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Motion to Authorize Committee to Study Tax Consequences of Various Public and Private Advocacy Activities Undertaken by Charitable and Non-Charitable Entities Negatived

Honourable senators,

I would like to share a few reflections on Senator Cowan’s very thoughtful motion which was brought forward to this chamber on May 8, 2012.

I thought we dealt with part (a) of the motion very thoroughly last spring. We conducted an inquiry into the interference of foreign foundations in Canada’s domestic affairs and their abuse of Canada’s existing Revenue Canada charitable status. We had some very productive debate on the matter and benefited from the input from a number of senators.

Senator Wallace addressed the current legislative framework in Canada; Senator Smith investigated and reported on the economic consequences of this foreign interference; Senator Finley probed exactly how much money was coming into Canada and the paths it was taking; Senator Lang pointed out the lobbying and political activities of some ‘‘charitable’’ groups; Senator Plett further explored how these activities were infringing on Canadian sovereignty; Senator Mockler provided some shining examples of positive and true charitable activity; and, based on his first-hand experience in Nunavut, Senator Patterson recounted some horror stories of interference, manipulation and disrespect for the charitable institution there.

The findings of these senators made a powerful case for immediate action to increase the level of transparency in the charitable sector and to expand the oversight of the CRA with respect to Canadian charities.

Fortunately, Bill C-38 provided targeted and much-needed legislative amendments that would facilitate the introduction of elements that the Senate found to be crucial to resolving these important issues.

Bill C-38 directed the Canada Revenue Agency to be more diligent in policing political activities carried out by charities; to ensure that substantially all of a charity’s resources are devoted to charitable purposes and that no more than 10 per cent of the charity’s resources are devoted to political activities; require that charities be more transparent in providing more information on their political activities as part of their regular reporting to CRA, including the extent to which their political activities are funded by foreign sources; and, further, to impose a one-year suspension on a charity’s ability to issue tax receipts if it exceeds the spending limit on political activities, or if it fails to provide complete and accurate information on its annual return.

The government provided the CRA with $8 million more over the next two years to implement these directions. 

The Income Tax Act was also amended to limit how charities may fund the political activities of other charities, by making the act of giving a donation by one charity to another a political activity if it can be reasonably considered that the purpose of making the donation is to support the other charity’s political activities.

Thanks to these new measures, transparency in the charitable sector is now on the rise, and the generosity and philanthropy of Canadians will not be threatened by future abuses of CRA charitable status.

I hope very much that further debate on Bill C-45 in the House of Commons will also produce an amendment to the Income Tax Act that will require the tagging of foreign donations to Canadian charities and allow for the tracking of this tagged money from the initial donor all the way to the final recipient.

I must say I believe that going forward with this motion would not be time-efficient. The first part of this motion duplicates the work that has already been done by my inquiry into the charitable sector, not to mention the legislative changes that have been put in place and that have largely resolved the issue of transparency.

The second focus of the senator’s motion would involve an examination of ‘‘corporate entities that claim business deductions against Canadian taxes owing for their advocacy activities, both in Canada and abroad.’’

Without knowing exactly what we are looking for or even knowing if the tax system is being manipulated, we would be obliged to investigate individual corporations to determine what they are claiming as deductions.

According to Statistics Canada, as of 2010 there were 1,337,940 Canadian-controlled corporations and 7,724 foreign controlled corporations operating in Canada. Where would we start looking? How would we find which corporations were engaging in questionable deductions? We would have a list of 1.3 million corporations to look through.  Without existing evidence that could point us in a certain direction, we would be looking for the old needle in the haystack, only this time without the benefit of knowing that there is even a needle to be found.

Looking at our current system of income taxation would open up a Pandora’s box of tax law, the 2,900 pages of our Income Tax Act, not to mention the 1,600 pages of regulations, 96 pages of rules and innumerable CRA policy statements.

There are at least seven bills currently before Parliament that deal directly with changes to Canadian tax law: Bill C-44, the helping families in need bill; Bill C-45, the jobs and growth bill; Bills C-48, C-377, C-458, C-463 and S-205, five acts to amend the Income Tax Act — technological changes, labour organizations, charitable gifts, travel expenses and carbon offset tax credit; and Bill C-462, the disability tax credit promoters restrictions bill.

As evidenced by these bills currently before Parliament, we are constantly and incrementally re-evaluating and improving the tax system, making reasonable changes where they are needed.

The third part of Senator Cowan’s motion, examining ‘‘educational entities that utilize their charitable status to advocate on behalf of the interests of private entities,’’ has also largely been resolved by the changes introduced by Bill C-38.  Educational entities that have charitable status are by definition charities; as such, they are bound to abide by the same rules and guidelines the CRA applies to govern the activities of all charities.

As a corollary, all educational institutions with charitable status are required to limit their political activities to 10 per cent or less of their resources.

A charity’s status would be more of a hindrance than a help in terms of the freedom to engage in political or advocacy activities.  Since the educational entity could use no more than 10 per cent of its resources, it would not be of much use to private organizations to have an educational entity, a charity, advocate for certain interests on its behalf.

Considering the expanded oversight of the CRA and the new rules for the reporting of donations, it would be very difficult, near impossible, for a private organization to surreptitiously use an educational institution as an advocacy pawn.

It is for these reasons, honourable senators, that I will not be supporting Senator Cowan’s motion going forward. Much of the subject matter of his motion has already been dealt with, and the part that remains is simply too broad in scope to be given proper consideration by a Senate committee already nearing its maximum capacity.

Honourable senators, I would strongly urge you to consider these points and vote this motion down.