More than 200 frustrated First Nations demonstrators converged on downtown Toronto Thursday to protest controversial plans by the federal and provincial governments to harmonize the goods and services tax with the Ontario sales tax.

They carried banners and posters saying, "Honour our treaties" and "Stop treaty violations."

A report commissioned by the Chiefs of Ontario suggests that it would cost First Nations between $85 million and $120 million in the first year of the HST. (Cheryl Krawchuk/CBC)

The protest began at Queen's Park in the morning then moved to Yonge-Dundas Square in the afternoon.

Some managed to get passes and enter the visitors' gallery at the provincial legislature. Others cranked up their drum beat a notch so members of the legislature inside would get the message.

Ontario aboriginal leaders say the harmonized sales tax (HST) will rob them of a point-of-sale exemption on the provincial portion of the merged tax.

"I came to support all my people and to stop the wrongful things going on," Nikeeta Tabobondung said at the legislature Thursday. From the Wasauksing First Nation near Georgian Bay, Tabobondung arrived wearing a T-shirt that read: "HST equals violation of mine and my baby's treaty rights."

A report commissioned by the Chiefs of Ontario suggests that it would cost First Nations between $85 million and $120 million in the first year of the HST and that the cost would increase each year.

Merging the GST with the provincial sales tax starting July 1 will punish many communities that are already living in poverty, Ontario Regional Chief Angus Toulouse told The Canadian Press.

Just as when the GST was introduced, First Nations weren't consulted before the governments pushed through the tax changes — an "assault" on their treaty rights — and Finance Minister Jim Flaherty has refused to meet with them, he added.

HST 'the last straw'

More than 200 protesters showed up at Queen's Park Thursday. (Cheryl Krawchuk/CBC)

"Many First Nations in Ontario see this new tax, the HST, as the last straw," he said.

"The government has just gone ahead and imposed taxes on our citizens in spite of our opposition and the animosity it has created. But First Nations will no longer sit by trying to quietly work these things out through forums and tables that are ineffective."

Aboriginal groups have threatened to fight the HST through any means possible unless they're allowed to retain their point-of-sale exemption on purchases that are made outside reserves.

Toulouse wouldn't disclose whether there are any plans to mount blockades, but said First Nations are considering peaceful protests.

B.C. aboriginal groups face same problem

Aboriginal people in British Columbia who will face the same problem July 1 also oppose the change, but no one has been able to get the governments to listen, he said.

Premier Dalton McGuinty said he's "firmly" on the side of First Nations and blamed the federal Conservatives for stonewalling his attempts to preserve the tax exemption.

"The federal government to this point in time is insisting that when we combine the HST with the GST, that that has to be payable in full by our First Nations communities, and we don't believe that's right," he said.

"They were exempt under the PST. We want them to be exempt under the HST as well."

Yet Ontario found a way to negotiate several exemptions to the HST, such as children's clothing and tampons. Even after the ink was dry on the lucrative deal it signed with Ottawa last year, the Liberals managed to add items such as coffee, fast food under $4 and newspaper subscriptions to the list.

But McGuinty insisted Wednesday that the exemption for First Nations was "something that we've been working on from Day 1."

'No problems'

There's nothing stopping him from preserving the exemption, said Fred Lazar, a Harvard-educated economics professor at Toronto's York University who prepared the report for the Chiefs of Ontario.

There's still room in the five per cent limit on point-of-sale exemptions in the agreement Ontario signed with Ottawa, and vendors already keep the point-of-sale data that can easily be transmitted to tax collectors, he said.

"There are no problems whatsoever facing the provincial government from following through on its statement," Lazar said.

"At the end of the day, it's simply the political goodwill, and thus far, they haven't shown that."

He said he believes it's actually the government's way of making First Nations pay for aboriginal protests such as the ongoing occupation in Caledonia over disputed land.

The simmering four-year land dispute, which has erupted in violent clashes between protesters and local residents in the town south of Hamilton, has cost taxpayers $64.3 million so far.

"The province, in my personal view, is reluctant to actually follow through on its words for fear that the media will catch on to this; they'll make an issue saying, 'Well, this is another giveaway to First Nations,'" Lazar said.

Revenue Minister John Wilkinson disagreed.

"We need to be working together and not speaking in inflammatory and divisive terms," he said.

With files from the CBC's Mike Crawley and The Canadian Press