CRA Audits: Six Questions

From The Catalyst Winter 2014

By Kathy Vandergrift

A robust, independent non-profit sector that can freely engage in public debate... is vital for a healthy democracy.

The prevention of poverty is not a charitable cause, but the alleviation of poverty is, according to the Canada Revenue Agency (CRA). That ruling, which required Oxfam Canada to change its purpose statement from prevention to alleviation, was added to a growing list of decisions that raise concern about the interpretation of charity laws by the current federal government. Another ruling now requires a small nonprofit, non-governmental organization (NGO) to translate all memos received from its Latin American, Spanish-speaking partners into English or French.

These and many other stories have emerged from the $13 million program to audit advocacy work by NGOs. Under the program, if an NGO’s advocacy work is deemed to be political, based on a fine line between allowable and restricted activity, it loses its charitable status.

As citizens, there are deeper questions to ask about what is being done in our name, supposedly to protect our tax dollars. At least six questions deserve serious consideration:

1. What ethical or legal principle justifies excluding prevention of poverty as a charitable purpose?

The negative health, economic, and social effects of poverty are now well-documented. Preventing it seems more charitable than just helping out after damage is done, by any definition of charity.

2. One stated rationale for these audits is value for tax credits, but which is a better value, a donation to an NGO or one to a political party?

Consider the following example (for Ontario residents): If I donate $400 to a political party, the money can be used for negative, personal attack ads or robocalls, and I get a 75 per cent ($300) tax credit. If I, instead, donate $400 to an NGO, the money can only be used for research and proposals to solve societal problems. Even if I do not have any other donations and am not a first time donor, I still only get a 30 per cent ($121) tax credit.

Citizens, including Christians, who want to support informed discussion of societal issues will get better value from NGOs than our current political parties. If value for tax dollars is the goal, then revision of the current tax credit policies makes more sense than spending millions to investigate NGOs who contribute to public debate on important issues.

3. Is it fair that for-profit organizations are allowed to deduct the costs of lobbying governments as a business expense, with few restrictions, while non-profit organizations are severely restricted in what they may do?

If reducing regulatory red tape is a good thing in the for-profit sector, then adding a heavy regulatory burden to the non-profit sector makes little sense.A healthy democracy requires a variety of voices to ensure that the needs of those without power are addressed and that important issues that may not be profitable also receive attention. Often called the third sector, NGOs fulfill that function, as well as providing direct services for people.

4. If protecting tax dollars is the goal, would it not make more sense to spend this $13 million to investigate international tax evaders?

Recently, the government acknowledged that Canada loses millions of tax dollars through such evasion, yet it had few resources to pursue this. So far, the money spent investigating NGOs has brought in almost no revenue. What’s more, these exhausting, detailed audits, which can include examination of individual emails, drain scarce resources within NGOs.

5. What happened to the “Accord Between the Government of Canada and the Voluntary Sector,” adopted with fanfare in 2001?

A core principle of the accord states that “Advocacy is inherent to debate and change in a democratic society and, subject to the above principles [accountability and independence], it should not affect any funding relationship that might exist.”

The accord, which also recognizes the right of voluntary organizations to challenge public policies, has not been officially revoked. Political leaders love to talk about their support for charities. Yet this only seems to apply to those that fill gaps in services and do not dare question policies that create social problems.

6. Will enough citizens become so upset about what is happening to the charitable sector that updating Canada’s antiquated charity laws will finally become a political priority?

A robust, independent non-profit sector that can freely engage in public debate about the challenges facing our society is vital for a healthy democracy. Faith-based organizations are a significant part of the charitable sector and protect our own interests. It may be time to speak out for the important role of the whole sector in building a more just society.

Kathy Vandergrift Kathy Vandergrift is the former chair of Citizens for Public Justice’s Board of Directors. She is a policy analyst who has worked for both non-governmental organizations and elected leaders in a lifetime search for practical steps to advance public justice.

CRA

(Photo credit: John Bristowe/Flickr)

Note: This post was updated to reflect revised figures for question #2.