Charities reform: flexible sanctions and accessible appeals.

OTTAWA -- The federal government has introduced new tax rules governing charities, particularly in the area of sanctions for late or non filing of income tax information and in the amount charities are to spend on charitable services.

Those changes respond to three areas in particular, including

* a new compliance regime,

* a more accessible appeals regime, and

* improved transparency.

The changes will be completed by January 1, 2005 and the federal government will spend $12 million per year to implement the reforms.

The government said the changes it has introduced respond to the 75 recommendations to improve rules governing charities under the Income Tax Act presented by the Voluntary Sector Initiative's Joint Regulatory Table's 2003 report called Strengthening Canada's Charitable Sector: Regulatory Reform.

Included in the new or changed sanctions are provisions to sanction charities for minor infractions of the Tax Act through education of charitable organizations and their employees so that they understand the compliance rules. This will be coupled with the continued use of Ministry of National Revenue compliance agreements to help correct minor or inadvertent infractions. These compliance agreements will emphasize risk control, problem solving and compliance management.

A series of penalties will replace the current and only penalty, revocation of a charity's status. For instance, a charity that fails to file its annual information to the government will be subject to, as a first step, a $500 penalty. However, the Minister may use the revocation rule for more severe cases of non-compliance with the Tax Act.