"So why are we proposing to just jump into this mess and say, 'Okay, we can handle it when the time comes?'" she said.

"You know what? We're already in crisis here, and that's what I'm concerned about."

'We're not ready for it'

The Parliamentary Budget Officer has estimated the annual national retail market for recreational pot will be worth $5.5 to $5.8 billion.

Independent Nova Scotia Sen. Dan Christmas — the first Mi'kmaw member of the Senate and a frequent critic of the "destructive" Indian Act — said the federal government should back any plan that allows "communities to generate their own revenue to meet their own needs."

"It seems we're at a point in time where we're at a fork in the road here," he said. "One road that has been taken in the past is to simply ignore First Nations' revenue-generating abilities and their inherent jurisdiction to raise their own funds and just go down the path of the federal government providing endless transfers to First Nations or Indigenous organizations."

Randall Phillips, chief of Oneida Nation of the Thames, near London, Ont., said many First Nations want to take the road that gives them a "slice of the pie."

Chief Randall Phillips of the Oneida Nation of the Thames says First Nations should get a 'slice of the pie' of tax revenue from the sale of legal cannabis. (Aadel Haleem/CBC)

Phillips said First Nations want in on the cannabis market — not only to collect tax to pay for social services, but also to foster business development and provide jobs to their people. He said First Nations do not want to respond haphazardly to a massive legislative change such as the legalization of pot.

"We're not ready for it," he said.

"Unfortunately, this is just another example of us reacting instead of actually thinking it out."