A significant victory for taxpayers was won on June 11, 2003, when the Federal Court of Appeal overturned the trial decision in Benoit v. Canada.

In March of 2002, trial judge Douglas Campbell declared that the descendants of Treaty 8 Indians do not have to pay any tax at any time for any reason. This decision was based on his assumption that the Indians of Treaty 8 believed an oral promise, allegedly made when the treaty was signed in 1899, that they would be exempt from tax. Justice Campbell himself found as a fact that federal government negotiators did not promise the Treaty 8 Indians a tax exemption. But because the Indians believed such a promise was made, ruled the trial judge, the federal government must accept
responsibility for this misunderstanding and exempt these Indians from tax in order to uphold the honour of the Crown.

Appeal courts overturn trial judgments every day, usually because of errors in legal reasoning. But in Benoit, the Federal Court of Appeal accuses Justice Campbell of a "complete abandonment of the rules of evidence". The trial judge excluded relevant evidence and based his decision on evidence that is "sparse, doubtful and equivocal".

For example, the trial judge excluded from evidence over one hundred transcripts of taped interviews of aboriginal elders conducted in the 1970s, in which the elders made no mention of taxation. Only one transcript of an interview, that with Cree elder Jean-Marie Mustus, who did mention tax, was admitted into evidence as relevant. The Court of Appeal notes that the silence of over one hundred elders regarding taxation suggests that they were never promised an exemption from it. The trial judge should have admitted all of - or none of - these transcripts into evidence.

Justice Campbell applied similar flawed logic in admitting into evidence an unsworn affidavit of Cree elder Joe Willier, interviewed in 1991 along with twenty-nine other elders. The fact that twenty-nine out of thirty elders made no mention of an unfulfilled tax promise was ignored by the trial judge.

In 1946 a Joint Committee of the Senate and House of Commons was created to review the Indian Act. Not one of the submissions put forward by tribes in the Treaty 8 area mentioned a treaty promise of a perpetual and all-encompassing tax exemption. John Callihoo, then President of the Indian Association of Alberta, told the Committee that on-reserve tax exemptions should continue, and that the payment of sales taxes by Indians on tobacco and matches was legitimate. The trial judge ignored this evidence.

Justice Campbell also ignored the evidence contained in a book by Father Rene Fumoleau, entitled "As long as this Land Shall Last: A History of Treaty 8 and Treaty 11, 1870-1939." This detailed account of the Indians' understanding of the treaties makes no mention of a tax exemption promise.

The Court of Appeal decision states that the trial judge failed "to understand the nature of the evidence before him" and failed to make "any attempt whatsoever to assess critically the evidence presented by these witnesses". In short, there was "insufficient evidence to support the view that the Aboriginal signatories understood that they would be exempted from taxation at any time and for any reason".

This case has huge national implications. Some Indian leaders maintain that the descendants of Treaties 1 through 11, signed from 1871 to 1923, should all benefit from the same treaty right to be exempt from taxation. Obviously this would have a considerable impact on federal and provincial tax revenues, with other Canadians being forced to pay more tax. Indeed, seven weeks after the trial judgment the Federal Court of Appeal ordered a stay, warning of irreparable harm. The judgment was suspended as it "could result in chaos to tax administration, and possible harm to business
competitors of those entitled to a supply of tax-free goods."

Gordon Benoit, the plaintiff, plans to appeal to the Supreme Court of Canada. If Canada's highest court restores the trial judgment, many of the 35,000 native people descended from the Treaty 8 signatories would expect to be reimbursed for taxes they and their ancestors have paid. The cost of a reimbursement for back taxes could amount to tens, even hundreds, of millions of dollars if one considers a century of taxes, paid in today's dollars, plus interest. Further, as indicated by federal government lawyers, a restoration of the trial judgment will create an administrative
nightmare for business, and open the door to extensive manipulation, market distortion, and increased smuggling.

The Canadian Taxpayers Federation (CTF) intervened at trial and again on appeal to argue that a race-based tax exemption would violate numerous international treaties and conventions against racism, not to mention basic principles of fairness. In light of the fact that treaty rights are acquired and exercised on the basis of ancestry, this would be a step backwards in the progress of human civilization, which has been towards equal individual rights for all citizens. For years the CTF has advocated lower taxes as a way to spur economic growth and to create prosperity for all. But the CTF opposes tax reductions or exemptions which are applied only to one group, at the expense of other Canadians.

Income - not race or ancestry - is the only valid basis for a tax exemption. That's why the federal government should raise the basic personal exemption from its current $7,756 to $15,000 for everyone. A restoration of the Benoit trial judgment by the Supreme Court of Canada would only serve to further isolate native Canadians and lead to the continuation of the failed paternalistic model of the past.