Canadian politics are rarely dramatic. But in the last month, the country has been in a turmoil as finance minister Chrystia Freeland quit hours before she was scheduled to deliver an economic update, amping up the infighting in Canada’s governing Liberal Party and pushing Prime Minister Justin Trudeau to announce he will resign after a decade in power. The country is also roiling over the new American president’s proposed 25 percent tariff on Canadian goods and divided over how to respond to Donald Trump’s offhand suggestion that the United States should annex its northern neighbor.
Meanwhile, Canadian Christians were startled by another development: a formal recommendation that the governing party consider taking tax-exempt status away from churches.
The Standing Committee on Finance, which includes representatives from four of Canada’s parties, issued a report in December with 462 recommendations. Item 430 recommends Canada “amend the Income Tax Act to provide a definition of a charity which would remove the privileged status of ‘advancement of religion’ as a charitable purpose.”
In other words, churches should no longer be considered charities, and donations to churches should not be eligible for tax deductions.
“I was kind of surprised that the finance committee thought, Yeah, it’s a good idea. We should do that,” said Levi Minderhoud, policy analyst for the Association for Reformed Political Action Canada.
While Canada has seen a shift away from religious affiliation in recent years, 53 percent of people still identify as Christian, according to the last census. Canadian law is also rooted in British legal tradition, where churches have been classified as charitable organizations for hundreds of years. While tax-exempt status can be seen as a privilege given to Christians, it extends to other religious groups as well and is grounded in the recognition that the government’s authority is limited when it comes to spiritual things.
“The idea [is] that the state isn’t really in charge of the church, doesn’t tax the church in the same way that it gets to tax individual citizens,” Minderhoud said.
Some in the Liberal Party want that to change, though, and are apparently unconcerned with the long-established legal precedent.
Religious groups, including the Evangelical Fellowship of Canada (EFC) and the Canadian Centre for Christian Charities (CCCC), have written to the new finance minister, Dominic LeBlanc, to oppose the idea. LeBlanc, who replaced Freeland and has been seen as a possible replacement for Trudeau, declined to comment for this article.
The Conservative Party—looking ahead to the expected 2025 elections—is assuring religious groups that it will not take away their charitable status.
“The Conservative Party of Canada believes in the freedom of religion,” shadow finance minister Jasraj Singh Hallan told Christianity Today in an email. “We were the only party to oppose this measure. … So it becomes clear that we need an election to get a Common Sense Conservative government elected to protect religious freedom.”
The Conservative Party is currently leading in the polls by more than 20 points. Most observers think the Liberals will lose a no-confidence vote in Parliament in March and then the subsequent election. The proposal to change churches’ tax status isn’t likely to shift any votes in their direction—and they probably can’t move forward with the idea anyway.
“This is not a realistic political thing right now,” said Ray Pennings, executive vice president of Cardus, a nonpartisan Christian think tank based in Canada. “But it does speak to a cultural narrative that is being pushed by some in which the intrinsic value of religion is no longer understood as a public good.”
Some local governments have already made moves to tax churches. In 2018, Nova Scotia decided that parts of the property of about 20 churches across the province were not tax exempt because they provided childcare centers during the week. In 2022, Iqaluit, in the territory of Nunavut, decided nonprofits would no longer be exempt at all. The two churches in Iqaluit—one Catholic, one Anglican—were told they would need to pay the government $38,000 and $29,000 each year, respectively. Church leaders described that as a “crushing financial burden,” which would likely force them into delinquency.
If the churches are forced to close, that would have negative impacts on the community, according to Christians who live there.
“These churches are the forefront in helping the poor and the needy and those who are hurting,” Looee Arreak, an Inuit gospel singer, told the Canadian Broadcasting Corporation. “We see families that are in trauma, in shock, trying to fundraise for the funeral cost of a loved one that has [died by] suicide because of post traumatic stress disorder. If you’re going to tax the churches, at least put the [funeral] costs down.”
EFC public policy director Julia Beazley made a similar point in her letter to the finance minister.
Cardus has done a lot of research in recent years on the financial benefit, or “Halo Effect,” of churches and found that the average congregation’s positive socioeconomic impact in the community is more than ten times the value of tax exemptions and credits. Similar studies in the US have found that urban congregations contribute more than $1 million each to their local economies.
Paul Rowe, professor of political and international studies at Trinity Western University, a Christian university in British Columbia, said these churches are also filling needs that would otherwise fall on the government. In Vancouver near where he lives, for example, First United Church – Vancouver Downtown Eastside does a lot of work ministering to people who are homeless or struggling with addiction.
“You take away their charitable status, and they’re going to be completely dependent on some kind of government handouts,” he said.
Rowe said the proposal is unlikely to move forward, given the precarious position of the Liberals. But he doesn’t think the idea is going away.
He said taxing churches might cause a backlash on a national level now, but that doesn’t mean it wouldn’t be palatable in some regions. Quebec, for example, has more negative views toward religion than other parts of Canada.
And perhaps the proposal from the finance committee is a sign the idea is growing more popular. A poll in 2022 found that 37 percent of Canadians thought churches should keep their tax-exempt status, while 35 percent would approve of it being taken away. The rest had no opinion.
So even though the proposal doesn’t seem like it’s going to go anywhere, in the midst of the general political turmoil, religious groups say they are still alarmed.
“The Recommendations politicize charitable status … and set a dangerous and destabilizing precedent for the charitable sector,” Deina Warren, CCCC’s director of legal affairs, wrote to the finance minister. “The contributions and positive impacts of religion ought to be affirmed and fostered in a diverse, multicultural, multi-religious society such as Canada. This proposal does the exact opposite.”
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