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Evidence of meeting #57 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was charity.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mark Blumberg  Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca
Michael Cloutier  President and Chief Executive Officer, Canadian Diabetes Association
Kate Bahen  Managing Director, Charity Intelligence Canada
Shawn Pegg  Director, Policy and Research, Food Banks Canada
Mary Dodd  Vice-President, Finance and Operations, Women's College Hospital Foundation
Allyson Hewitt  Director, Social Entrepreneurship, Social Innovation Generation

4:20 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Hoback. That's five minutes and 10 seconds.

Mr. Caron, you have the floor for five minutes.

4:20 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Thank you very much. I also thank our witnesses for their presentations.

Most of my questions go to Mr. Blumberg and Ms. Bahen, whose presentations were really interesting. I say that with no reflection on the interesting presentations given by the other witnesses.

We have heard a lot about the stretch tax credit and about all the other avenues that people are looking at at the moment. I found Ms. Bahen's and Mr. Blumberg's comments particularly interesting because they dealt with the legal aspects of the things that are currently concerning us.

Ms. Bahen, we hear a lot about the Canada Revenue Agency and its closer oversight of possible tax scams or charity scams. Do you know how many Canada Revenue Agency employees work specifically in the area of the legitimacy of charitable organizations?

4:20 p.m.

Managing Director, Charity Intelligence Canada

4:20 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

So you have no idea about the budget allocated to it?

4:20 p.m.

Managing Director, Charity Intelligence Canada

4:20 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

You mentioned that two of Canada's top 100 charities have been found guilty of tax fraud. You say that the people involved have disappeared, or, in a lot of cases, they disappear and then pop up somewhere else. Is there no way to identify these people and bring them to justice?

4:20 p.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

What I've seen the courts and the CRA do—and I'm not an expert—is come down on the individual donors, the donors who were involved in funding these tax schemes. In our experience, and as I provided in our submission, we are a tiny charity. We're unknown. We have worked with two donors who were approached by a trusted adviser; one was an accountant, one was an executive director. We ran the paperwork through expert legal advice. In each situation, it came back clean and legitimate.

What we have seen the CRA do, which is completely appropriate, is this: where donors, however innocent or unsuspecting they may be, are unwitting participants in a tax scheme, they are assessed the full amount of what was tax receipted plus interest.

The situation we worked on was an elderly lady who was asked to make a donation of $1.1 million and a tax receipt was going to be issued for $5.5 million. These are highly sophisticated schemes that are far and beyond what a reasonable man on the street could possibly research on a charity, and there would be very financially onerous consequences.

Are the people running the charities—I don't know, maybe Mark knows—ever brought to accountability? Are they ever brought to trial?

4:20 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

People don't go to jail in Canada for abusing charities, unfortunately.

On my website, globalphilanthropy.ca, I've put a list of all the charities that have been revoked in the last five years, as well as the names of all the directors of those charities, as well as the reasons for their revocation, if they're provided by CRA. I've put up also copies of the letters that CRA sent to those charities once they've been revoked. But it's a little bit late, once the charity's been revoked, many years later to put up this stuff.

One of my suggestions is to make ready use of police forces to investigate abuse of charities and establish a dedicated police unit that focuses on complicated schemes involving charity fraud. I think that is something that's needed. We have it with the bribery issue for foreign corruption.

I think, quite frankly, it's an embarrassment what's going on in Canada. If you look at the U.S. media, they're covering the Canadian charity situation here more than the Canadian media is covering some of these abuse situations. It's having a negative impact on other countries, because they're getting involved in these schemes that are based here in Canada.

4:20 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I would like briefly to go back to the discussion on advocacy activities.

Mr. Blumberg, as you know, the budget implementation bill has specific provisions on advocacy activities by charitable organizations. Some of them are under the impression that the intention in this case is to limit not their advocacy, but their politics.

Is it your impression that those fears are justified and that the provisions could actually be used for those purposes by any given government?

4:25 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I think people, parliamentarians, senators, and cabinet ministers should be more careful when they talk about the charity sector, when they make allegations and things like that. I think that would probably be more helpful than more tax incentives, in terms of encouraging public trust in charities.

4:25 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you. Merci.

We will go to Mr. Adler, please.

May 8th, 2012 / 4:25 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Thank you, Chair.

Thank you all for appearing here today.

I want to address my first question to Mr. Blumberg.

I'm looking at an article from last year that appeared in the NDP's holy grail, The Toronto Star. There was an audit conducted by CRA between the years 2005 and 2009, where $15 million was raised by the International Relief Fund for the Afflicted and Needy Canada that was sent overseas to be used for the creation of promotional videos that “...demonize Israel, characterize the Arab-Israeli conflict as a religious war, appeal for all Arab and Muslim nations to join in the struggle against Israel and glorify martyrdom”.

How on earth would an organization in this country get a charitable designation to conduct such activities?

4:25 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I think what you'd have to do is look at the charity application. I doubt it had any of that stuff in it. That's the first thing. So I don't think you should blame CRA, because 20 years earlier someone put in a nice application saying they were going to help starving people abroad.

The second thing is, I find it interesting that this group provided more than $15 million to what is indirectly a listed terrorist organization, and because CRA has revoked them as a registered charity, we actually know less about them now than if CRA hadn't revoked them. It would have been better if they hadn't revoked them, because then at least we could see how much money is going in and how much money is flowing to the terrorists. But right now they've been revoked, and because they're a non-profit and not a registered charity, we have no right to know how much money is coming in, and they're continuing on. I think it's an interesting issue for you guys to think about.

4:25 p.m.

Conservative

Mark Adler Conservative York Centre, ON

CRA can still go in and audit their activities as a non-profit, right?

4:25 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

They can audit them as a non-profit. If they're very profitable, they could turn them into a non-profit and they could have to pay a little tax, yes. That's hardly much of a situation. I think the better thing would be that non-profits that have to file these T1044s...that those become public, and people can at least get an idea of how much money is going in and what it's being spent on.

4:25 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Presumably, this isn't the only organization in this country doing these kinds of things. What's the solution? If we strip them, as you say, of their charitable status and move them into a category where they become less transparent and less accountable.... What's the solution?

4:25 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

The solution in part is some of those things. It would be important to have more transparency, so you have it across the board in the non-profit area, instead of making it.... It's not just IRFAN. With Ornge and other things, people are deliberately setting up structures.

In the case of Ornge, they spent $11 million on legal fees to set up structures that largely deal with lack of transparency. Have non-profits involved to have the transparency less in that case....

I would suggest to you to level the playing field a bit there. Have charities have a lot of transparency, as they do—maybe even more—but have non-profits have it too.

I would also suggest that charities that do foreign activities need to be more careful in how they're doing it. CRA has some good rules on direction and control for foreign activities.

IRFAN wasn't following those rules. I would suggest that there be more education in that area for charities, so they understand it.

4:25 p.m.

Conservative

The Chair Conservative James Rajotte

You have one minute.

4:25 p.m.

Conservative

Mark Adler Conservative York Centre, ON

What about foreign government money, like Saudi money or Kuwaiti money, supporting domestic charitable organizations in this country?

4:30 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

Well, money comes from abroad. I believe CIDA spends a lot of money doing stuff around the world. Some people don't like some of the things that CIDA supports, like equality for women and other things. But people abroad also give to Canadian charities and things like that—

4:30 p.m.

Conservative

Mark Adler Conservative York Centre, ON

But if foreign governments are supporting Canadian charities to engage in political activity in this country, I mean that should be known to everybody, shouldn't it?

4:30 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

You know what? My take would be that—

4:30 p.m.

Conservative

Mark Adler Conservative York Centre, ON

As a political candidate, I have to disclose whoever donates to my campaign.

4:30 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I don't have any problem with disclosure and transparency. For the environmental charities that are being accused of all sorts of things under the sun, I don't think even those would have a problem. If you look at the U.S. tax returns, the 990s, you can see how the money is flowing to Canada and being used for various types of initiatives and activities. I think it's already out there.

4:30 p.m.

Conservative

Mark Adler Conservative York Centre, ON

But we would have to go to Washington to find out if—