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The International Journal
of Not-for-Profit Law

Volume 12, Issue 3, May 2010

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Restrictions on Foreign Funding of Civil Society

Special Section

Introductory Overview
International Center for Not-for-Profit Law

Mohamed ElAgati

Debebe Hailegebriel

Aleksej Bogoroditskii

Sri Lanka
Rohan Edrisinha

Marcos Carrillo


Maintaining Control: Recent Developments in Nonprofit Law and Regulation in Vietnam
Mark Sidel

The NGO Law: Azerbaijan Loses Another Case in the European Court
Mahammad Guluzade and Natalia Bourjaily

The Origin of the Species: Why Charity Regulations in Canada and England Continue to Reflect Their Origins
Peter Elson

Legal Forms of Civil Society Organizations as a Governance Problem: The Case of Switzerland
Georg von Schnurbein and Daniela Schonenberg

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Editorial Board

The Origin of the Species: Why Charity Regulations in Canada and England Continue to Reflect Their Origins

Peter R. Elson1

Numerous attempts have been made in the last ten years to push for the realignment of charity regulation in Canada. These calls for change have consistently included a proposed separation of tax policy and charitable regulation and the establishment of a Charity Commission-like agency, similar to the regulatory regimes in the United Kingdom and New Zealand. Like Australia and the United States, Canada has an integrated rather than an independent relationship between tax policy and charity regulation. This article argues that institutional origins and their positive reinforcement are critical to understanding both long-term regulatory regime development and the reluctance by governments to make substantial changes. The origins and evolution of England’s Charity Commission and the 1930 amendment to the Income War Tax Act in Canada are presented as case studies. If desired regulatory change is to occur in Canada or elsewhere, it needs to start with a clear understanding of the context in which the original regulatory regime was created and reinforced.


Numerous attempts have been made in the last ten years to push for the realignment of charity regulation in Canada.2 These calls for change by charity lawyers and third sector representatives have consistently included a proposed separation of tax policy and charitable regulation and the establishment of a Charity Commission-like agency, similar to the independent regulatory regimes in the United Kingdom and New Zealand. Like Australia and the United States, Canada has integrated relationship between tax policy and charity regulation. While variations within these two forms of charitable regulation exist, the forms themselves have been highly resistant to change once they have been established.

This article argues that institutional origins and their positive reinforcement are critical to understanding both long-term regulatory regime development and the reluctance by governments to make substantial changes. The 1930 amendment to the Income War Tax Act in Canada is presented as an example of an integrated regulatory regime and then is compared to emergence of the independent Charity Commission in England in the early to mid-1800s. The article concludes with an analysis of why the origins of regimes hold important lessons for their reinforcement and the potential for change.

First and foremost, the modern regulation of charities takes place with highly institutionalized structures, either at the federal/central or provincial/state level. These institutionalized structures demonstrate adherence to established or highly organized protocols and procedures, which are positively reinforced each time the protocols and procedures are exercised.3 In the case of charity regulation, protocols and procedures are exercised each time an application for registration is reviewed or revoked. That’s not to say that change does not occur, as witnessed in changes manifesting from the Charities Act 2006 in England.4 However, even England’s recent changes in charity law did not attempt to change the institutional configuration of the Charity Commission as an independent regulator or the HM Treasury as the source of tax policy. The premise of historical institutionalism is that contemporary regulatory policies constraints are embedded in these institutions and that because institutions are difficult to change, the origins of a particular institutional regime takes on added importance.

In Canada, the 1930 Amendment to the Income War Tax Act established the foundation on which all charities in Canada continue to operate. The 1930 amendment collectively introduced a universal tax deduction for charitable donations; defined the statutory term for charity; established a designated ceiling on income tax deduction for donations; and assigned the Department of Revenue as the designated regulator. These amendments to the Income War Tax Act still echo through the corridors of charity regulators and voluntary organizations across Canada. The immediate contextual importance of this legislation will be demonstrated through a profile of events leading to, during, and following its passage in the House of Commons on May 28, 1930. The longer-term institutionalization of the 1930 Amendment will be demonstrated through attempts by the voluntary sector to have statutory changes made by Parliament and the Supreme Court of Canada.

Developments Leading to the 1930 Income War Tax Amendment

A combination of tight moral control and extensive worker exploitation between the late 1800s and early 1900s was reflected in the growth of numerous reform movements in Canada.5 This social and moral reform was undertaken by groups such as the Women’s Christian Temperance Union, the Dominion Enfranchisement Associations, and other social gospel movements that promoted moral as well as physical well-being. These groups tackled issues related to women’s education, urban public health, and sanitation, and promoted the establishment of recreational opportunities in both urban and rural areas.6
As charities were proliferating, so were other means of providing social support. Social justice aspirations and religious ideologies were integrated into service provision for much the same reason that Jesuit priests were the leading explorers of the early 1600s: the conversion of the masses to a particular faith-based life. The Moral and Social Reform Council of Canada is a case in point. This alliance of Anglican, Methodist, Presbyterian, and Baptist churches and the Trades and Labour Congress of Canada worked to get the federal government to enact the Lord’s Day Act in 1906.7 Another example is the National Social Service Congress in 1914, which has been described by Dennis Guest as a “display case of religiously motivated, social reform thought in Canada,” where speakers represented the right wing, the center, and the left wing of the social gospel movement.8

Until this point, citizens and religious institutions were the primary drivers of voluntary sector activities and organizations. Governments provided funding when they were obliged to do so, but otherwise viewed social services as a means to control social unrest rather than a way to address social needs.9 The prevailing view of the federal and provincial governments at the time was that social services and opportunities for employment were there for the taking, and it was only moral laziness or illness which stood in the way. (Laziness and moral decay were terms that were used to describe the “undeserving poor”; widows or those with a mental illness were considered the “deserving” poor.) This “hands off” approach by government was pervasive, and it was only by political or economic necessity that social action was taken. Income security measures resulting from the Winnipeg General Strike of 1919 and financial aid programs for World War I veterans and their families signalled the first major entry by the federal government into the area of social security.10
The proliferation of charities created to help the poor fostered social status for their benefactors and moral servitude for their recipients. It also resulted in the creation of local, centralized governing bodies such as the public Social Service Commission in Toronto in 1912, which was designed to streamline charity work and impose a degree of administrative efficiency and accountability, and led, over time, to the creation of the United Way of Greater Toronto.11 By the end of the 1920s, similar federated fundraising organizations were formed in major centers across Canada.12

According to social work historian Gale Wills,

There was an assumption early in the Depression that properly organized private charity would take the strain off the relief budget, partially because it used philanthropic rather than tax dollars, but mostly because of the persistent belief that unemployment was a matter of individual circumstances and that “good” [social welfare] casework would result in putting people back to work.13

This perspective eroded as the Depression continued, but it still dominated political and economic discourse throughout the decade.

By 1929 the Liberal government was being urged by the opposition Labour party to address the severe levels of unemployment and to assist provinces, regardless of provincial jurisdiction for welfare as defined by the British North America Act.14 Immigration was exploding, growing from less than 50,000 per year in the early 1900s to 400,000 per year in 1913.15 It was this massive immigration to Canada that led to the creation of so many ethnic-centred mutual support and fundraising organizations.16 The National Council on Child and Family Welfare, for example, took a lead role in supporting the provision of relief across Canada and in the process developed strong political, economic, and community connections.17

The proposed personal tax deduction amendment to the Income War Tax Act was thus introduced in the context of a growing economic depression, accelerating unemployment, massive immigration adjustments, a traditional federal reluctance to provide support in areas of provincial jurisdiction, and a pending federal election. The 1930 Income War Tax Act Amendment itself was one of the last pieces of legislation passed by W. L. MacKenzie King’s minority Liberal government before a federal election resulted in the Liberals being defeated by the R. B. Bennett-led Conservative Party.  What follows is an outline of how this legislation was introduced and debated.

Canada’s 1930 Income War Tax Amendment

A number of amendments to the Income War Tax Act were moved in the House of Commons by the Hon. Charles Avery Dunning, Minister of Finance, on May 1, 1930, as part of the Ways and Means Motion to implement his recently tabled budget. The amendments included provisions

… 2. That the income of co-operative companies and associations be exempt from income tax; and … 3 (b) That donations, to the extent of ten per cent of the net income of the taxpayer to any church, university, college, school or hospital in Canada, be allowed as a deduction.18

The subsequent debate in Parliament on the motion evolved not around the justification for the deduction, which was readily acknowledged, but the type of charitable organization that would benefit.19 This limited (i.e., institutional) tax provision was quickly met with vigorous opposition from community funds, federated charities, and non-sectarian charities. The Act also was seen to favor charities in Quebec, which were all affiliated with the Roman Catholic Church, over the non-sectarian charities that dominated in Ontario and the other provinces.20 The proposed amendment attracted attention in the media, and the notice of at least one well-positioned business executive. The Toronto Star commented on the proposed income tax provisions in its Friday, May 2, editorial entitled “The Income Tax Concessions”:

Among the concession to income taxpayers which Mr. Dunning makes in his 1930 budget, one of the most interesting is the provision that “donations to any church, university, college, school or hospital in Canada shall be treated as deductions from income up to a maximum of 10 per cent of the net income of the taxpayer.” This type of deduction is quite new to the Canadian Act, but something of the sort has been many times suggested. … [T]he new provision recognizes and encourages a type of contribution which is extremely valuable in every community.21

Further in the same May 2 edition of the Toronto Star, the 10 per cent limit on donation deductions received special attention. Reporting on the amendment from the perspective of churches (the “Biblical Budget,” as it was called), it was reported that for the first time in Canadian history the biblical tithe was being used (by Finance Minister Dunning) to encourage and help the churches of Canada, irrespective of denomination. The benefit to schools, universities, colleges, and hospitals was also noted in the same article, as was the precedent for similar tax deductions which had been established in the United States.22

The Toronto Star continued its coverage throughout the month, including another editorial on May 6, 1930. Entitled “No Tax on Philanthropy,” the editorial called the tax deductions for donations the most novel feature of the Dunning budget and continued with the comment that “...Unknown to the public a number of organizations engaged in important community work urged the Dominion government over a period of years to take the step now determined upon.”23

The motion to amend section 3 (b) of the Income War Tax Act on tax deduction for donations to any church, university, college, school, or hospital was debated in Parliament starting on May 24. J.S. Woodsworth, an Independent labour Party MP at the time,24 led the committee debate with a call to extend the exemption to community funds, or federated charities.25 Dunning replied that this proposed extension was noteworthy, but still too narrow to reflect the wide range of representations he had also received. Opposition Conservative member R.B. Hanson stood in the House to advocate for the inclusion of the Victorian Order of Nurses and similar organizations:

If the minister is going to grant this exemption, he should cover the whole field. I am not opposed to the exemption; indeed it was urged upon the government by this party many years ago in the house, and I suggest to the minister that if he is adopting the principle, the exemption list is not wide enough.… The whole question [of exemptions] should be reviewed by the minister.… I have no doubt that representations have been made to him by every institution in Canada.26 

Others made similar appeals for the inclusion of charitable and social agencies that existed at the time in most major cities.27 Their exclusion from a deduction would create an undue burden on many worthwhile charities and their inclusion would support the voluntary community donations. Dunning, for his part, found merit in the suggestions that had been put forward, but was reluctant to proceed, citing the governments’ lack of experience in knowing what the consequences would be. The opposition parties were also adamant that the government should not be given discretion to determine eligible charities.28
The eligibility floodgates continued to open, with museums and non-sectarian and federated charities being noted as worthy exemptions, complemented by continued references to the existing tax provisions in the United States.29 Dunning indicated that he too was impressed with the wide range of representation he had received, but he declared that he was overwhelmed by potential implementation issues. Dunning appealed to the House to be allowed to start with the provisions as outlined in the amendment and then to look to widen the exemptions in the future—e.g., in one year—once the government had gained experience.30

When the Ways and Means Committee continued its debate in Parliament on May 27, Opposition leader R.B. Bennett reiterated the government’s own (biblical) position on the 10 per cent of personal income limit for tax deductions for donations to worthy causes, and pointed out the discrepancy between this principle and the proposed practice of only allowing donations to be deducted it they went to particular types of charities. W. D. Euler, Minister of National Revenue, and Finance Minister Dunning both restated their earlier position that the principle of allowing tax deductions for donations to charity was important, but the administrative and forgone tax revenue costs were unknown and caution was called for. At this point Dunning conceded that the use of the term “charitable institutions … operated exclusively as such and not for the benefit of private gain” appealed to him, again acknowledging potential unforeseen administrative difficulties.31

On May 28, 1930, less than thirty days after the amendment to the Income War Tax Act was first introduced, W. D. Euler, Minister of National Revenue, stood in Parliament, and acknowledged the value of argument for the inclusion of federated charities, the Red Cross, and other organizations. Euler then stated that the government had decided that the clause should be broadened, but specific reference to charities by type would only create another wave of protests from those excluded. The term Euler proposed to include was “charitable organization.”32

Euler then proposed the following amendment: “That section 3 (j) be amended by striking out the words ‘any church, university, college, school or hospital’ in lines 24 and 25, and substituting therefore the words ‘any charitable organization.’”33 Euler continued at this point to establish the legal foundation on which charities continue to stand in Canada, by quoting directly from Halsbury’s Laws of England:

Only those purposes are charitable in the eye of the law which are of a public nature, whose object, that is to say, is to benefit the community or some part of it, not merely particular individuals pointed out by the donor. Accordingly gifts which are directed to the abstract purposes of relieving poverty, advancing education or religion are charitable… “Charity” in its legal sense comprises four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads.

Euler continued, “I submit that this phrase embraces every organization of this kind.” Section 3 (j), he said, would then read as follows:

Not more than ten per centum of the net taxable income of any taxpayer which has been actually paid by way of donation within the taxation period to, and receipted for as such by any charitable organization in Canada operating exclusively as such and not operated for the benefit of private gain or profit of any person, member or shareholder thereof.34 

Opposition leader R. B. Bennett congratulated Euler for having introduced the amendment, expressed his satisfaction that the term “charitable organization” covered “every species of benevolence,” and said that the 10 per cent limit also protected the government from excessive foregone revenue.35 The Bill was then reported, read the third time, and passed unanimously by the House of Commons.

The passing of the 1930 amendment to the Income War Tax Act marked the first time in Canada that a universal tax deduction was introduced for any charitable donation; the statutory term for charity was defined; a designated ceiling on income tax deduction on donations was imposed; and a regulatory body, the Department of Revenue, was assigned to administer the Act.36

If Euler’s reference to the Bible as a basis for capping allowable tax deduction for charitable donations to 10 per cent reflected a long religious history, it was no less profound in a legal context than his reference to the Halsbury’s Laws of England. The quote he used from Halsbury’s was a direct passage from the majority judgment in the House of Lords by Lord Macnaghten in the 1891 Pemsel case which was, and continues to stand as, the leading judgment and interpretation of “charitable purposes.”

Developments Following the 1930 Income War Tax Amendment

During R. B. Bennett’s term as Prime Minister from 1930 to 1935, additional amendments were made to the Income War Tax Act  so that by 1935 eligible donations included not only gifts or property to charities and educational institutions but also donations to the “Dominion of Canada or any province or political subdivision thereof.”37 The Act prudently reserved the right for the government to validate the value of the gift or property to prevent inflationary assessments, which the government still exercises to determine “fair market value.”38

As valuable as the deduction of donations to charities appeared to be at the time, the inability of charities to raise the funds necessary to provide services only expanded during the years of the Great Depression.39 In the 1930s, millions of Canadians were unemployed; on the prairies, farmers were devastated by a seven-year drought.40 In a letter to Prime Minister R. B. Bennett in 1933, Charlotte Whitton of the Canadian Council on Child and Family Welfare predicted that the number of families on relief would be at least 80 per cent higher than at the corresponding period the previous year.41
For support, charities turned to local municipalities. But they relied on property taxes for their income, and during the 1930s this source of revenue was either limited or in default. Increasingly, provincial governments had to assume the responsibility for debt relief. Yet some provinces were themselves in financial straits, and so the provinces in turn appealed to the federal government for support.42

The federal government responded under pressure from provincial governments to address the massive unemployment and years of drought on the prairies by increasing its funding for unemployment relief measures and passing an Employment and Social Insurance Act in 1935.43 Meanwhile, relief in the form of soup kitchens, bread lines, clothing depots, and shelters for the hungry and homeless were provided by caring individuals, religious groups, and voluntary agencies such as the Red Cross.44 This economic climate significantly increased the number of local organizations and local branches of national organizations to which tax-deductible donations could be made by those who were more fortunate.

England’s Charity Commission: Thirty-Four Years in the Making

While Canada’s charity regulator emerged in 1930 during the Great Depression, England’s Charity Commission was formally created in 1853 for reasons that were founded in progressive educational reform, not economics or unemployment. While a body of Commissioners was established with the Statue of Charitable Uses 1601 to ensure that charitable gifts were used for their intended purpose, costly legal remedies made the process impractical.45 The industrial revolution in the nineteenth century combined with widespread dislocation and poverty and the emergence of a social reform movement brought the Brougham Inquiry into being. The Brougham Inquiry, headed by Lord Brougham and launched in 1819, lasted almost twenty years and resulted in the prosecution of almost 400 charities. The initial aim of Lord Brougham was that the Inquiry would address access to education by the poor, particularly educational charities and their benign neglect of general public education. Others associated with the inquiry were interested in more general charity abuses such as fraud and misallocation of funds.46 The initial proposal was rejected by the House of Commons several times due to the influence of powerful universities, churches, and charities that did not want their “private” practices examined. Nevertheless, in 1819 the Inquiry into Charitable Endowments, or the Charity Commission, got underway.47

This initiative was by no means the only incident of reforming the general state of welfare in England at the time. In 1834 the Poor Law was amended to provide the right for administrators to distinguish between “deserving” and “non-deserving” poor, and for the institutionalization of workhouses, an initiative driven by middle- and upper-class interests that paid for the services provided.48

The Charity Commission was conducted by trained lawyers between 1819 and 1837 in a series of four approved commissions, reported semi-annually and surveyed nearly twenty-nine thousand charities.49 According to historian Richard Thompson, the creation of the inquiry was an important step in the evolution of inquiry per se as well as the specific investigation of charity.50 Without explicitly intending to do so, the Commission became an agent for reform without any of the bureaucratic trappings that would follow later. Between 1830 and 1837, previously informal reporting and examination processes were tightened up, and the training of Commissioners, attribution of reports, standardized corrective action, and a centralized advisory board were introduced.51 The focus of the Commissioners’ activities, it must be noted, was on conducting inquiries as a legal research unit. It was in this context that its auxiliary function as an agency of reform was exercised.

Systemic action on the part of the authorities in response to these inquiries was often buried in a stormy sea of paper and political intrigue, as the Commission itself had no formal remedial powers.52 Informally though, admonishment, mediation, and trusted advice were most often the tools of persuasion, as, when necessary, was legal action through the courts. Each renewal of the Commission presented an opportunity for opponents to limit its activities and for proponents to push for its renewal.

The fourth and last issue of the Royal Commission expired in 1837.53 When Lord Brougham pushed to have the Education and Charities bill adopted there was serious and well-connected resistance to the directive nature of education portion of the bill and it was “discharged” by the House of Lords.54 Expectations on the side of charity reform proponents that the Commission would be renewed for a fifth term were abruptly halted and a final report was quickly assembled. The final report of the Commission listed eleven faults in charitable trust administration. Among these were the expense and difficulty in replacing trustees; the risk of making loans based on personal security; the difficulty and legal expense incurred in changing the charter of a trust; and charity mismanagement and conflicts of interest. In short, although the report did not say so, there was an ongoing need for a new agency to oversee charities.

There are mixed views on the relationship of the Charity Commission Inquiry (1818-1837) to the formation of the permanent Board of Commissioners in 1853. Some, such as Richard Thompson, hold the view that the relationship was tenuous at best. Richard Mitcheson, writing in 1887, draws a much closer link. A Select Committee of the House of Commons was established in 1835 to review the incomplete reports that were then available from Lord Brougham’s Commission.55 The Select Committee recommended the appointment of a board to superintend and sanction charities, including an audit of accounts, general governance of all charities, and legal action when necessary. Meanwhile, scandals associated with misuse and misdirected charity funds continued, as did the call for reform and sustained opposition from powerful and well-connected churches, universities, and corporations.56 This dynamic was not restricted to charities; labor laws, poor laws, and a number of other measures were introduced and fiercely debated as public opinion, for the first time, started to manifest itself in the political sphere.57 The Charity Commission Inquiry in 1818 was the first clear example of the fusion of social inquiry and the Royal Commission.

In 1849, a Royal Commission was appointed to once again examine the reports of Lord Brougham’s Commission. By this time all the reports from the earlier Brougham Commission were complete. The Royal Commission issued its findings in 1850 and agreed in almost every point with those of the Select Committee of 1835. This Commission resulted in the Charitable Trusts Act of 1853, which was in fact originally drafted by the 1849 Royal Commission.58

Charitable Trusts Act of 1853

While the Charitable Trusts Act of 1853 incorporated many of the recommendations of the Royal Commission, there were two exceptions of note. First, the commissioners initially had no power of audit, although they did require the submission of annual financial accounts. Second, the power to divert welfare charity funds to useful purposes was not included, although they could authorize the sale or exchange of lands held by a charity.59 What the Act did include was the appointment of a permanent commission;60 powers to conduct inquiries into the condition and management of charities; taking action on charitable property, including its transfer to a new trust; and sanction of the commissioners as a condition for any legal action against a charity. Judges could make decisions in chambers on certain charities,61 including authorizing trustees to remove unfit or incompetent officers;62 and to the relief of many, the practice of making vexatious suits against charities for the sake of costs was curtailed.  

The Charity Commission itself consisted of three permanent members, and a fourth member, along with the secretary, held office at the pleasure of the Crown.63 The three permanent members were paid and had judicial tenure of office, meaning that they operated independently and were non-political. The unpaid commissioner was an M.P., although there were ongoing questions as to the particular role of this person who acted in part as a buffer between Parliament and the Commission. When the work of the Endowed Schools was added in 1869, the work not only became heavier, it became a political lightning rod for sectarian education issues. It would be almost one hundred years before full independence was achieved.64

While amendments to the Act were introduced in 1855 and 1860, the basic role of the commission remained: namely, that of inquiry and advice, property transactions, sanctioning judicial proceedings and remedial schemes. In 1860 the Commission was given de facto judicial powers, restricted to applications made by the majority of trustees where the income of the charity exceeded fifty pounds. Appeals to the district or county court were made where the income of the charity was less than fifty pounds.65 The result of this latter measure was that regulation of charities shifted from the courts to the Commission.

This development didn’t stop opponents of the Charity Commission from trying to circumvent its jurisdiction through private Acts of Parliament and legal rulings. Consequently, a further amendment was passed in 1862 decreeing that no Act of Parliament or decree of the Court of Chancery related to charities could circumvent the jurisdiction of the Charity Commissioners. The power of the Commission was further enhanced in 1869 when the work of the Endowed Schools Commissioners was transferred to the Charity Commissioners. This added responsibility brought with it a raise in the number of Commissioners from three to five.66 The power of the Commission was increased again in 1872 with the passing of the Charitable Trustees Incorporation Act. In this case the Commissioners were granted the power to grant certificates of incorporation. Over time further modifications were made with the intention of increasing the discretion and authority of the Commission. Until 1899, that is: in 1899 the endowed school work was removed from the Charities Commission and their responsibilities returned to the supervision of non-educational charities.

The presence of the parliamentary charity commissioner in the operations of the Charity Commission slowly diminished until the person was rarely seen except at the formal induction.67 This political absence was raised during Lord Nathan Committee on Charitable Trust Law in 1952. Subsequently, with the Charities Act 1960, P.M.s became ineligible to sit on the Charity Commission and the link to Parliament became the Home Secretary.
The work of the Nathan Committee is well known and documented, as is the Charities Act 1960 and its successors, the Charities Acts of 1992, 1993 and 2006.68 What is less well known and appreciated is that the very structure of the Charity Commission has been held intact since its initial inception by the Select Committee of the House of Commons in 1835, which was struck to review the reports from Lord Brougham’s Commission.

Findings and Analysis

The 1930 amendment to the Income War Tax Act was a critical event in voluntary sector/government relations in Canada. Paul Pierson points to the path-dependent processes and positive feedback mechanisms that can be highly influential at the early stages of policy development.69 In the overall context of income tax in Canada, 1930 is within the early stage of its development. The Income War Tax Act was first introduced in 1917 and no systematic provision for charitable deductions had been implements prior to the First World War. The 1930 amendment to the Income War Tax Act established a path-dependent process that tax deductions to charities would be constrained to a limit of 10 per cent of personal income. This measure was applied annually to subsequent individual and then corporate tax returns, and has been in place, with small variations, to the present day. The millions of taxpayers who annually apply charitable deductions to their income tax forms and the thousands of charitable registration applications received by the Charities Directorate of the Canada Revenue Agency continue to reinforce this integrated governance structure.

While there have been periodic increases in the level of charitable deduction allowance, there been no attempt to either roll back or eliminate this deduction. The annual use of this same deduction by millions of individual Canadian taxpayers and its promotion by eligible charities to donors combine to represent a positive feedback mechanism and ongoing reinforcement of the tax deduction policy. Charitable deduction regulations were institutionalized through the growth of the internal mechanisms established in the Department of Revenue to administer these deductions and related regulations, including the centralized registration of all charities in 1967.  One of the characteristics of path dependency is that the further the government progressed along this path, the greater the likelihood it would continue, and the harder it would be for any alternative to be considered, which has indeed been the case.
In England, the basic separation of tax policy and charity regulation has also been consistently reinforced. The Charity Commission currently operates under Schedule 1A of the Charities Act 1993.70 The number of members of the Commission has not expanded a great deal, given the vast increase in the volume of its activities. The current Commission allows for a minimum of four and a maximum of nine members, including the Chair. Members must collectively have knowledge and experience of the law relating to charities, charity accounts and the financing of charities, and the operation and regulation of charities of different sizes and descriptions. At least two members continue to require appropriate legal qualifications, while at least one must have knowledge of the Welsh context and be appointed following consultation with the National Assembly for Wales.71

The Charity Commission in England continues as a non-Ministerial Government Department. It is part of the Civil Service and reports annually to Parliament. The Charity Commission is independent of Ministerial influence and independent from the sector it regulates. The Charities Act 2006 continued this precedent by restating that: “In the exercise of its functions, the Commission shall not be subject to the direction or control of any Minister of the Crown or other Government Department.”72 The Charity Commission continues to exercise a number of quasi-judicial functions where it uses powers similar to those of the High Court, as were specified in the Charitable Trusts Act 1853. Like the original Brougham Commission, the Charity Commission operates with the benefit of considerable powers of persuasion rather than relying solely on punitive regulatory measures or court action.

In Canada, the 1930 amendment to the Income War Tax Act has also been legally and politically institutionalized. The act itself established the terms under which organizations could register for charitable tax status and those terms remain firmly in place. Challenges to the Supreme Court of Canada have upheld the right of Parliament to define charitable purposes and several political appeals have been rebuffed. In fact, a recent ruling by the Supreme Court of Canada reinforced the integrated tax and regulatory relationship by viewing foregone tax revenues as a legitimate factor in the consideration of charitable tax status.73

The 1930 amendment to the Income War Tax Act established the regulatory limit on charitable deductions, but unlike the statutory definition of charitable purpose, it has undergone several modifications that were directly driven by budgetary tax changes introduced by the Department of Finance. Increases in deduction allowances were introduced in 1972, 1995, and 1996, to 20, 50, and 75 per cent respectively. The latter two increases corresponded to significant budget cuts to the voluntary sector which were designed to mitigate the political backlash from the funding cuts and foster voluntary sector independence from government grants by providing greater access by donor markets. For the same reason the deduction of public traded securities to charities in 2006 followed a massive cut in voluntary sector funding.74

It has only been since 2000 that the Charities Directorate of the Canada Revenue Agency has initiated any form of “soft” regulation, intermediary sanctions, and general charity education. Even now, charity education is restricted to meeting regulatory requirements rather than any general form of governance or operational guidance.75

The 1930 amendment to the Income War Tax Act is a critical event in voluntary sector/government relations in Canada. The statutory and regulatory mechanisms put in place on May 28, 1930, have been positively reinforced over time and consolidated and enhanced in 1967 with the development of the central registration and regulation of charities by the Canada Revenue Agency. The explicit desire by the federal government to balance support to charities and limit foregone revenue has been consistently maintained through both the registration and taxation processes.

Taxation and regulation issues raised by voluntary sector representatives during the Voluntary Sector Initiative in Canada in 2000-2005 were rebuffed, not just by the representatives of the Department of Finance, Treasury Board and the Canada Revenue Agency, but by more than seventy years of positive reinforcement for the statutory role first established by the federal government in the 1930 Amendment to the Income War Tax Act. In England the Charity Commission continues to enjoy the independence that was first set down by the Charitable Trusts Act 1853.

The regulatory regimes for charities in England and Canada both emerged under a general climate of economic and social upheaval, one in context of the industrial revolution, the other one hundred years later during the Great Depression. What history and the institutionalization of these two regulatory regimes for charities have demonstrated is that the origins of a regulatory regime lead to its positive reinforcement regardless of the extent to which external circumstances or its efficiency may change. Changes may take place at the periphery, and this has occurred in both Canada and England, but the core regulatory regime is likely to remain true to its origins. 


1 Peter R. Elson, Ph.D., pelson@mtroyal.ca, is Senior Research Associate in the Institute for Nonprofit Studies, Mount Royal University, Calgary, Alberta.

2 Boyle, F. K. (1997). "Charitable Activity" Under the Canadian Income Tax Act: Definitions, Processes and Problems. Retrieved August 10, 2009, from http://www.vsi-isbc.org/eng/regulations/reports.cfm; Drache, A. (1999). A Canadian Charity Tribunal: A Proposal for Reform. Ottawa: Non-Profit Research Initiative, Kahanoff Foundation. Drache, A. (2001). Hostage to History: The Canadian Struggle to Modernize the Meaning of Charity. Retrieved August 10, 2009, from http://www.drache.com/drache.cfm?view=articles.details&article=77&search=1. IMPACS, & Canadian Centre for Philanthropy (2002). Let Charities Speak: Report of the Charities and Advocacy Dialogue. Vancouver: IMPACS - Institute for Media, Policy, and Civil Society and Canadian Centre for Philanthropy. Panel on Accountability and Governance in the Voluntary Sector (1999). Building on Strength: Improving Governance and Accountability in Canada's Voluntary Sector. Ottawa: Voluntary Sector Roundtable. Aptowitzer, A. (2009) Bringing the Provinces Back In: Creating a Federated Canadian Charities Council. Toronto: C.D. Howe Institute.

3 Pierson, P. (2004). Politics in Time: History, Institutions, and Social Analysis. Princeton, NJ: Princeton University Press.

4 Charity Commission (2009). Charity Commission Consultations. Retrieved August 13, 2009, from http://www.charity-commission.gov.uk/enhancingcharities/consultations.asp. Charity Commission (2008). Charities and Public Benefit: The Charity Commission’s General Guidance on Public Benefit. London: Charity Commission. Fries, R. (2006). Charity Commission for England and Wales. International Journal of Not-For-Profit Law, 8(2), 7-16.

5 Andrew Armitage, “Canadian Social Welfare (1900 - 1988): Chronology,” in Social Welfare in Canada: Ideals, Realities and Future Paths (2nd edition) (Toronto: McLelland and Stewart, 1988). Samuel A. Martin, An Essential Grace: Funding Canada's Health Care, Education, Welfare, Religion and Culture (Toronto: McClelland and Stewart, 1985).

6 Allan Moscovitch,  & Glenn Drover, “Social Expenditures and the Welfare State: The Canadian Experience in Historical Perspective,” in A. Moscovitch & J. Albert, eds., The Benevolent State: The Growth of Welfare in Canada (Toronto: Garamond Press, 1987).

7 Dennis Guest, The History of Social Security in Canada. Retrieved May 15, 2006, from www.thecanadianencyclopedia.ca.

8 Ibid., p. 33.

9  Andrew Armitage, “Canadian Social Welfare (1900 - 1988): Chronology,” in Social Welfare in Canada: Ideals, Realities and Future Paths (2nd edition) (Toronto: McLelland and Stewart, 1988).

10 Janet Lautenschlager, Volunteering: A Traditional Canadian Value (Ottawa: Voluntary Action Program—Canadian Heritage, 1992).

11 Paula Maurutto, “Charity and Public Welfare in History: A Look at Ontario, 1830-1950,” The Philanthropist, vol. 19, no. 3 (2005), pp. 159-167.  Gale Wills, A Marriage of Convenience: Business and Social Work in Toronto 1918-1957 (Toronto: University of Toronto Press, 1995).

12 Gale Wills, A Marriage of Convenience: Business and Social Work in Toronto 1918-1957 (Toronto: University of Toronto Press, 1995).

13 Ibid, p. 65.

14 House of Commons Debates, 16th Parliament, 3rd Session, Vol. I, February 15 Session. (1929) pp. 166-167.

15  Jad Bitar, The Emergence of Centraide in the Greater Montreal Area: A Case of Radical Social Innovation (Montreal: HEC [École des hautes études commerciales], 2003).

16 Janet Lautenschlager, Volunteering: A Traditional Canadian Value (Ottawa: Voluntary Action Program: Canadian Heritage, 1992).

17 Canadian Council on Child and Family Welfare, “Proceedings of the Eleventh Annual Meeting: Canadian Council on Child and Family Welfare,” Child and Family Welfare, vol. VII, no. 1 (1930).  Library and Archives Canada , Canadian Council on Child and Family Welfare, MG26-K, M-3179, pp. 604959 - 604961, Correspondence to R. B. Bennett, Prime Minister, 1933. Richard B. Splane, 75 Years of Community Service to Canada: Canadian Council on Social Development, 1920-1995. (Ottawa:  Canadian Council on Social Development, 1996). Paula Maurutto, “Charity and Public Welfare in History: A Look at Ontario, 1830-1950,” The Philanthropist, vol. 19, no. 3 (2005), pp. 159-167.

18  House of Commons Debates, 16th Parliament, 4th Session, Vol. III, 1930, pp. 1677.

19 John D. McCamus, Report on the Law of Charities, vol. 1 (Toronto: Ontario Law Reform Commission (1996).

20 Rod Watson, “Charity and the Canadian Income Tax: An Erratic History,” The Philanthropist, vol. 5, no. 1 (1985), pp. 3-21.

21 Toronto Star,“The Income Tax Provisions” (editorial), (1930, May 2), p. 6

22 Thomas Wayling, “Dunning Uses Bible Tithe to Aid Canadian Churches,” Toronto Star, (1930, May 2) , p. 9.

23 Toronto Star, “No Tax on Philanthropy” (editorial), (1930, May 6), p. 6.

24 Woodworth was to become founder and leader of the Co-operative Commonwealth Federation, the precursor to the current New Democratic Party.

25 House of Commons Debates, 16th Parliament, 4th Session, Vol. III, Sess. 2513 - 2519 (1930).

26  Ibid., p. 2513.

27 Examples explicitly cited during the debate included: the Victorian Order of Nurses; Boys’ Welfare; Montreal Hygiene Committee; the Social Hygiene Council; the Anti-tuberculosis Association; the King’s Daughters; the Federated Charities of Montreal; the Child Welfare Association; the Family Welfare Association; the Children’s Aid Society; the social settlement of boys’ and girls’ clubs; and the Red Cross Society.

28 House of Commons Debates, 16th Parliament, 4th Session, Vol. III, Sess. 2513 - 2519 (1930).

29 Ibid.

30 Ibid.

31  House of Commons Debates, 16th Parliament, 4th Session, Vol. III, Sess. 2645 - 2651 (1930).

32 Ibid.

33 House of Commons Debates, 16th Parliament, 4th Session, Vol. III, Sess. 2714 - 2715 (1930), p. 2714.

34 Ibid., p. 2715 (emphasis added).

35 Ibid.

36 Canada Revenue Agency, “The Future of Charities in Canada,” (1998) retrieved June 8, 2006, from http://www.cra-arc.gc.ca/tax/charities/policy/ces/ces-004-e.html. House of Commons Debates, 16th Parliament, 4th Session, Vol. III, Sess. 2714 - 2715 (1930). John D. McCamus, Report on the Law of Charities, vol. 1 (Toronto: Ontario Law Reform Commission, 1996).

37 Harry H. Stikeman, Income War Tax Act and Excess Profits Tax Act 1940 (Canada) (Toronto: Richard De Boo Ltd., 1947), pp. 265. David Walden, D, “The Tax Credit System: Blessing or Burden?” Archivaria, vol. 18, (Summer 1984), pp. 84-90.

38 Revenue Canada Agency, IT-297R2, “Gifts in Kind to Charity and Others” (Ottawa: Canada Revenue Agency, 1990), retrieved May 3, 2007, from http://www.cra-arc.gc.ca/E/pub/tp/it297r2/it297r2-e.html. Harry H. Stikeman, Income War Tax Act and Excess Profits Tax Act 1940 (Canada) (Toronto: Richard De Boo Ltd., 1947).

39 Rod Watson, “Charity and the Canadian Income Tax: An Erratic History,” The Philanthropist, vol. 5, no. 1 (1985), pp. 3-21.

40 Janet Lautenschlager, Volunteering: A Traditional Canadian Value (Ottawa: Voluntary Action Program—Canadian Heritage, 1992).

41 Library and Archives Canada, Canadian Welfare Council, Vol. 18-21, p. 0604959, Charlotte Whitton to Rt. Hon. R.B. Bennett, September 11, 1933.

42 Andrew Armitage, “Canadian Social Welfare (1900 - 1988): Chronology”, in Social Welfare in Canada: Ideals, Realities and Future Paths (2nd edition) (Toronto: McLelland and Stewart, 1988).

43 Ibid.

44 Janet Lautenschlager, Volunteering: A Traditional Canadian Value (Ottawa: Voluntary Action Program—Canadian Heritage, 1992).

45 Fries, R. (2006). Charity Commission for England and Wales. International Journal of Not-For-Profit Law, 8(2), 7-16. O'Halloran, K., McGregor-Lowndes, M., & Simon, K. (2008). Charity Law & Social Policy: National and International Perspectives on the Functions of the Law Relating to Charities. New York: Springer.

46 Gilbert, M. (1922). The Work of Lord Brougham for Education in England. Unpublished Doctoral Thesis, University of Pennsylvania, Philadelphia.

47 For example, many universities and any cathedral or collegiate churches or religious schools that had an internal affairs auditor (also called a special visitor) were exempt.

48 Fingard, J. (1975). “The Relief of the Unemployed Poor in Saint John, Halifax, and St. John's, 1815-1860.” Acadiensis: Journal of the History of the Atlantic Region, 5(1), 32-53.

49 Thompson, R. (1979). The Charity Commission and the Age of Reform (Toronto: University of Toronto Press). Willson, F. M. G. (1958). The Parliamentary Charity Commissioner. Parliamentary Affairs: The Journal of the Hansard Society for Parliamentary Affairs, XII (1958-59), 180-198.

50 Thompson, R. (1979). The Charity Commission and the Age of Reform (Toronto: University of Toronto Press).

51 Ibid.

52 Ibid., 49.

53 The first commission was established in 1818 and focused on education charities. The second lasted from 1819 to 1830; the third from 1831 to 1834 and the fourth from 1835 to July 1837.

54 Ibid, 49.

55 Mitcheson, R. E. (1887). Charitable Trusts: The Jurisdiction of the Charity Commission, Being the Acts Conferring Such Jurisdiction, 1853-1883 (London: W. Maxwell and Son).

56 Ibid, 49.

57 Ibid, 49.

58 Ibid, 54.

59 Charitable Trusts Act, 1853, s24.

60 An exemption to this oversight existed for Roman Catholic charities until 1859.

61 Charities with annual incomes above thirty pounds.

62 Charitable Trusts Act, 1853, s. 22.

63 Ibid, 54.

64 Willson, F. M. G. (1958). The Parliamentary Charity Commissioner. Parliamentary Affairs: The Journal of the Hansard Society for Parliamentary Affairs, XII (1958-59), 180-198.

65 Ibid 54.

66 Ibid 54.

67 Ibid 54.

68 Nathan, L. (1950). Report of the Committee on the Law and Practice Relating to Charitable Trusts: Abstract [electronic source]. London: Charitable Trusts Committee, http://www.bopcris.ac.uk/bopall/ref9691.html, 6. P., & Leat, D. (1997). “Inventing the British Voluntary Sector by Committee: from Wolfenden to Deakin.” Non-Profit Studies, 1(2), 33-45.

69 Paul Pierson, “Not Just What, But When: Timing and Sequence in Political Processes,” Studies in American Political Development, vol. 14, no. 1 (2000), pp. 72-92.

70 Charity Commission (2008). Charity Commission Governance Framework, retrieved January 4, 2010, from http://www.charity-commission.gov.uk/tcc/govframe.asp#1.

71 Ibid.

72 This statement is contained in Charities Act 2006 (c. 50) Part 2 — Regulation of charities Chapter 1 — The Charity Commission.

73 A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency), [2007] 3 S.C.R. 217, 2007 SCC 42. Also see A. Parachin (2009). “Legal Privilege as a Defining Characteristic of Charity.” Canadian Business Law, vol. 48, no. 1, 36.

74 Hon. Jim Flaherty, The Budget Plan 2006 (Ottawa: Department of Finance, 2006), retrieved June 15, 2006, from http://www.fin.gc.ca/budget06/bp/bptoce.htm). Andy Levy-Ajzenkopf, “Surprise! Budget Cuts 2006,” Charity Village Cover Story (October 2, 2006), retrieved October 2, 2006 from www.charityvillage.com.

75 Elson, P. (2010, forthcoming). High Ideals and Noble Intentions: A New Understanding of Nonprofit and Voluntary Sector Relations in Canada (Toronto: University of Toronto Press).

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