Own-source revenue for self-governing groups
Learn about different types of revenue generated by self-governing Aboriginal governments as well as the Government of Canada’s own-source revenue policy.
As of April 1, 2017, funding reductions for self-governing Indigenous governments under Canada's own-source revenue policy will be suspended for up to three years while the Government of Canada and self-governing Indigenous governments work in collaboration toward a new self-government fiscal policy framework. This will ensure that while work is underway to develop a new policy, those with self-government agreements will be able to allocate all of their resources to the most pressing needs in their communities.
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What is own-source revenue?
Own-source revenue (OSR) is the revenue that an Aboriginal government raises by collecting taxes and resource revenues or by generating business and other income. Under self-government agreements, Aboriginal governments use some of this revenue to contribute to the costs of their own operations, such as providing programs and services to their citizens. Many Indigenous groups are able to generate OSR.
The Government of Canada’s own-source revenue policy
Under the Government of Canada's OSR policy, federal transfers to self-governing groups are offset by a portion of a group's revenue capacity. The policy only applies to groups that are signatories to modern treaties and other self-government agreements.
The purpose of the Government of Canada's OSR policy is to take into account the ability of self-governing groups to contribute to the costs of their own government activities when determining the level of federal transfers. Over time, and based on ability, an Aboriginal government's reliance on federal transfers may be expected to decline. A similar practice exists for transfers to the territorial governments, which also rely heavily on transfers from the federal government.
Actual own-source revenue contributed by Aboriginal governments
Under the terms of their agreements with the Government of Canada, Aboriginal governments undertake to report their revenues to the Government of Canada through an OSR report. This report is generally constructed using the Aboriginal government's annual consolidated audit, which provides data on the government's expenditures and revenues for a given year.
In 2012-2013, Aboriginal Affairs and Northern Development Canada (now Indigenous and Northern Affairs Canada) transferred $265 million (19 agreements) to self-governing groups at a net amount of $4.0 million in OSR offsets (about 1.5% of the federal transfers). However, the total OSR offset is expected to increase as OSR is gradually being phased-in in all agreements.
An OSR offset is the amount contributed by an Aboriginal government, resulting in a reduction of that amount to federal transfers from the Government of Canada. By design, any group with significant revenues will face a reduction in federal transfers over time as the Aboriginal government will be expected to make a greater contribution towards its programs and services.
Changes to the Government of Canada’s own-source revenue policy
On July 27, 2015, Aboriginal Affairs and Northern Development Canada (now called Indigenous and Northern Affairs Canada) released Canada's Fiscal Approach for Self-Government Arrangements (the Fiscal Approach), setting out a detailed policy framework for the provision of federal financial support to Aboriginal self-governments as well as a revised methodology for calculating OSR offsets. This includes details on the protection of program transfers for health, education and social development, and a revised treatment of eligible revenues. Under the fiscal approach, the Own Source Revenue policy will no longer apply to sectoral arrangements addressing only health, education, and social development, such as the Mi'kmaq Education Agreement between Canada, Nova Scotia, and 12 Mi'kmaq First Nations.
The fiscal approach also introduced other revisions to the OSR policy, including:
- income from portfolio investments income will not be included as eligible revenues
- income arising from impact benefit agreement (IBA) payments relating to projects off the Aboriginal government land-base will not be included
- in most cases, revenues arising from transfers or revenue sharing provided directly by provinces or territories will be excluded from federal OSR calculations.
Further details regarding the OSR policy are set out in the fiscal approach.
To ensure that the Government of Canada's fiscal policy framework reflects the desire for a renewed nation-to-nation relationship with Indigenous peoples, Indigenous and Northern Affairs Canada has launched a joint fiscal policy development process in collaboration with signatories to modern treaties and self-government arrangements in Canada. Further changes to Canada's Own-Source Revenue policy may result from this policy development process.