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The CRA Should Not Define Poverty's Threshold

07/25/2014 05:46 EDT | Updated 09/24/2014 05:59 EDT
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Prevention is better than cure. The doctor knows it. The taxman doesn't.

The Canada Revenue Agency (CRA) has recently forced Oxfam Canada to exclude "preventing poverty" from their mission statement in order to keep their charity status. "Relieving poverty is charitable, but preventing it is not," the CRA advised Oxfam Canada.

Some view this episode as merely a dispute over semantics. Others, who are more cynical, believe Oxfam Canada is being snubbed for its criticism of Israel's occupation of the West Bank. Jason Kenny, the minister for employment and social development, was furious with Oxfam and admitted that although he had donated to the Charity in the past, he was "dropping Oxfam as a charity."

Irrespective of what has caused this dispute, a fundamental question needs to be answered. Why does the CRA think that charities have to wait for individuals to fall into poverty's trap before the charities can help the disadvantaged? Isn't prevention better than a cure?

A CRA spokesperson, Philippe Brideau, explains the agency's understanding of what qualifies as charitable work. Referring to the courts, Mr. Brideau mentioned that the risk of poverty was not the same as being in need. Thus, "an organization cannot be registered with the explicit purpose of preventing poverty," he argued.

The courts and the CRA must revisit their definitions of poverty, and perhaps consult with development economists who study the poor and poverty. The courts cannot be the sole arbitrator of how to define, measure, prevent and alleviate poverty. At the same time, the CRA may also not be the sole determinant of what constitutes charitable work.

Remember, it was only in 2008 that the CRA was forced to recognize the London School of Economics (LSE), a globally recognized center of academic excellence, as a legitimate institution of higher learning. An agency that recognized God's Bible School and College in Cincinnati, Ohio, but refused to recognize LSE is also in need of some learning.

The bigger concern, however, is with a black-and-white definition of poverty. The assumption that one is not poor one day, but wakes up to be poor the next day is completely flawed. Why? Because becoming poor is not the same as becoming pregnant. The slippery slope to poverty begins long before one recognizes the descent. Hence, the exclusive focus on relieving poverty forces aid agencies to observe individuals' and communities' fall from sustenance into dependence, instead of actively and pre-emptively supporting at-risk populations.

Abhijit Banerjee and Esther Duflo, professors of economics at MIT and authors of the bestseller, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, open their book by pointing out that nine million children die every year before they turn five. If the CRA is the arbitrator of who could be saved from dying, it should then advise development practitioners of the moment they are permitted to assist. How close should one be to death before Oxfam and others are allowed to intervene?

If the charities are permitted only to alleviate poverty, and not to prevent it, then whose job is it to certify the poor before they become eligible to receive assistance? This is not a trivial concern. By jumping into the controversy, the CRA has inadvertently assumed the responsibility of certifying poverty. It may fault charities who help cohorts not deemed poor enough by CRA. Should Canadians expect new definitions and standards for poverty from the CRA's Charities Directorate?

The link between preventive healthcare and poverty has been long-established in the development literature. Poor Economics, a strongly recommended text for the CRA's Charities Directorate, is filled with accounts of disease, health and poverty. There are lessons on how to prevent households from falling into poverty by addressing the very causes of poverty, which in many instances are diseases and lack of access to water and arable land. In Africa, HIV/AIDS has wiped out entire communities. Those who survived were left in abject poverty. In Asia, Malaria, Hepatitis B, and waterborne as well as other preventable diseases have taken the lives of breadwinners, condemning the surviving families to poverty. Preventive healthcare in all these circumstances is indeed akin to preventing poverty.

Canadians will be well-served if the CRA ensures the judicious use of charitable donations so that the funds reach the intended. Canadians look up to the CRA to ensure that charitable donations are not used to support armed conflicts or luxurious lifestyles of charities' office bearers. That is the job that Canadians intend the CRA to do. As to who is poor and when one should help the needy, this should be left to development professionals.

P.S. I have requested my accountant to be prepared for an audit. If allegations of revenge audits are true, I would not be surprised to be the next victim.

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