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Native groups protest against the harmonized sales tax at Queen's Park in Toronto. Natives have threatened to protest the G8 and G20 summits if they don't receive a point-of-sale exemption from the coming HST.

Kevin Van Passen/The Globe and Mail

The federal government is set to give aboriginals a major concession on Ontario's new harmonized sales tax, amid threats that protesters will "shut down the country" when it plays host to world leaders at the coming G8 and G20 summits.

Until this month, Ottawa had ignored natives' pleas for a provincewide point-of-sale exemption from the HST after it takes effect on July 1. But with native leaders set to plan protests that could include outright blockades, federal and provincial officials engaged in a frantic round of negotiations.

Sources say that an 11th-hour deal to give aboriginals the exemption is now imminent, and that it was the spectre of major disruptions that forced Stephen Harper's government to come to the table.

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The talks began on June 4, and picked up steam after a meeting a week later at which aboriginal representatives put government officials on notice that they would back up their unhappiness with the end of the exemption by taking action.

Alvin Fiddler, senior policy adviser at the Independent First Nations Alliance - a tribal council representing five communities - said the main item at a meeting of native leaders next Tuesday in Fort Frances, Ont., would be how to maximize exposure to natives' complaints. "It's direct action that usually gets the most attention," he said.

Stan Beardy, Grand Chief of the Nishnawbe Aski Nation, said in an interview that representatives are very close to reaching an accord. But "if the thing isn't resolved, we have to tell our people to do whatever we need to do in order to protect our rights," he said. "We have to shut down the country if we have to."

For 30 years, natives in Ontario have not had to pay provincial sales tax when making purchases anywhere in the province. By contrast, they receive exemptions from the federal goods and services tax for most goods bought off-reserve only after filing their income tax returns.

Until this week, it appeared that the federal rules would apply to the HST. But under the new deal, it's expected that the 8-per-cent provincial portion of the tax will again be exempted at point of sale - though it's unclear whether that will be possible in the early weeks that the new tax is collected, given that the change will come just two weeks before it takes effect.

The aboriginal campaign to reinstate the exemption gained traction at the provincial legislature before the federal shift. Premier Dalton McGuinty has repeatedly called for its inclusion, and his government entered a memorandum of understanding with native leaders to that effect. Last month, Finance Minister Dwight Duncan wrote to his federal counterpart, Jim Flaherty, calling it a matter "of great importance to both of our governments and Ontario First Nations."

Both provincial opposition parties sided with the government, passing a unanimous motion that might have put additional pressure on Mr. Harper's Conservatives.

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