The national lobby group unveiled a five-point plan on Tuesday to address issues it has identified on reserves, such as poverty and corruption.
"The results are horrific. Aboriginal people on reserves tend to have lower incomes, lower education levels, higher incarceration rates, higher obesity rates, higher smoking rates. The list goes on and on and on," Colin Craig, the federation's director in the Prairies, told reporters in Winnipeg.
"If you think about those bleak communities that literally are in the middle of nowhere, and there aren't any opportunities right now — and there likely won't be, no matter how many social program dollars you put into it — this is what we're talking about."
Craig said billions of dollars in taxpayers' money have already been wasted on what he called a "dysfunctional" reserve system.
"Governments shouldn't keep continuing to single aboriginal people out. They need to treat everyone the same," he said.
Transfer funds to band members, group says
The federation is calling on the government to phase out the Indian Act, transfer ownership of homes on reserves to those who live there, and make First Nations fully accountable for the public money they receive.
Craig said Ottawa should launch pilot projects that would see federal money going directly to band members, circumventing chiefs and band councils in the process.
First Nations governments would then tax their own members for services provided, he said.
But Chief Morris Swan Shannacappo of the Rolling River First Nation, located about 250 kilometres west of Winnipeg, says there is another way to ensure accountability over federal funds.
"Stop stealing our resources and give us our fair share," he said.
Ken Whitecloud of the Sioux Valley First Nation said the idea of allowing First Nations people to own the reserve land where they live is tempting.
"It would be nice to be able to do that, to be able to take our land and use it for mortgaging purposes," he said.
"That's the biggest thing … we can't take the land and mortgage it for loans or use it for liens against loans or anything."
Craig is also calling on the federal government to provide financial help to First Nations members who want to leave their home reserves for other opportunities.
Easier said than done, says expert
But Peter Kulchyski, a native studies professor at the University of Manitoba, warns that phasing out the Indian Act is easier said than done.
"You can't just get rid of the Indian Act. You'd then remove all kinds of things that have been place for a long time, and you'd create a kind of chaos," he said.
A spokesperson for Aboriginal Affairs and Northern Development Minister John Duncan told CBC News the government has "already begun to address many of the issues raised not just by the Canadian Taxpayers Federation, but also by First Nation members themselves."
For example, the government is expanding a First Nations land management regime, allowing more First Nations to have more control over their reserve lands and resources, the spokesperson said in an email.
Ottawa has also introduced legislation to make First Nations leaders more accountable to their people, according to the spokesperson.
Craig said the taxpayers federation is concerned about corruption and accountability on some First Nations, although he would not name one as an example.
"I think people can make their own judgments when they hear of reserves that have the grassroots living in poverty, and the chiefs and councillors are paying themselves more than the prime minister," he said.
But Grand Chief Derek Nepinak of the Assembly of Manitoba Chiefs disputed the federation's claims.
"The truth is that it's a false narrative and indigenous people across Canada pay taxes," he said.
"Every time we take a dollar out of our pocket, we're paying taxes back into the system."
Craig said he hopes the federation's ideas will at least get people talking.