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Quebec delivers bad news in gas tax case

Wallace “Bully” Stacey proprietor of Bully’s Truck Stop stands on the Quebec Court of Appeal steps after hearing his lawyer, Timothy Huot, argue on behalf of himself and 10 other gas retailers. (Daniel J. Rowe, The Eastern Door)

Khanata Gas Station owner Donna McComber read the Quebec Court of Appeal’s five judges’ decision last week that ruled unanimous (5-0) against her and the other Kahnawake gas retailers who filed suit against Revenue Quebec and the Canadian Revenue Agency, and decided the fight must continue.

“They left us with some leeway to move forward,” she said.

The court of appeal decision confirms Superior Court justice Louis Crete’s decision that was handed down in December 2013, and found that neither ancestral rights nor the 1763 Royal Proclamation protects the community’s gas retailers from collecting and submitting taxes for non-Native clients who fill up on reserve.

McComber, who is joined by 10 other gas bar owners on the suit, was understandably disappointed with the ruling.

“Mostly you just get pissed off,” she said. “You read it and again we’re treated like children, again. We’re treated like, ‘let us take care of you and we’ll tell you how to do things.’”

The retailers, represented by Timothy Huot of the law firm Spiegel Sohmer, will now seek leave to appeal to the Supreme Court of Canada.

The other side of the courtroom viewed the decision differently. Quebec’s lead lawyer Patrice Peltier-Rivest said, leaving the court of appeal in November, that the Aboriginal tax exemption right does not apply to the commerce sector.

Quebec attorney Philippe Vallieres-Roland was excited at the ruling telling The Eastern Door Friday that it would have a direct effect on the crown’s case against First Nations Winery owner Floyd Lahache, and the case against the Rice brothers and father charged in relation to Operation Machine.

He highlighted some paragraphs the he feels directly relate to his two cases.

“It is true that s. 35(1) of the Constitution Act, 1982 must be given a large and liberal interpretation in favour of Aboriginals,” paragraph 42 of the ruling reads.

“There must, however, be a reasonable degree of continuity between the ancestral practice being invoked and the modern right being asserted. Even if the object of an ancestral right can evolve over time, this does not mean it can be transformed into a completely different modern right.”

In addition, paragraph 43 of the decision challenges the historic line from pre-contact to modern trading practices.

“There is no rational connection between the pre-contact trading in which the appellants’ ancestors engaged and their commercial activities. As a result, it is impossible to conclude that the ancestral right claimed can be grounded in s. 35(1) of the Constitution Act, 1982,” reads the decision.

The Quebec court also agreed with the lower court and found that “the trial judge did not err by holding that the right to trade freely in the Royal Proclamation does not have constitutional status.”

The retailers had argued that it does.

Revenue Quebec spokesperson Genevieve Laurier said the decision confirms that a fair playing field must exist for fuel retailers.

“It is an important decision that reiterates the principle of tax fairness and confirms again that Kahnawake retailers have the same obligations as their competitors off reserve,” she said via email.

“Fuel retailers must collect and remit the consumption taxes. The trader is personally liable to pay the proceeds of taxes collected, but in any case, it is the buyer who pays the taxes, not the seller.”

Huot sees things differently.

“If this decision were to stand, the consequences would be very serious for Kahnawake because it means two things,” said Huot. “That the Native merchants in Kahnawake will be made to manage a tax system of which they are not a part. They’re not subject to taxation on the reserve, and yet we would make them manage the tax system and also, I would venture to say, the people of Kahnawake don’t much benefit from the tax system either.”

Huot added that the system already taxes Natives off-reserve when fueling up and other places, and the ruling insists that their businesses comply with a more complicated system than gas station owners off-reserve must work with.

“Indians pay taxes that they shouldn’t be paying routinely, and they get no benefit from that, and now what the courts are saying indirectly is that on top of that they have to manage this system, which is made more complicated than other tax compliance obligations off the reserve because here they have two distinct types of clients: taxable clients and non-taxable clients,” said Huot.

McComber sees her case as bigger than just the 11 people involved in the suit.

“It doesn’t just affect the gas,” said McComber. “It will affect everything. They’ll come after us for everything.”

John Louis Steven Rice, Wallace “Bully” Stacey, Sylvia Thomas, Leah Diome, Bobbi-Jo Delormier, Debra Goodleaf, Sheila Lazare, John “Six Footer” McComber, Lee Jacobs and Derek White are the other retailers involved in the law suit.

The tax break, the retailers have argued, is the one area local fuel retailers can use to compete with major oil companies.

“You have to ask yourself, can Kahnawake compete by charging the same rate of tax?” asked Huot. “I can tell you with certainty that they cannot.”

For McComber, it’s about protecting what her people have left.

“I don’t want to be known as the Joseph Brant of my generation,” she said. “Joseph Brant is the one who signed over nine million acres on us, which apparently we’re still fighting for. We don’t have a choice, we have to appeal.”

Huot told The Eastern Door during the Superior Court trial that the case would likely require a higher court judgment in the end.

“We knew that this kind of case would have to wind its way invariably to the Supreme Court,” said Huot. “It’s just too important for Natives generally, and it’s of critical importance for Kahnawake.”

The deadline to apply for leave is 60 days from the judgment, after which the judges of the Supreme Court will decide if it will hear the case.

Huot said the Supreme Court should decide by the fall of this year, and added it’s a frightening future for not only Kahnawake, but for Native communities across the country if the Court of Appeal ruling stands.

“Over time, in over 350 years, they’ve removed every opportunity from the Natives of Kahnawake, and from the midpoint of the 19th century, they invaded the reserve turning it into a transportation hub, invading it with 28 million people a year, removing from them any opportunity to sustain themselves any other way,” said Huot.

“The only way now that they can sustain themselves is through retail sale that is carried on with a marginal competitive advantage, and which represent only a marginal tax loss to governments compared to a lot of other things, and they want to remove that from them. What are they going to do? What are they going to rely on? That’s the tragedy here.”

The retailers argue that should the decision stand, Highways 132 and 138 will see a number of the stations lining the roads shuttered, taking their workers with them.

“We have 20-something gas stations in this town,” said McComber. “How many of us survive if we don’t appeal? Not many… Twenty gas stations employ at least 200 people, and with that the stores that go along with it.”

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