The Muslim Association of Canada audit became symbolic of the systematic targeting of Islamic charities, writes Abdul Nakua, and the lack of widespread condemnation from the philanthropic sector raises troubling questions.
As news broke of the Quebec City mosque massacre on the evening of January 29, 2017, the reaction was swift and strong across the Muslim community, and indeed across the country. The next day, vigils were held near ground zero and in communities from coast to coast to coast. On that morning, the office of Premier Kathleen Wynne reached out to plan a visit to the Muslim Association of Canada’s (MAC) Masjid Toronto. While I was working out the details with the premier’s staff for the reception, just one floor up from where the premier would be speaking our executive director and other key executives of MAC were being interviewed by a Canada Revenue Agency (CRA) audit team. Despite the terror of the night before, the auditors were intent on starting interviews first thing that morning. As Wynne made her way to the podium to address the congregation, I watched members of the audit team quietly making their way out of the building. It seemed that no one among the audit team’s supervisors thought it was a bad idea to continue with the site visit and the interview at this moment of grief.
The response to the tragic Fort McMurray wildfires was markedly different. The audit team’s leader postponed planned May 2016 site visits to MAC chapters in Edmonton and Calgary out of respect for those affected by the fires. They were conducted months later.
These were some of the 30 MAC site visits across the country conducted by the CRA’s Review and Analysis Division (RAD) during a 13-month span starting in December 2015. During those visits, 27 interviews were conducted and 746 gigabytes of data extracted, including 181 gigabytes of email messages alone, comprising almost 500,000 emails. The audit included 63,523 files and more than one million financial transactions. Even with such voluminous documentation, it became clear to MAC that there were Islamophobic overtones governing the manner in which the audit was being conducted. This was evident in the types of questions being asked, the way data was collected, and how the site visits were managed.
Five years later, those fears crystalized in the CRA’s “administrative fairness letter” (AFL), a letter issued at the conclusion of the audit summarizing the major findings and evidence, which was issued on March 17, 2021. This 150-page document read much like right-wing extremist anti-Muslim writings. It asserted various allegations relying on flimsy conjectural evidence or no evidence at all. For instance, it used vague or suggestive words and qualifiers in more than 600 places across the document: it used the word “appear” 274 times, the word “may” 223 times, and the word “suggest” 69 times. It relied heavily on unreliable Islamophobic websites, blogs, and videos as well as newspaper articles that were later corrected. We were left bewildered. How could a federal agency such as CRA be blind to such egregious problems with sources and evidence? And how could a tax-related audit expand its mandate to endeavour to police not only the charity and its members but the Islamic faith itself?
There is presumption of guilt until the charity can prove that all of the allegations and suspicions raised are baseless.Terrance Carter, lawyer
Systemic racism within the CRA has now been well documented. Regardless, a charity like MAC must refute every allegation raised in an audit. As Terrance Carter, a leading lawyer in the area of Canadian charity and not-for-profit law, noted, there is presumption of guilt until the charity can prove that all of the allegations and suspicions raised by RAD are baseless. That is an impossible threshold for any charity to meet, he argues. After reviewing the audit process, Geoff Hall, a litigator at McCarthy Tétrault LLP, described the MAC audit as “a textbook example of prejudice and discrimination.”
The MAC audit was perhaps just the worst and latest in a litany of similar audits. It became symbolic for the systematic targeting of Muslim charities, a practice laid bare in meticulous legal arguments, shared by many experts in charitable law. Faisal Kutty and Faisal Bhabha reviewed this in a recent opinion piece published by The Philanthropist Journal. This was ultimately acknowledged by the government, as Prime Minister Justin Trudeau admitted in his remarks at the first national summit on Islamophobia that government agencies need to stop practices that “target” Muslims. More recently, it is laid out in stark detail in a Senate report, emphasizing the need to tackle its systemic nature.
Even with this mountain of evidence, Canadians shrugged. The reaction ranged from inaction to indifference, exposing just how deeply Islamophobia is entrenched in many segments of Canadian society. These audits drew no widespread condemnation and flew largely under the political radar.
There was also no widespread condemnation from the philanthropic sector itself – and that raises troubling questions.
The Muslim philanthropic sector in Canada grew over the past 60 years with the aim of supporting the spiritual, social, and cultural life of the young Muslim community by building social cohesion and addressing the unmet needs of community members. It has become an important part of the Canadian charitable sector. A 2018 survey estimated that Muslims led at least 359 charitable organizations. This heavy-handed approach by the CRA has had a huge impact on an otherwise thriving sector.
These audits . . . expose the power relationship between those in the centre and those at the margins of Canadian society.
These audits are a microcosm of how systemic racism permeates society and shapes the relationship between the privileged and the disadvantaged, or more broadly expose the power relationship between those in the centre and those at the margins of Canadian society. Structural biases affect all aspects of our lives, including our access to justice and due process. Therefore, understanding those relationships and addressing their impact on communities become increasingly important as Canadian society becomes more diverse and racialized.
We have watched this power polarity play out on the national stage. In 2012, the CRA targeted environmental, anti-poverty, and human rights charities with what were widely considered politicized audits. In stark contrast to the Muslim-charities audits, this sparked national debate and was correctly labelled as government abuse of power. Justin Trudeau, then the leader of the third party, described it as “tax audit harassment” and a “witch hunt” against critics of the government. He identified political-activities reform for charities as a top priority of his government if elected, promising to “modernize the rules” so charities could do their work “free from political harassment.”
There was no such uproar or support for the Muslim-led charities dealing with similar government overreach. There was also little attention paid to this by the charitable sector. With the exception of a single statement issued in 2023, following an inconclusive review report by the Taxpayers’ Ombudsperson regarding the RAD audits, there was little in the public record for the sector leaders pressuring the government to address this issue.
A call for an immediate moratorium on these audits pending a comprehensive review was ignored by the government and did not get any traction from opposition leaders. Such a call did not even win a clear endorsement from the charitable sector. In contrast, the government did not hesitate to halt the CRA’s audits of the environmental charities.
A call for an immediate moratorium on these audits did not even win a clear endorsement from the charitable sector.
Both Canada Without Poverty and MAC decided they could no longer challenge unfair audits through an ineffective federal judicial-appeals regime. Instead, they both took a momentous decision and brought their challenges to Ontario’s Superior Court of Justice, arguing that since audits are state action, they must be subject to Canada’s Charter of Rights and Freedoms. Canada Without Poverty filed notice arguing that the Income Tax Act violated Section 2 of Canada’s Charter of Rights and Freedoms. Likewise, MAC asserted that its RAD audit in its entirety – from the selection process, to the administration of the audit and its preliminary findings – had been irreparably tainted by Charter violations of sections 2(a) (freedom of religion), 2(b) (freedom of expression), 2(d) (freedom of association), and 15 (equality).
The MAC legal team made, in my opinion, a strong case that MAC’s basic rights had been infringed. In hearings before Justice Markus Koehnen, MAC counsel summed up its case against the CRA with a damning analogy: “Imagine if a Black charity was selected based on KKK statements and the CRA relied on work from David Duke, an American radical right, neo-Nazi, and long-time Klan leader to support its audit findings.”
After many months of reviewing the massive body of legal submissions, Justice Koehnen finally delivered his ruling on the MAC challenge. While recognizing the differential and biased treatment that MAC endured during the CRA audit, he allowed the CRA to continue to conduct the audit despite prejudiced practices and bias. He raised concerns about the fact that the CRA did not maintain a focused examination on terrorism financing and that the audit’s direction strayed into areas unrelated to its stated purpose. He identified areas where the CRA treated MAC differently than charities led by other religious communities, casting doubt on whether the CRA would sanction Christian or Jewish charities in the same way. Koehnen also challenged the rigid conception of religious activities by the CRA, stating that the social aspect is an integral aspect of religious observance, in order to foster a sense of community. Further, he recognized that promotion of religion goes beyond just religious doctrine.
When the state overreaches and the rights of Canadians are infringed, timely intervention is not just an option, it’s an obligation.Geoff Hall, lawyer
Despite all these findings, Koehnen ultimately chose to consider the case from the narrow prism of administrative law rather than rule it a Charter violation. He used the “prematurity principle” as a legal pretext to refuse to rule on the merits of the case. Oddly, these overreaches, in his assessment, did not rise to the level that forces the court to intervene. MAC’s lead counsel, Geoff Hall, said the ruling was “not only legally wrong but also departs from the courts’ long-standing commitment to safeguarding the rights of all Canadians. When the state overreaches and the rights of Canadians are infringed, timely intervention is not just an option, it’s an obligation.”
Systemic Islamophobia within the federal government’s agencies and regulatory bodies is the result of legislation and directives. The Senate committee concluded that such “laws, policies and practices continue to systemically disadvantage Muslims.” It acknowledged the policies’ “profound and lasting effects on Muslim communities.”
Courts are supposed to be the last resort to address the pernicious effects of such prejudice and bias. If the courts refrain from addressing any suspect discriminatory practices, such practices are normalized. Such normalization will further marginalize disadvantaged communities.
In the case of Canada Without Poverty, Justice Ed Morgan, in a bold decision, struck down subsection 149-1(6.2) of the Income Tax Act, declaring that restrictions on charities’ public policy dialogue and development in the act are contrary to the Charter and therefore of no force and effect. He ruled that the restrictions on political activities infringed on charities’ freedom of expression.
The sector was jubilant about the Morgan ruling and successfully mounted a campaign to dissuade the government from appealing. In a rare win for the sector, the government later announced that it would amend the Income Tax Act to conform with Justice Morgan’s decision.
The reaction to the audits and the Charter challenges show those of us on the margin that the sector leaders in the centre view some parts of the sector as more equal than others.
In contrast, there was little reaction to Justice Koehnen’s ruling on MAC’s Charter challenge case, let alone any attempt to analyze its impact on the sector. Indeed, the sector is expected to challenge any form of systemic bias on a matter of principle, especially in an increasingly diverse society. The sector should be guided by the premise that the whole is much greater than the sum of the parts. The reaction to the two sets of CRA audits and the two Charter challenge cases show those of us on the margin that, based on word and deed, the sector leaders in the centre view some parts of the sector as more equal than others.
Regulatory regimes will ultimately earn their legitimacy by how much trust the regulated have in them. Both the environmental-charities and the Muslim-led-charities audits have exposed flaws within Canada’s charity regulatory system. The current statutory and regulatory mechanisms were established back in 1930 through an amendment of the Income Tax Act. This was further consolidated in 1967 with the development of the central registration and regulation of charities by the CRA. However, this regulatory regime was criticized in several high-profile reports, most notably the Broadbent Report in 1999, which concluded that the current system is untenable and recommended major change. Adding to these deficiencies, there remains a lack of robust judicial review of regulatory decisions that are accessible for charities to challenge CRA audit decisions. This is evident in the fact that the government has not lost a single case in the Federal Court of Appeal for the past 50 years. But despite many calls for reform, successive governments have resisted such demands.
As recently as 2021, the report by the Advisory Committee on the Charitable Sector proposed some remedies to improve the current system. Unfortunately, there is no political will or leadership to pursue such an undertaking, especially within the current fractured political environment.
With the passage of time, it has become increasingly evident that the current regulatory system is old, rigid, ineffective, and, most importantly, flawed. Future reform needs to address the systemic bias inherent in the regulatory regime that allocates the preponderance of power to the federal government. A modernized regulatory framework similar to that of the UK or Australia would be the best way forward. Within such a framework, the CRA’s role would be confined to assessing charities’ eligibility for tax exemptions, but all other functions would be managed by a new Charity Commission which should be equipped with a robust judicial review process that is more accessible, equitable, and affordable for organizations. The sector should also champion two legislative reforms that have been the subject of advocacy for decades. The first is to assign jurisdiction of charity appeals to the Tax Court of Canada for a de novo hearing. The second would be to modernize the definition of “charity.”
Systemic biases and structural racism are complex phenomena with a costly price tag disproportionately paid for by the margins, which is the result of a power imbalance that favours the centre at the expense of the margins. As Michel Ralph Troullot has observed, the ultimate mark of power is its invisibility, and the ultimate challenge is the exposing of its roots.
The recently released Senate report concludes that Islamophobia is present in many of our institutions and remains an uncomfortable fact for many Canadians.
Within Canada, the roots of this imbalance can be traced to the way in which multiculturalism is perceived. Will Kymlicka, the Canada Research Chair in Political Philosophy at Queen’s University, has noted that multiculturalism was conceived within the prevailing power structures of 1971 and consequently ended up reproducing many of the same hierarchies and exclusions of that era. Daniel Meister, in his book The Racial Mosaic, traces the roots of racism within Canadian society and concludes that Canada’s struggle with discrimination and racism, both historical and contemporary, is hidden from sight. He argues that multiculturalism policy was more effective in combating racism and prejudice faced by European minority groups but was simultaneously racist toward people racialized as non-white. Consequently, it shifted the centre–margin hierarchies from anglophone–European to white–non-white. The recently released Senate report echoes this point. It concludes that Islamophobia is present in many of our institutions and remains an uncomfortable fact for many Canadians.
To address this imbalance, multiculturalism must be reimagined within a decolonization framework to address systemic racism such as anti-Indigenous racism, anti-Black racism, and Islamophobia. It should be configured to delineate the contours of power and privilege and address the imbalance therein between the centre and the margins, and thus enable the nurturing of a dynamic culture that reflects the lives, histories, and identities of all Canadians.
Big shifts like these can not be fulfilled without government leadership. The charitable and non-profit sector has an opportunity to lead the way for such transformation. It can gather its collective voice and advocate for more social and economic equality in society. To many, this may seem a mission impossible for a sector struggling to be heard. To the optimists, it is worth the effort.
Clarification, February 2, 2024: The first paragraph of this op-ed has been altered. The sentence “No one among the audit team’s supervisors thought it was a bad idea to continue with the site visit and the interview at this moment of grief” was changed to read “It seemed that no one among the audit team’s supervisors thought it was a bad idea to continue with the site visit and the interview at this moment of grief.”