Ottawa is set to pay millions of dollars in compensation to descendants of Chinese workers who were charged a head tax to enter the country.

The government has agreed to acknowledge the tax was discriminatory and will pay $12.5 million into a new foundation. The agreement comes following negotiations with the the National Congress of Chinese Canadians, a group appointed to negotiate redress.

"We have concluded the negotiations and now we are looking forward to signing the agreement with the federal government as soon as possible," said Pin Tan, of the Congress.



The federal government imposed a $50 head tax on Chinese immigrants in 1885 after Chinese workers were no longer needed to work on the Canadian Pacific Railway.

The amount was raised to $500 in 1903. In 1923 the head tax was replaced by the Exclusion Act, which barred Chinese immigrants from the country altogether until 1947. The tax was the equivalent of about two years' wages at the time. About 80,000 Chinese were singled out.

It wasn't fully repealed until 1967.

"The cabinet has approved an acknowledgment, commemoration and education program to make sure that Canadians understand those issues, those wrong things that were done to the communities in the past," said Raymond Chan, Minister of State for Multiculturalism.

However, some head tax payers and their families are upset with the deal. The Ontario Coalition of Head Tax Payers and Families, which is representing 4,000 of them, is questioning why it has been shut out of negotiations with the government.

It is demanding individual payments to Chinese who were charged the tax.

"We think that no money should go out until it is settled," said Susan Eng, of the coalition. "There is widespread opposition in the Chinese community."

The group is planning to sue the government to stop the deal. It says every Chinese-Canadian who paid the price for decades of discrimination should be given the chance to be heard.

The Congress said it is willing to hear proposals about how the money should be spent.

But the Canadian Taxpayers Federation is opposed to any money being paid out.

"The danger is that it fosters other groups to come forward and also demand compensation and tax money," said John Williamson, of the Federation. "We'd kind of get into a cycle whereby it's one group after another."