How a weaponized tax agency attacks Conservative enemies

by Gregory Beatty


nation2When the federal Conservatives announced an $8 million fund in the 2012 budget for Canadian Revenue Agency to audit charities, then-Natural Resources (now Finance) Minister Joe Oliver said it was to crack down on “environmental and other radical groups.”

The fund’s since been boosted to $13 million, and over 900 charities have come under scrutiny to determine if the amount of money, volunteer time and other resources they devote to “political activity” exceeds the 10 per cent threshold allowed under a 2003 policy statement.

Some of the organizations that have been, or currently are being audited include PEN Canada, Amnesty International, the United Church of Canada, the David Suzuki Foundation, Canada Without Poverty, the Canadian Centre for Policy Alternatives and Tides Canada.

As a whole, they’re a pretty diverse group dealing with issues such as human rights, the environment, poverty, foreign aid, animal welfare and peace.

They do have one thing in common, though: they’ve all been critical of the Harper government’s right-wing political and economic agenda.

The targeting has been so blatant that critics are calling it political interference. That’s not limited to the government, either. Some audits have been triggered by complaints by Ethical Oil — an industry-funded lobby group with close Conservative ties.

The matter is serious enough, the federal NDP stated in a July 16 letter to Minister of National Revenue Kerry-Lynne Findlay, to warrant an external review.

“Our tax system is based on people voluntarily disclosing information to CRA,” says Regina-Lewvan NDP candidate Erin Weir. “So it’s critically important that citizens have confidence the CRA will be fair and impartial.

“Some substantial concerns have been raised about the auditing of these charities, and the appropriate response would be an external review to determine whether it’s politically motivated,” he says.

Oliver’s statement would seem to suggest it is. Fueling further suspicion, says Ryerson University political scientist John Shields, is the Harper government’s long history of partisan behaviour.

“This government is not known for conducting policy on an evidence-based model. They very much curtailed [Statistics Canada’s ability to gather data], they’ve silenced scientists from speaking on issues that might contradict government policy, and they’ve shut down research projects.”

“Historically, the government has been a major source of funding for the non-profit sector,” says Weir. “And there have been controversies in the past around the Conservatives withdrawing public funding from organizations they disagree with. So this needs to be investigated.”

So far, the CRA has only stripped one non-profit (Physicians For Global Survival) of its charitable status for exceeding the 10 per cent cap — thus denying it the right to issue tax receipts for donations.

Most charities are already cash-strapped and can ill afford to lose their tax status. Even just meeting CRA demands for financial records, e-mails and other pertinent documents as part of the audit process drains precious time, staff resources and money, and hinders their ability to fulfill their mandates.

That hurts Canadians, says Shields.

“The non-profit sector is a critical part of our society. Many provide services that Canadians have come to rely on. And the government is delivering a lot of its services now through non-profits. Part of that’s due to off-loading to use cheaper labour. But it’s not just that. Non-profits are generally close to the community and can deliver specialized services that fit with needs.

“There used to be a time when [charities] were encouraged to be a voice for their communities,” he adds. “It was a way to ensure that groups who traditionally didn’t have much of a voice in government were included [in policy discussions]. Under the Conservatives, that’s largely been shut down. They accept the service part, but not the voice part.”

And charities are getting the message. Most are reluctant to comment publicly for fear of antagonizing the Harper government and perhaps attracting CRA attention, but when a master’s student named Gareth Kirby interviewed 16 charities anonymously for his 2014 thesis at Victoria’s Royal Roads University, he found that they had become more cautious about speaking out.

Not helping matters is the complexity of charitable tax law, says Shields.

“Sometimes advocacy is clear, such as when it involves direct lobbying of government or supporting a particular party or candidate.

“But are educational campaigns advocacy? Organizations like the Fraser Institute are non-profit, but because they’re considered educational they’re not seen as engaged in advocacy. And non-profits are often asked to speak to bureaucrats and politicians about issues. Is that advocacy?”

In their defence, the Conservatives insist they’re just being good stewards with taxpayers’ money and ensuring tax fairness.

Peter Gillespie of Halifax Initiative, an organization working to reform international financial institutions to eradicate poverty and promote environmental sustainability, says if the Conservatives were really serious about those goals they’d reverse a recent $250 million CRA budget cut and go after the estimated $7.8 billion in tax revenue that (according to Canadians For Tax Fairness) Canada loses each year to off-shore tax havens.

“An investment in CRA, which is the opposite of what’s happening now with it downsizing its audit staff, has the potential to bring in enormous revenue if they could strengthen their tax planning unit and go after big corporations that are using creative accounting techniques to avoid paying taxes where the economic activity is actually taking place,” says Gillespie.

There’s an international effort to tighten reporting requirements and help countries track down the estimated $32 trillion in tax-sheltered wealth that’s out there, but it’s slow-going, says Gillespie.

“The G20 has asked the OECD to take this issue on, but they’re under ferocious pressure from multi-nationals who are completely opposed.”

Charter challenges to the CRA crackdown are likely, says Shields, with charities arguing their constitutional right to freedom of expression, association and equality has been infringed upon.

“But the courts work very slowly, and it takes a lot of money and resources.”

The tax law in this area needs to be refined as well, he says.

“There absolutely needs to be greater clarity about what is and isn’t advocacy. Also, I think there needs to be education within society about the important role non-profits play.”