OTTAWA—The Canada Revenue Agency has been aggressively collecting back taxes from a group of mostly low-income aboriginal women who lost a long-running legal battle to be exempt from paying personal income taxes because their employer was situated on a reserve.

Native Leasing Services, an employee outsourcing company that has its headquarters on Six Nations of the Grand River, a reserve near Brantford, Ont., is seeking a remission order from National Revenue Minister Diane Lebouthillier — who would have to recommend it to cabinet for approval — on behalf of 3,916 former employees.

“Most of the applicants live on or near the poverty line ... A large portion of these employees will never be able to pay the tax assessments that have been made against them,” Jim Fyshe, a lawyer working pro-bono for Native Leasing Services, wrote in the application for a remission order filed in June 2013.

The employees, whose annual income at Native Leasing Services averaged about $27,000, according to Fyshe, are being pursued by collections officers who are putting liens on their homes, garnishing their wages and clawing back benefits for years of personal income taxes after the courts supported a decision by Canada Revenue Agency to reinterpret the Indian Act.

One of them is Ramona Dunn, 53, who the Canada Revenue Agency says owes nearly $94,000 in taxes, fines and interest for the five years she worked as a registered nurse and diabetes educator at Anishnawbe Health Toronto, where she was technically an employee of Native Leasing Services.

Dunn, who grew up in poverty — at one point living in a shack behind a gas station with her mother, a residential school survivor — said she took the job at the non-profit agency for a smaller salary than she would have earned at a hospital.

“I was willing to work for less money than my skill set would have given for me just for the chance of working in my community and helping my people,” Dunn says from her home in Exeter, Ont., adding the tax exemption, which she still believes she has a right to as a status Indian, helped make up some of the difference in take-home pay.

Now Dunn, whose severe arthritis prevents her from working full time, has remortgaged her home and the Canada Revenue Agency threatens to put a lien on her property.

“Never in a million years would I have thought they would go after me,” says Dunn, who has started an online petition and wrote a letter to Lebouthillier about her case, receiving a pro-forma response on Nov. 24 assuring her officials would review her issues.

Philippe Brideau, a spokesman for the Canada Revenue Agency, said they could not comment on individual cases due to privacy reasons, but said remission orders are considered on a case-by-case basis.

“Each request is carefully reviewed by the CRA to determine if the collection of a tax or enforcement of a penalty is unreasonable or unjust or if it is in the public interest to grant remission,” wrote Brideau, who did not make Lebouthillier available for an interview.

“The filing of a request for remission does not create a suspension of collection action for a tax debt. The CRA makes every effort to reach a mutually acceptable payment arrangement based on the taxpayer’s ability to pay before proceeding with any collection actions,” Brideau wrote.

Native Leasing Services, part of the O.I. Group of companies, was set up in the 1980s by First Nations activist Roger Obonsawin and his partner, Ljuba Irwin, as a way for First Nations people and non-profit organizations serving the aboriginal population to exercise their right to be exempt from income taxes under section 87 of the Indian Act.

Native Leasing Services would hire the workers as a centralized agency — taking care of payroll and other administrative tasks — but the work would actually be done for the clients based off-reserve.

The Canada Revenue Agency later changed its guidelines and entered into an agreement with Native Leasing Services to clarify them through a series of test cases in court.

Irwin says Native Leasing Services was under the impression that should they lose what ended up being a long and protracted legal battle, the past debts would be forgiven.

That ended up not being the case.

January 25, 1983 — Nowegijick v. The Queen

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The Supreme Court of Canada rules that Eugene Nowegijick, a member of Gull Bay Indian Band in northwestern Ontario, has the right as a status Indian to be exempt from paying taxes on his personal income under section 87 of the Indian Act because his employer, the Gull Bay Development Corp., was situated on the reserve, even though he performed his duties as a logger off the reserve.

1987 — Native Leasing Services

Roger Obonsawin and Ljuba Irwin create O.I. Employees Leasing Inc. — Native Leasing Services and set up its head office on the Six Nations of the Grand River, a reserve near Brantford, Ont. This allows its employees, who work mainly at aboriginal non-profit organizations off reserves, to be exempt from paying income taxes.

April 16, 1992 — Williams v. Canada

The Supreme Court of Canada ruled that Glen Williams, a member of the Penticton Indian Band, did not need to pay taxes on his employment insurance benefits for work done on a reserve even though the benefits themselves did not come from the reserve. The court established “connecting factors” to define eligibility for tax exemption under section 87 of the Indian Act.

Political protests

The Canada Revenue Agency, then known as Revenue Canada, interpreted the ruling to mean employees of Native Leasing Services, working off-reserve, must pay income taxes. These new guidelines would come into effect Jan. 1, 1995, which set off a political battle — especially as then prime minister Jean Chrétien broke a promise he made while in opposition the year before — culminating with Obonsawin and other indigenous activists occupying fifth floor of a Revenue Canada building in downtown Toronto in December 1994.

December 23, 1994 — A compromise

The deputy minister at Revenue Canada, Pierre Gravel, writes a letter to Irwin saying the agency would “take all available steps to expedite consideration by the courts of any challenge of the guidelines or their application in particular circumstances” in exchange for vacating the fifth-floor of its office building. This led to Native Leasing Services and Revenue Canada selecting four “test cases” to clarify the law and establish legal precedent.

April 12, 1996 — Collections on hold

Revenue Canada tells Native Leasing Services that it would assess all income earned by its employees after Jan. 1, 1995, as taxable, but should any employees file notices of objection, it would hold them in abeyance while the test cases — Shilling, Clarke, Horn and Williams — made their way through the courts.

June 9, 1999 — Shilling v. MNR

After years of procedural back-and-forth, the lead test case involving Rachel Shilling, a member of Rama First Nation near Orillia, Ont., who worked for Anishnawbe Health Toronto through a contract with Native Leasing Services, goes to trial. Federal Court Trial Division Judge Karen Sharlow rules in her favour, essentially reverting back to the common-law principle supported by the Supreme Court in 1983.

Subsequent losses

Internal Revenue Canada documents released through the courts show the federal government was concerned about the impact of this victory for Native Leasing Services would have, especially as it would make it harder to secure modern treaties in exchange for relinquishing the Indian Act tax exemption. The government appealed Shilling and won, with the Supreme Court of Canada refusing to grant Native Leasing Services leave to appeal on March 14, 2002.

June 2013 — Remission order

As its former employees have been losing individual appeals and being told they owe thousands of dollars in back taxes, Native Leasing Services submitted a request for a remission order to the Canada Revenue Agency on behalf of 3,916 employees seeking relief. It is also seeking leave to appeal to the Supreme Court on one of the cases that was dismissed by the Federal Court of Appeal last month.

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