Charities are widely perceived as organizations that provide
assistance to those in need and aim to make the world a better
place. However, the word "charitable" has a different
meaning at law.
For an organization to be registered as a charity in Canada it
must be established for exclusively charitable purposes. However,
nowhere in Canadian legislation is the term "charitable"
defined. The term has been interpreted over time from court
decisions that serve as legal precedents (referred to as "the
The common law develops slowly and often struggles to adapt to
the ever quickening pace of evolving societal norms. As a result, a
curious legal distinction has developed between the "relief of
poverty", which the common law considers to be charitable, and
the "prevention of poverty" which is not. Providing
assistance to the impoverished is considered charitable but
providing assistance to persons who are not yet
impoverished has yielded a different result. The root of this
distinction is that the prevention of poverty could mean providing
assistance to a class of beneficiaries that are not poor.
In 2014, the Canada Revenue Agency ("CRA") advised
Oxfam Canada that it could not remain a registered charity if it
did not remove from its official purposes the "prevention of
poverty". Last month, this odd legal distinction resurfaced in
a decision of the Federal Court of Appeal.1 In that
decision, Credit Counselling Services of Atlantic Canada Inc.
("Credit Counselling") was advised by the Minister of
National Revenue that its charitable status was to be revoked
because it had as one of its stated purposes the "prevention
of poverty". As one of its primary activities, Credit
Counselling provided debt management services in which it
negotiated the repayment of debts owed by debtors to creditors.
Credit Counselling did not screen any prospective recipients of its
debt management services nor did it offer its services exclusively
to individuals considered to be poor. As a result, the court
ultimately agreed with the Minister of National Revenue and upheld
the annulment of Credit Counselling's charitable status. From a
legal perspective, the court's findings in the above decision
were correct. However, the result may be considered less than
satisfactory from the broader societal perspective.
Other countries bound by this common law interpretation of the
term "charitable" have taken proactive steps to navigate
around its peculiar application. The United Kingdom recently passed
amendments to its legislation governing charities to expressly
state that the prevention of poverty (in addition to the relief of
poverty) is a charitable purpose.
As the court in the above decision noted, until the Canadian
government takes steps akin to those in the United Kingdom, the
legal distinction between the relief and prevention of poverty is
here to stay.
1 Credit Counselling Services of Atlantic Canada Inc.
v. Canada (National Revenue), 2016 FCA 193.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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