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It’s Budget Day. Will the government take the opportunity to rebuild our confidence in the political process?

Every year, the government proposes changes to the Income Tax Act. And these changes are implemented immediately and retroactively – even though they aren’t law yet.

This works when we trust the government to make the proposals law soon.

But often the government don’t act quickly. And in the case of one major change that impacts the charity sector – split-receipting – it’s been seven years.

It means taxpayers spend considerable time and money complying with rules that might never become law.

Seven years of waiting. That starts to put a lot of strain on our trust in government.

Read the whole story, by Kathryn Chan, in The Mark.

On December 16, 2009, the highest secular court in the United Kingdom decided that the definition of Jew applied by the highest religious Jewish Court is a racial or ethnic definition rather than a religious definition. This decision lays bare a fundamental difference between the Christian and Jewish concept of “religion,” which could lead ultimately to Jewish synagogues losing their status of being a qualifying religion for purposes of charity law. If these two religions, which share the same Holy Scriptures and religious patriarchs, were to be treated differently in charity law in the future, it would have profound implications for the social fabric of a country which prides itself on pluralism and tolerance. It would create a rift with the Christian, Muslim and other religious communities, given that they will maintain their charitable status.

None of the three secular courts that were asked to determine whether the admission policies of the Jews’ Free School in London are discriminatory wanted to rule on a religious issue. All three secular courts went out of their way to accept the definition of being a Jew utilized by the Orthodox Jewish religious courts without criticizing them on moral grounds or seeking to challenge them in any way. There is no basis for criticizing secular courts for ruling on religious issues when they are forced to do so by Jews choosing to litigate in a secular court when they are not satisfied with the remedies or answers in their own religious courts.

The litigation began because a student was denied acceptance to Jews’ Free School, now legally known as JFS, because his mother was not recognized as a Jew by the definition of the Orthodox Jewish Court, London Beth Din. JFS began in 1732 as the Talmud Torah of the Great Synagogue of London and is one of the most sought after state secondary schools in Great Britain. The issue is whether the definition of Jew applied by the Office of the Chief Rabbi (the OCR) was a religious test as opposed to a racial or ethnic test. The primary test was whether the person was a matrilineal descendant of an Orthodox Jew.

Mr. Justice Munby, in the first court to hear the case, held that it was a religious test. He substantially applied an “if it’s OK for Christians, it’s OK for Jews” analysis. He said that if Muslim and Roman Catholic schools can set out their own religious definition of a Muslim or Roman Catholic for purposes of determining who can attend their religious schools, then Jews should be able to do so also. The Court of Appeal and the Supreme Court both said that Justice Munby had missed the point. Jewish schools could set their own definition; but had chosen a definition which was fundamentally racial or ethnic rather than religious.

Probably unintentionally, Lord Phillips, President of the Supreme Court, used words which echo the most significant charity law decision in English history, Pemsel, which set out the advancement of religion as a charitable purpose, saying: “The gentile in the street would not identify such a person as a Jew. Equally, he would not identify such a person as a member of the Jewish religion. Membership of a religion or faith normally indicates some degree of conscious affiliation with the religion or faith on the part of the member.”

The problem for the law of charity is that the Orthodox definition of whether a person is Jewish has no religious component. The common law of charity has always required the belief in God or a supreme being. There is nothing in the common law of charity which recognizes as a religion a belief system which defines its members by virtue of a person’s matrilineal relationship with another human being. Worship or veneration has always been integral to the common law concept of religion. The Charities Commission guidance on the characteristics of a religion says that “the belief system involves a relationship between the believer and the supreme being or entity by showing worship of, reverence for or veneration of the supreme being or entity.”

The law of charity with regard to religion was undoubtedly informed by a Christian understanding of religion. Fundamental to this understanding is the personal faith of the individual and not the religious heritage or beliefs of his or her parents. The Charity Commission and the secular courts accept Judaism as a religion. They accept synagogues as charitable institutions substantially because they accept churches and mosques as charities. If they were forced to make the same hard academic analysis as applied by the Supreme Court to the question whether being a Jew required an individual to believe in God and personally worship that God, they may reluctantly come to the consequent decision that Judaism is not a religion under the strict requirements of charity law.

If synagogues were to lose their charity status, they would lose all the resulting tax benefits and would receive far fewer charitable donations. This would have a negative knock-on effect in society, because it would affect the public good done outside of the synagogue in the community-at-large.

Published in Offshore Investment Magazine, this article written by Blake Bromley looks at the massive increase in domestic charitable giving in China after the 2008 Sichuan earthquake disaster. It also reviews Blake’s involvement in advising the officials of the Ministry of Civil Affairs responsible for drafting the proposed Charities Act. It deals with some of the reasons Charity Law in a Communist society with a developing market economy should be conceptually different than that in a Capitalist society.

Here is an excerpt. To read more, please download this paper.

The Chinese consider 2008 a watershed year for the evolution of philanthropy. No one had expected the magnitude of financial generosity generated by the Beichuan earthquake. There is no doubt that the outpouring of donations had significant social and political impact. One of the priorities prior to enacting the full charity law will be amendments to the Public Benefit Donations Law of 1999. There were also five million people who directly or indirectly volunteered after the Beichuan earthquake. There was also a quantum leap in the amount of volunteerism which was inspired by the 2008 Olympics in Beijing. Consequently, priority will also be given to a new Regulation for Volunteers.

Tax incentives for charitable giving are generally restricted to domestic charities. There is a growing interest in locating charities in offshore tax havens. The reasons to select an offshore jurisdiction relate to accumulating capital, controlling corporations, and carrying on businesses with charitable funds. This paper, entitled Reasons to use Charities in the Offshore World and presented by Blake Bromley at the 19th Oxford Offshore Symposium held from September 6-12, 2009, suggests that if going offshore to a jurisdiction with low tax rates it is often better to keep the funds outside of the restrictions of charity law so as to enable greater flexibility and innovation.

Here is an excerpt. To read more, please download this paper.

The reality is that almost all tax incentives for donating to charity are limited to onshore charities. There are some exceptions to this in specific tax treaties such as the Canada – United States Income Tax Convention. It is also possible that the European Community may come to provide tax incentives for cross-border philanthropic giving. However, these exceptions seldom change the reality that people who can assuage their tax rage by donating to charity are not likely to go to the expense and complication of moving their wealth offshore into a jurisdiction which does not appeal to them as their permanent domicile and residence. In my experience the wife is apt to veto offshore tax planning found so alluring by the husband because of very practical family non-tax considerations.

At the Vancouver Club on November 24, 2009, Blake Bromley responded to a discussion paper by Canadian think tank Cardus. The report, entitled A Canadian Culture of Generosity: Renewing Canada’s Social Architecture by Investing in the Civic Core and the “Third Sector,” examines a “strategic response to flagging volunteerism, philanthropy and civic participation.” Blake’s response is below. A video was also made of the event and it can be viewed here.

I want to begin by thanking Cardus for their invitation to respond to the discussion paper A Canadian Culture of Generosity: Renewing Canada’s Social Architecture by Investing in the Civic Core and the “Third Sector”. I have registered over 650 charitable foundations and organizations over the past 30 years. For the 15 years prior to the current economic downturn I advised on charitable donations amounting to at least $100 million each year. Consequently I have witnessed the cultural, religious and economic values of those whom the paper identifies as “primary core” donors at very close range.

This paper identifies a growing “civic deficit” in Canada. In my opinion, the primary core donors do not suffer from a deficit of care. Instead they suffer from a deficit of confidence in charities. Charities measure their success by the quantum of donations whereas donors assess quality of services. It troubles me that this paper has not dedicated one sentence to the need for charities to be accountable in terms of efficiency and productivity. If Canada is to truly foster a vastly increased level of civic engagement, charities must begin by justifying the effectiveness of their utilization of the funds contributed to them by both private donors and governments.

It also troubles me that the paper focuses almost entirely on the charitable sector in seeking to improve Canada’s social architecture. Charities are the most restricted and circumscribed instrument for social change.  The law of charity as applied by Canada Revenue Agency (CRA) is entirely hostile to innovation and creativity when addressing social problems. The societal values which shape the law of charity are the attitudes towards the poor of Victorian England. If you want to understand the policy values which inform the law of charity you should read Charles Dickens, preferably beginning with Oliver Twist.

Consider what the law of charity has to offer Canadians concerned about homelessness. It you want to work with absolutely the worst drug addicts in the downtown Eastside, the law of charity will fully support your endeavors. My wife manages a residential program in the downtown Eastside for persons suffering from chronic intractable schizophrenia. Our dinner conversations about the terrible needs of her residents frequently turn into an even more depressing conversation about how dysfunctional the charity world can be and how charitable resources are spent. While charities always call for additional resources, they are less diligent in addressing the problems which arise over the decades as compassion and a diminishing lack of focus on their core mission leads them to take on an ever increasing range of services which are outside their expertise.

However, if you believe that the homeless problem would be better addressed by providing apartments for those who have just recently experienced the loss of their job, their first psychiatric episodes, or a divorce, the law of charity will be of no assistance. Charities can build ghettoized accommodation for the destitute; but cannot adopt a progressive policy of having mixed income social housing. It is for reasons such as this that Benefic today challenges clients to consider alternatives to funding charities. In recent years I have counseled against donations worth hundreds of millions of dollars. While the tax incentive for giving to charity is alluring and seductive, the consequent limitations on a charity’s ability to be innovative and progressive in addressing social problems means that it is sometimes, but not always, better to pursue other legal and tax instruments available for civic participation. Foremost among these is a nonprofit organization. I am the process of structuring a series of transactions which will divert to a single nonprofit more than $100 million which the family intended to give to the private foundation I registered for them a decade ago.

Another limiting aspect of the law of charity is that it forbids advocacy and other political activities. Consequently, a charity cannot lobby government to allow it to expand its programs to include progressive mixed income social housing. Most Canadians are aware that charities are precluded from political activities. When lamenting the decline in civic engagement, it would be interesting to research the extent to which lower political participation results from the fact that young Canadians often start their civic engagement within a charity, where active involvement in the political process is forbidden.

In the past half-century there have been only three cases in Canada in which the courts have expanded or modernized the definition of charity. The first case affirmed the charitable nature of a First Nations radio service; but has since been interpreted as applicable solely to First Nations so is of no value in moving the law forward. The most significant movement of the law was the case in which the court determined that providing abortion services is charitable in Canada. The most recent favourable decision was in 1996 and decided that an analogy could be drawn between the word “highway” in the Preamble to the Statute of Charitable Uses of 1601 and the “Internet Highway” of the modern age. The paper refers to the Voluntary Sector Initiative launched in 2000 without mentioning that it squandered nearly 100 million taxpayer dollars without bringing an iota of change to the legal concept of charity. It is difficult for me to recommend to Canadians as the primary vehicle for our civic core a sector which in the past four decades has lost every legal challenge to the status quo except these three cases.

Two years ago Geoff Cowper and I appeared before the Supreme Court of Canada to argue that the concept of charity should be expanded to include amateur sports. The government argued that CRA registered any organization which utilized sport as a means of carrying on a charitable purpose and therefore amateur sport per se should not be charitable because it would be too expensive for the national treasury. The Supreme Court said that it could only allow incremental change to the law of charity and that this was too great an expansion without going to Parliament. As a consequence of this decision, today CRA is moving to annul or revoke the charitable registration of Christian camps all across Canada on the basis that they are being operated for the collateral purpose of promoting sport under the guise of advancing religion. Caledon Teen Ranch in Ontario announced publicly that CRA said it would annul its registration on November 13. Solicitor client privilege prevents me from naming Christian camps which my children have attended which have been issued Administrative Fairness Letters from CRA stating that their registration should be revoked because, in the judgment of the government, too many hours in the camping day were spent having fun instead of being spent in chapel advancing religion.

The paper proposes increasing the charitable tax credit. My intellectual difficulty in supporting this proposal is that more than two decades ago when the charitable establishment in Canada proposed removing the tax deduction for charitable donations from individuals and replacing it with a tax credit, I appeared in front of the Finance Committee of the House of Commons and opposed it on a philosophical basis. A deduction simply removes from the donor tax which he would otherwise pay on donated income or property.  A tax credit shifts the policy focus to the question of whether any other donor has a lesser cost in making a comparable donation. The case for tax credits in 1988 was simply that rich guys have higher personal marginal tax rates and therefore each dollar they donate costs them less on an after-tax basis than a poor guy. The appendix to this paper extends that rationale to say that a donor of appreciated public securities with a low cost base receives greater tax benefits than a person who donates cash. Consequently, the proposal asks that the tax credit for donations of cash be increased to equal that provided to donations of shares.

This proposal is entirely consistent with the economic and political rationale of the donation tax credit. My concern is that it is yet another step towards defining the culture of generosity on the basis of the tax benefit to the donor rather than on the merits of the social program being funded. It is not healthy for the integrity of Canada’s civic culture for every charitable appeal to increase the emphasis on the tax benefits to the donor.  The greater the emphasis on tax incentives, the more people look to the charitable sector as a place to design and perpetrate tax scams.  The paper states charitable gifts were up slightly in 2007 to nearly $10 billion. This can only be considered positive because the paper does not disclose that CRA denied well over $2.5 billion in claimed donations for tax-sheltered gifting arrangements. It is important when assessing the health of Canada’s civic core to understand the difference between the quantum of donations claimed for purposes of tax credits and the quantum of funds which are actually received by charities and available to be employed in carrying on charitable activities.

The paper emphasizes that an increasing percentage of donations come from a decreasing number of donors. The paper does not point out that many million dollar donations are tied up in endowments at the request of charities. The consequence is that the capital gift appears in the donation statistics in the year of the donation but only 3.5 percent dribbles down to charities for program expenses in subsequent years.

I regret that I have not been more positive in my response to this paper. As a Canadian deeply concerned about our civic culture, I give a great deal of thought to contemporary problems such as homelessness. There is general agreement that a high preponderance of the homeless people in Vancouver suffer from significant mental health problems. There is also general consensus that the government closing mental health facilities such as Riverview Hospital is a material cause of so many of them being on the street today. By design, governments have been increasingly downloading social problems onto charities and by default, charities, lacking adequate resources, have been downloading social problems onto the streets.

My worry is that I am complicit in this increasing social tragedy because I, as a professional who has incorporated over 400 charitable foundations, have made it easy for governments to believe that registered charities are the primary solutions to problems in our civic culture. Increasing the culture of giving is viewed as the solution rather than changing government policies. I have dedicated three decades of my life to increasing the culture and tax efficiency of charitable giving.  However, when I ponder the trendlines in the evolution of the charitable sector, or read a paper such as this, I worry that increasing charitable giving without releasing charities to innovate, advocate and develop sustainable sources of non-donation income is contributing to the problem rather than the solution.

The good news is that I am substantially alone in holding these views. The charitable establishment dismissed my views on tax credits in 1988 and will continue to do so today. I am very confident that the majority of the charity establishment will support this paper. I am less confident that it will be as compelling to “primary core” donors.

Theological schisms inevitably lead to disputes as to who owns church properties. When King Henry VIII had his great schism with the Pope in Rome and established the Church of England, he had Parliament pass legislation in 1536 to dissolve the monasteries and appropriate the chantry endowments. Subsequently, dissenters not controlling Parliament have seldom found the courts willing to allow them to take church property after a schism.

The most recent schismatic church group to lose the battle to take church property from the established diocese and bishop is St. John’s Shaughnessy Anglican church. On November 25, 2009, Kelleher J. of the Supreme Court of British Columbia held that “possession and control of the properties held by the parish corporations must be exercised in accordance with the Act and the Constitution, Canons, Rules and Regulations of the Diocese”. In doing so, the Canadian court adopted the “neutral principles of law” approach developed in the United States which looks to the governance structure of the church at issue. Applying the rules of the Anglican Church of Canada to the property dispute, Bishop Michael Ingham and the Anglican Synod of the Diocese of New Westminster were handed a clear victory.

While the Vancouver case was being argued before the court, the England and Wales High Court (Chancery Division) handed down a decision which came to the same result without reference to American law. In England, the property in dispute was the Russian Orthodox Cathedral in London. The parishioners rejected the leadership of Alexis II, the Patriarch of Moscow and All Russia, and sought to come under the ecclesiastical authority of the Patriarch of Constantinople, the leader responsible for the Orthodox Church following the Great Schism of 1054, which divided the Roman and Orthodox churches. This historical link made the parishioners’ claim much more legitimate than that of the Vancouver parishes, which asserted that they should come under the ecclesiastical authority of the Primate of the Southern Cone that encompasses Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay. However, the English court sided with the authority of the ecclesiastical oversight in Moscow that was in place when the Cathedral came under the control of the Orthodox Church.

In London, there was an actual trust deed with explicit terms to be interpreted by the court. The London claimants did not attempt to base their claim in cy près, an obscure legal doctrine that allows courts to alter impossible or impracticable charitable trusts. The Vancouver claimants sought to imply a trust and then argue cy près in spite of having no written express trust. If the English decision had been argued in the Vancouver case, it is likely that Kelleher J. would have been even more resolute in his decision.

The Anglican Church faces a further threat to its properties, particularly in England, as a consequence of the invitation of the Pope to Anglican priests to bring their entire congregation into communion with the Roman Catholic Church. As more Anglo-Catholic parishes take advantage of this Ordinariate facility, more will want to keep their church buildings. The Bishop of Southwark recently sought legal advice on the implications there might be for the diocese and its parishes if any priest or group of lay people wished to become Roman Catholics. In his presidential address to his diocesan synod, he publicly stated that “No Priest or group of laity has the right to take church property with them when they change denominations, for a Diocese holds such property in trust for the mission and ministry of the Church of England to all the people of its parishes and this duty of care would continue.”

This language sounds similar to the implied trust argued by St. John’s as the basis for the property held by the parish. The Bishop of Southwark made it clear that his legal advice is that such a transfer could “only be done with the goodwill of the diocese”. The goodwill of his diocese is not likely to extend to giving up church properties to parishioners wanting to pursue a different theology any more than the Diocese of New Westminster was willing to give up St. John’s.

Property disputes following church schisms raise many issues other than property rights. As a former parishioner of St. John’s Shaughnessy for 20 years, I have followed this dispute closely since leaving the parish. I am supportive of both the court’s legal analysis of the issues and its decision. Having met Alexis II twice when I was advising the Russian government on drafting the law of charity in the early 1990’s, I have concerns about the extent to which the KGB influences the Patriarchate of Moscow and All Russia which led me to be more supportive of the parishioners of the Russian Orthodox Cathedral in London. However, there is little doubt in my mind that the law in Canada, England and the United States is on the side of the established ecclesiastical hierarchy when it comes to the issue as to who owns church property following a schism.

I arrived in Beijing on October 27, 2009 to speak at the International Conference on the Social Mobilization Mechanism For Catastrophic Disasters and the Formulation of Emergency Laws and Regulations when the press announced the funding of largest-ever private foundation in China. The conference, sponsored by the Ministry of Civil Affairs, was initiated to help China formulate responses to disasters such as the Wenchuan Earthquake that occurred on May 12, 2008 in Sichuan. I was invited to speak because of my ongoing work with the drafting committee of the law of charity in China.

Charity circles and government officials were abuzz with the news that Chen Fashu donated $1.2 billion to his new charitable foundation, called Xinhuadu Philanthropic Foundation. Reportedly having a personal fortune of about  $3.7 billion, Chen Fashu is regarded as the 15th richest man in China. Given my experience with private foundations in Canada, I was grilled about the possible tax and business motivations for this donation by a senior government official whom I had known for years.

Because China does not assess capital gains or other taxes on the disposition of shares and does not provide a tax deduction for donations to a charitable foundation, there seems to be no tax motivation for such a gift. Worse, once the funds are contributed to the foundation, the income generated continues to be taxed as it would be if it were in a taxable corporation. In spite of receiving none of the fiscal benefits that would result from such a donation in Canada, there is a great deal of skeptical speculation about Chen Fashu’s motivations in making this gift.

The stunningly ironic aspect of this conversation was its location. My cynical inquisitor was hosting me in a private dining room at the extravagant Beijing Hong Kong Jockey Club Clubhouse that was built as a quid pro quo for Beijing to allow the equestrian events of the 2008 Olympics to be held in Hong Kong. My host had told me that as a high government official, it was prudent for him not to be a member. However, he nonetheless had the connections to entertain me in the Club.

At a private dinner hosted by officials of the Ministry of Civil Affairs the following evening, I sought confirmation that Chen Fashu’s private foundation had actually been registered. Although I have worked with these people on China’s proposed charity law for years, they were unwilling to confirm or deny the status of the Xinhuadu Philanthropic Foundation. I will follow the evolution of this major new player in the private foundation world in China and report on it in the future.

I have just returned from Beijing again, where I spoke at the International Conference on the Social Mobilization Mechanism For Catastrophic Disasters and the Formulation of Emergency Laws and Regulations. China brought 120 people together from 30 countries to talk about the improving responses to natural disasters after the earthquake in Sichuan last year. With so many typhoons, floods, earthquakes and tsunamis in Asia recently, the majority of participants were government officials.

The paper I presented at the conference dealt with Canada’s Emergencies Act and emphasized that government responses even to emergencies were subject to the Charter of Rights and Freedoms. Since I have significant experience with fundraising, I focused on the Matching Fund Mechanism developed by the Canadian International Development Agency (CIDA) to encourage donations to eligible charities for a few weeks following some of the most prominent disasters by providing matching funds. With the double incentive of a personal tax credit for donation and matching funds provided to the recipient charities, Canadians donated $213 million to 23 eligible charities during a 17-day period after the Indian Ocean tsunami of Christmas 2004.

However, my formal presentation was overshadowed by my responses in the question period. I pointed out that individuals acting outside formal charity channels were also important conduits for responses to disasters. This is particularly true among the expatriates of the countries in which the disasters take place. However, even in domestic giving, more and more people are giving to organizations that are perceived as being the most effective, even if they are not registered charities. When a person weighs the tax benefits of giving to a charity against the overheads that many charities incur, many people are choosing to give to informal social organizations that do not have registered charity status.

I told the conference that a few weeks earlier, the television in my barbershop was tuned to the BBC covering the devastation triggered by days of intense rain from Typhoon Parma. My Filipino barber was from the area. After my haircut, I went to my bank machine and got $800 to give to my barber to send to people he knew in the Philippines who were suffering as a result of the disaster. Even though I personally had spent a year in the Philippines working for an international relief organization 30 years ago and have been almost exclusively engaged in doing legal work with charities since then, I chose to respond to this natural disaster by donating through an informal channel that could not offer a donation tax receipt.

The following week, my barber showed me Western Union records to prove he had wired the money and asked for my fax number. The day before I left for Beijing my staff brought me a fax they thought was junk mail because it had many people’s names on it and had no letterhead. On closer examination, I realized that it was a list of Filipino people who had each received 1,000 pesos from my $800 donation and were writing to thank me. That fax was evidence that my informal donation had immediately reached real people who had suffered from Typhoon Parma.

On my recent trip to Hanoi, I was privileged to have the General Secretary of Vietnam’s Peace Committee spend two days hosting me on a visit to Vietnam’s magnificent World Heritage Site, Ha Long Bay. We had about 18 hours of frank and intense conversation during which I learned a great deal. My host served as Vietnam’s first Ambassador to Brazil and so is very familiar the concept of what he termed “21st Century Socialism,” which is evolving under President Lula of Brazil and Hugo Chavez of Venezuela. I had an illuminating personal tutorial not only on the drive out but also over a long lunch in a junk as we explored this beautiful bay.

“21st Century Socialism” is a political strategy which follows Marxism and incorporates some Leninism as well as some of Ho Chi Minh’s ideology. However, it repudiate Trotskyism, Stalinism and Maoism. This is a socialism strategy which recognizes the advantages of achieving power through elections rather than revolutions. This distinguishes it from the experiences in China and Vietnam. However, without a revolution to overthrow the “old order,” ways must be developed to co-opt the democratic political process and entrench a new ideology into a hostile bureaucracy. Just as Republican politicians beginning a new administration in the United States believe the inherited bureaucracy is riddled with their ideological enemies, so 21st Century Socialists believe bureaucrats appointed by previous governments are intent on sabotaging their agenda. However, it would seem that Chavez and Lula are developing much more sophisticated para-government mechanisms to address this issue than we have in Canada.

Unlike the ideology of change through revolution and coup d’etats, “21st Century Socialism” recognizes the need to accommodate people’s environmental, religious and cultural beliefs into society. If the new political party is to survive elections and have its ideology entrenched beyond the constitutionally set term limits, it must be politically attractive to the people.

It was fascinating to learn about the international links in this movement and determine the relatedness of ideologies and experiences in Cuba, the Soviet Union and other socialist countries. Since I have previously worked in Russia on the law of charity, we had an interesting time comparing experiences in the Soviet Union prior to Perestroika. It is clear that capitalism is now an accepted pathway to socialism in a way which was not fully contemplated by Karl Marx. However, it is unclear, and a matter of continued ideological debate, exactly where capitalism, globalization and the World Trade Organization fit into “21st Century Socialism.”

Vietnam was a masterful innovator of creating and utilizing para-government organizations for political purposes for the last half of the 20th Century. In Canada, we pay most of our attention to Chavez of Venezuela with little respect for his political smarts. While the roll-out of “21st Century Socialism” is most visible in South America, I believe that the intellectual and ideological framework for it will be significantly influenced by Vietnamese scholars and officials.

If global anti-terrorism initiatives are going to have an impact, they must put more emphasis on understanding the religious issues and less on money laundering. It is also imperative to understand the history of political disputes and grievances which are local. I believe the solution is to pursue “hearts and minds” strategies rather than anti-money laundering legislation.

This issue was brought into the forefront in early September when I was visiting Jakarta for meetings with counter-terrorism officials related to preventing charities from funding terrorism. I arrived right about the time the police were surrounding the house of Noordin Muhammed Top, the militant mastermind who has been implicated in every major terrorist attack in Indonesia since 2003.

The gun battle was over and Top and three others were dead by the time I met with a senior official of the Coordinating Ministry for Political, Legal and Security Affairs of the Republic of Indonesia the next morning. I first met this official at a consultation sponsored by the Charity Commission of England and Wales in Sri Lanka in 2003 with senior government officials from Asian countries, who were collaborating on how to prevent charities using their funding to finance and facilitate terrorism. I was the only person there who was not a government official in Sri Lanka in 2003 and had been invited because of my global perspective on the activities of charities.

In Jakarta, I was briefed on the counter-terrorism education programs carried out by the Indonesian government since 9/11. None of these programs were originally implemented in Jakarta because they thought the terrorist problem was confined to Java, Sulawesi and Aceh. However, after the hotel bombings in July they finally scheduled programs to take place in Jakarta over the coming months. On this visit, however, the details about the programs were overshadowed by the news of Top’s death. According to reports, Top refused to surrender and was killed in an hours-long gunfight in a house in Solo in central Java, which contained hundreds of pounds of explosives, M-16 assault rifles, grenades and bombs. He was identified by his fingerprints. It was a major triumph for the anti-terrorism forces and a major blow to the al-Qaida-funded regional terrorist group, Jemaah Islamiyah.

Meanwhile, the most interesting conversation I had while in Jakarta dealt with the particular challenges of religion-inspired terrorism and the difficulties in addressing this in an Islamic country. They carry on their education programs in universities rather than mosques for reasons that are not prudent to articulate. On the other hand, the National Police Chief began his press conference with Alhamdulillah – praise God. God is readily invoked by both terrorists and counter-terrorism officials.

Java was selected by Noordin because of its population’s susceptibility to radical Islam. In 1949, an Islamic Allamah proclaimed the Indonesian Islamic State in Java — the citizens believe the Jakarta government is “colonizing” them and are open to terrorist retaliation. This political history is much more important than any Saudi Wahabi influence.

Indonesia is also struggling with how to respond to the sharia ganun passed by the Aceh parliament this week. This imposition of sharia law will allow adulterers to be stoned to death. Aceh was identified to the world as an area of struggle with terrorists after it was devastated by the tsunami and the Helsinki MOU currently determines power sharing there. It might be more useful for the “war on terror” to focus on the curtailment of basic human rights when developing its “hearts and minds” strategies.