Madam Speaker, the second petition reflects concerns I have been hearing from many different stakeholders about the direction and control system as it exists within the Income Tax Act.
Petitioners note direction and control requires the use of resources by various organizations. It is cumbersome, resource-intensive and adds unnecessary administrative burdens. Also, in the context of international development, it makes it very difficult for organizations to work in the most effective way possible in partnership with local communities because these regulations require all projects to be under the control of the Canadian entity.
Petitioners further note that the first report of the Advisory Committee on the Charitable Sector, made up of 14 sector members, recommends that the Minister of National Revenue work with the Minister of Finance to address the problems associated with the current system. Also, the Standing Committee on Foreign Affairs and International Development had a unanimous recommendation calling on the government to fix the direction and control system.
Therefore, petitioners call on the government to replace the original regime and “own activities” test in the Income Tax Act, which requires registered charities to devote all their resources to charitable-sector activities carried out by themselves, with a regime that permits registered charities to operate and further their charitable purpose, and to replace current administrative requirements around direction and control with a requirement for registered charities to establish reasonable and practical parameters for ensuring resource accountability when working to achieve a charitable purpose through a third party that is not a qualified donee.