07/11/2014 04:49 EDT | Updated 09/13/2014 05:59 EDT

Does the Government Have in Hand in Which Charities Get Audited?

Sverre Haugland via Getty Images

Concern is growing in Canada over the politicization of the Charities Directorate at Canada Revenue Agency. On the same day that the issue was covered by the Globe and Mail and the CBC, CRA emailed everyone on its "Charities and Giving" list the Director General's speech at the Canadian Bar Association's National Charity Law Symposium entitled "The importance of an independent and effective charities regulator in Canada."

In this speech the Director General says that lawyers and accountants she met while attending a conference of international charities regulators in Australia in April told her "there is a perception that audits of charities are politically motivated, and the CRA is targeting certain types of charities at the instruction of the government."

This perception of Charities Directorate's current program of auditing political activities of Canadian charities is now global. Certainly, my conversations with lawyers and accountants in the United States, Europe and Asia are consistent with how the current situation in Canada was played back to the Director General in Australia.

It is all too easy for the CRA to blame this perception on "the media." Being a charity lawyer myself, unfortunately I have had too many conversations with many of the organizations being audited to sanguinely dismiss concerns, as did the charity lawyer cited, on the basis that "at the end of the day, [CRA's] going to do the right thing." I have been retained professionally by too many charities under audit to not worry about the impact on the charitable sector of Stephen Harper's provision of $8 million in the 2012 budget specifically to audit the "political activities" of charities.

Initially, the primary focus was on environmental groups. However it has extended to charities' activities such as protecting human rights and humanitarian aid.

The problem is not that charities should be allowed to engage in political activities. The problem is that when conducting these audits, CRA gives a meaning to "political activities" that is designed to make its political masters happy.

One can only hope that CRA audits would be governed by the rule of law rather than a political agenda.

It has not been covered in the press in Canada, but just one day before this email from the Charities Directorate and this press coverage on political activities, an important legal decision was handed down in England. The First-Tier Tribunal released its decision in an appeal of The Human Dignity Trust against The Charity Commission for England and Wales.

This decision held that "promoting the sound administration of the law" was a "fourth head" charitable purpose under the common law. This was not an expansion of the law of charity, but was recognized in cases as early as 1876 and as recent as a House of Lords decision in 1972. These common law decisions from England are recognized by the courts and CRA as being determinative of the law of charity in Canada.

Most environmental and other charities under audit are simply "promoting the sound administration of the law." This is not a political activity except in the eyes of the Harper government, which treats any recourse to the courts of law or public opinion in support of laws that conflict with the government's political agenda to be "political activities."

It is interesting that the Charity Tribunal relied upon Canadian cases dating from 1893 and 1898 as authority for the principle that "a trust to promote the enjoyment of existing civil rights (as opposed to securing new ones) is charitable." Consequently, it is not a political activity for a charity to campaign to allow Canadians to continue to enjoy and protect civil rights that are afforded to them under existing law.

CRA needs to conduct its political activities audits based upon the principles of the charitable purpose "promoting the sound administration of the law." Canada's reputation with regard to the politicization of charity audits for "political activities" has been tarnished both domestically and internationally. A charitable sector and tax system that relies upon voluntary compliance will become dysfunctional if its regulator is perceived as pursuing a political agenda rather enforcing the rule of law. If CRA would abandon its "advocacy chill" agenda, it would simultaneously remove the chill from the sector and the heat that it is bringing on itself.


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