An international consortium of not-for-profits has convened to press the Canada Revenue Agency (CRA) to end its alleged campaign of politically motivated audits of environmental and human rights organisations.
Canada – which received the best possible score in Freedom House’s 2013 Freedom in the World study and is rated globally by the State of World Liberty Index and the Economist Intelligence Unit’s Democracy Index as 10th (it had been 3rd as recently as 2006) and eighth respectively, might seem an unlikely subject for such concerns. But a perceived increase in government rhetoric and allegations that an expansive audit into the political activities of not-for-profits by the CRA is targeting organisations which are critical of government, policy has brought the independence of Canada’s civil society to international attention.
Much of what is currently raising concerns in Canada has its roots back in 2012. In January of that year Joe Oliver, then Natural Resources minister, wrote an open letter denouncing “environmental and other radical groups” who “threaten to hijack our regulatory system to achieve their radical agenda” and ” use funding from foreign special interest groups to undermine Canada’s national economic interest”. This was followed on March 21st of the same year by a formal complaint to the CRA by EthicalOil.org – which, as numerous media outlets have pointed out, was founded by a former aide in the Prime Ministers office – about the political activities of Environmental Defence Canada, an environmental charity.
Complaints from extractive industry advocates against the impact of not-for-profit campaigning were followed up on the 29th of March 2012 by a controversial Federal Budget which increased requirements on detailing foreign funding for political activities enhanced scrutiny by the CRA of not-for-profit advocacy activities. The Federal Budget also saw a C$8 million increase of the budget of the CRA to audit the advocacy and political activities of charities alone.
None of he above developments are necessarily regressive. Indeed, increasing the powers and resources of a regulator can help to increase public trust in not-for-profit organisations by ensuring better governance standards and by cracking down on prohibited activities. Though the perception in many (but not all) not-for-profits may have been that the new focus on the political activities of charities amounted to a challenge to the independence of civil society, there is a case to be made that the government was merely seeking to enforce the law as it was clearly intended all along.
One controversial aspect of the 2012 Federal Budget was the requirement that grants and gifts made from one not-for-profit to another that were to be spent on advocacy activities should be counted against the maximum 10% that the donor organisation is allowed to allocate from its budget for such activities. Though challenging, this measure clearly reinforces the intended effect of the existing guidance that has been in place since 2003 by closing a loophole that could theoretically allow organisations to spend well in excess of 10% of their income on “political activities”. However, these amendments have arguably given the CRA considerable discretion in making these determinations and the Voice-Vois coalition have highlighted a number of cases where charities have been threatened with losing their charitable status for activities which appear to be core to their charitable mission.”
The most substantive criticisms of the newly endowed CRA have come since audits of the “political activity” of charities commenced from April 2012. According to a timeline published by CNBC News, the first wave of 10 audits included at least five environmental charities. They identified Environmental Defence Canada, Tides Canada Foundation, Tides Canada Initiatives Society, Ecology Action Centre, Equiterre as having been audited between April 1st and Match 31st, 2012 although CRA has not released an official list citing confidentiality provisions of the Income Tax Act. Though there may be a case for secrecy in investigating allegations against a specific charity, if investigations are being made as part of a random, cross-sector audit then it would seem healthy for the CRA to give details of who it is auditing to reassure all concerned of the agency’s impartiality.
The response from the CRA and government officials to allegations that audits have been politically motivated have been somewhat contradictory, with the CRA stating that it “does not conduct research into the political views of any charity, and it does not base its decision to audit any charities on this criterion” while the head of the charities directorate, Cathy Hawara, told the press that: “We also gave consideration to . . . what you might call political leanings, to make sure that we weren’t only focusing on one side of the political spectrum.”
CAF’s Future World Giving report: Enabling an Independent Not-for-profit Sector, highlights the worrying global trend for governments to crack down on the advocacy activities of charities which are critical of government policy. In this report we cite the current situation in Canada as concerning due to the perception of politicised regulatory activities and the damaging rhetoric coming from some in government. CAF has not been alone in raising these concerns with CIVICUS highlighting the issue in its 2013 State of Civil Society report and a consortium of 12 international charities being brought together, backed by the Canadian Council for International Co-operation, representing an additional 70 development organisations, to press for answers from the CRA.
When, on 20th August, 2014 legislators from the opposition New Democratic Party sought hearings before the House of Commons’ Finance Committee on the CRS’s political-activities audits, they were blocked by Prime Minister Stephen Harper’s Conservative government. Gerald Keddy, parliamentary secretary to the revenue minister, described the suggestion of such a hearing as “shameful,” and added that the ” idea that the professional men and women who work within the CRA in an arm’s-length auditing process, maintaining the integrity of the system, could somehow fall under political influence is simply wrong.”
Whatever the true intentions of the CRA and Canada’s government are, to ignore the perception that regulators are being swayed by politicians would be to risk the integrity of Canadian civil society. It is hoped that these perceptions do not have a chilling effect on civil society advocacy because the one thing that governments should fear more than a critical not-for-profit sector, is the loss of legitimacy that comes from the absence of a critical friend.