03/29/2012 04:06 EDT | Updated 05/29/2012 05:12 EDT

Taxman to eye foreign donations, political activities by charities

OTTAWA - The federal government wants the taxman to keep an eye on charities that get into political activities, especially if they use foreign money to do it.

The Conservatives have expressed anger recently over what they see as foreign cash being used to bankroll Canadian environmentalists fighting developments such as the Northern Gateway pipeline.

They decry that as foreign interference in a domestic issue — and now they plan to rein it in.

Thursday's budget said the Canada Revenue Agency will get more powers to monitor political activities by charities and to require reporting of foreign financing for these activities.

Charities are allowed to engage in limited, non-partisan politics, but the government suggested some may be overstepping the boundaries.

"Recently, concerns have been raised that some charities may not be respecting the rules concerning political activities," the budget documents say.

"There have also been calls for greater public transparency related to the political activities of charities, including the extent to which they may be funded by foreign sources."

The budget promised tighter rules on charities which give money to other charities for political purposes.

And the taxman will be able to impose new penalties on charities that exceed limits on political spending or fail to provide full disclosure of funding and activities. The sanctions could include fines or a suspension of a charity's ability to issue tax receipts.

A lobby group promoting the Canadian oil industry applauded Thursday's moves.

"EthicalOil.org is very glad to see the government has responded to our efforts to expose environmental lobby groups masquerading as charities and hold them to account," spokesperson Jamie Ellerton said in a release.

"Between the abuse of charities law by engaging in partisan and political activity, and the foreign funding used to clog the present regulatory hearings for the Northern Gateway Pipeline, the measures in Budget 2012 will go a long way to ensuring lobby groups masquerading as charities will be held to account for their political and partisan actions."