Prevention vs. relief of poverty: Not a difference without a distinction in the eyes of the law



Global Publication July 2016

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 common law”).

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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