Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.
A recording is available from Parliament.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Do we have specific agreements with countries, such as the United States—which is an ideal example—or other countries, that addresses reciprocal conditions offered to charities that make international donations?
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
We've talked about it here. We do have a specific rule in the Income Tax Act which will allow, in certain circumstances, a foreign charitable organization to become a qualified donee for Canadian tax purposes.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
That was not exactly my question. I would like to know if there are reciprocal agreements to ensure that countries treat international charities in a similar manner.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
No.
Conservative
The Chair Conservative James Rajotte
That's a clear answer.
Colleagues, we do have votes, so we will be suspending at 5:15 p.m.
We'll go to Mr. Marston, please.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair.
I want to thank the officials for answering these questions.
One of the questions I had that you reasonably answered was what could be construed as misuse of a receiving charity. I think you answered that pretty clearly.
For a long time here—let's say in the last three, four, five months—there have been conversations about U.S. groups trying to gain political influence in Canada and funding into charities. I recently read a book—without naming the book, because I don't want to promote anybody here—that talked about a certain religious group from the U.S. that is establishing links to Canada and making donations into organizations here whose view was to train folks to be more in conformity to their belief structure back in the U.S. The purpose was to have these people educated, as Mr. Brison said, in the techniques or organizing or operating campaigns to assist a political party of their choice in this country.
Would there be any violation, in your mind, anywhere in that process? I am trying to be as general as possible, because it could be anybody on any issue, but that is consistent with what I've read.
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Mr. McCauley would be able to speak to the application of the rules, but a charitable organization in Canada has to have charitable purposes, its activities have to be charitable, and only 10% of the resources can be used in political activities that are subordinate or related to its charitable purposes.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Who would be monitoring to decide where that 10% is?
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
First of all, the charity itself is accountable for being aware of the rules and self-assessing, and managing its affairs accordingly. Then that information, if these measures are passed, would be an additional piece in the reporting requirements annually. Then, yes, if there were a reason, we would be taking a look with the charity at the books and records, and having a discussion with them.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
You'd have to have some kind of indication before you'd go to that stage, I presume.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
We do some random audits.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
I referred earlier to being part of the United Way. In the United Way, we would give a donation to a sector here and there and to particular organizations. Every so often, once in a while, the money we gave to an organization that had made the application and requested things went in a different direction. And maybe they just changed strategic direction in the meantime, but it took us some time to catch up to the fact that they had done that. So that's what prompted me to look at it in this fashion.
Most regulation, I believe, that the CRA implements and deals with and follows through with on behalf of the Canadian taxpayer we would call strict. How much leeway do you have in a situation? As this is unfolding, from the standpoint of strictness, it sounds to me like there's not going to be what we would refer to as leeway. You're going to have a black and white regulation, and it's going to be consistently adhered to.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I don't believe there are any new regulations, and the rules haven't changed. We have guidance up now that, again, won't be changed. So we will be looking at political activities the way we've looked at them before and the way we'll look at them going forward. I don't think the rules are any harder or tougher.
Conservative
The Chair Conservative James Rajotte
Thank you.
I have two more members. Can I get an indication of how many more members want to speak? If we can finish part 1 before the vote, then we can move to part 2 after the vote.
I have Mr. Mai and Mr. Brison.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
Thank you, Mr. Chair.
I would like to continue in the same vein as Ms. Nash. She began asking questions about the work of foreign charities. You are saying that the Canada Revenue Agency is going to establish criteria. However, the bill states that the Minister of National Revenue has the power to make decisions in that regard, in consultation with the Minister of Finance. Is it not true that, once again, the decision will be coming from the minister?
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Like previously, we would define a process where we would have to be able to publicly show what are the considerations we would take into account in coming to a determination about eligibility for the foreign organization, and then we would be providing that assessment over to finance department officials, and I assume finance department officials will have some sort of a process within the Department of Finance as well for us to consult with the Minister of Finance. For all of that, at the end of the day there will certainly be transparency around it.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
The bill grants power to the Minister of National Revenue. How does the process work right now? Is it the Canada Revenue Agency that decides who gets a number? Now, things are going to change and that power is going to be given to the Minister of National Revenue.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I think you're correct, in that currently it is the CRA that provides the registration. As I understand how it would be administered, it would be a continuation of that; it would be the CRA coming to a conclusion based on the facts and based on the criteria around eligibility. Then there's a little loop over to “the Minister of Finance” to consult, and then that information or that decision would be made public, or if it's a denial it would be provided back to the applicant with a reason.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
You can see where I am going with my questions. The bill gives the Minister of National Revenue more and more decision-making powers. I have no problem with regard to the Canada Revenue Agency; I know that it is impartial. The thing that concerns me is the powers given to the minister in the budget implementation bill. In this case, you are telling us that the Canada Revenue Agency will be able to set criteria, but there is nothing to say that the minister has to comply with those criteria.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
There's a principle, certainly under administrative law, that the minister has to act in a way that's consistent with the law and consistent with the expectation of due process and due consideration for items and decisions made within that law and within delegated authorities.
I guess what I'm trying to suggest is that the same structure and approach would have to be put in place for this measure so that it is consistent and acceptable in terms of how we administer other measures under the Income Tax Act or other authorities the minister might have.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
I would like to make a comment on the authorities given to the Minister of National Revenue with respect to the intermediate sanctions and with respect, in particular, to political activities.
We've taken an existing authority, which is currently in place with respect to the obligation to maintain books and records and have them available for inspection and those kinds of things, and have used it for that particular purpose.
Probably the larger change with respect to authority has to do with the foreign charitable organizations. I guess what I'd point out to the committee is that currently under the Income Tax Act there is no consideration at all by the CRA. It is automatic registration if you meet the conditions.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
In the budget, $8 million has been allocated to the Canada Revenue Agency for increased monitoring of the political activities of charities.
Can you tell us how this amount is going to be spent?
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Yes. It's certainly not all for audits. A good chunk of the money will go toward modifying the system that allows for the information provided annually on a charity's return—the new information required—to be posted publicly. So a chunk of money is for systems renewal. There's also a chunk of money, frankly, for outreach, education, and consultation with the sector and for providing more information. Then, yes, there's another chunk of the money for increased monitoring and review, such as audits, desk audits, and that kind of thing.
As we do with all measures, there will be those kinds of activities undertaken as part of the $8 million.