Of Tax Receipts and Trenches: The Unsettling Pipeline of Canadian Charity to West Bank Settlements 

Despite Canada’s official foreign policy condemning Israeli settlements in the West Bank as illegal and sanctioning extremist settler violence, an investigation has revealed that Canadian charities are funneling millions of tax-deductible dollars to organizations that support and expand these very settlements, creating a stark policy contradiction where the government’s left hand undermines its right.

Critics assert that charities like the Mizrachi Organization of Canada and the Canadian Zionist Cultural Association are acting as financial conduits, violating tax rules by failing to maintain direct control over donations and, in some cases, indirectly supporting entities linked to the Israeli military, thereby using the Canadian charitable system to subsidize activities that perpetuate the conflict and undermine prospects for peace, all while the Canada Revenue Agency’s enforcement appears inconsistent and insufficient to close the loopholes.

Of Tax Receipts and Trenches: The Unsettling Pipeline of Canadian Charity to West Bank Settlements 

In the bruised stillness of a West Bank hospital room, the weight of a conflict thousands of miles away becomes painfully personal. Khader Nawaj’ah, his face swollen and hand casted, recounts a nightmare: waking under a barrage of stones and sticks, wielded by Israeli settlers from a nearby outpost. His crime? Sleeping on his own family’s land in the Palestinian village of Khirbet Susiya. His story is not an isolated incident but a recurring trauma, one that, critics allege, is indirectly subsidized by a surprising source: the charitable donations of everyday Canadians, amplified by the very tax system designed to promote public good. 

This is the uncomfortable paradox at the heart of a complex financial pipeline. While the Canadian government officially condemns Israeli settlements as illegal and sanctions “extremist settler violence,” its own revenue agency oversees a framework that allows tax-deductible donations to flow to organizations fortifying those very settlements. This isn’t a story of shadowy illicit financing; it’s a story of how activities deemed contrary to Canadian foreign policy can operate in plain sight, shielded by the legitimate veneer of a charitable tax receipt. 

The Village on the Precipice 

To understand the impact, one must first look at Khirbet Susiya. This is not a bustling city but a collection of homes and tents on a rugged landscape, where Palestinian families live under the constant twin threats of demolition and violence. After being displaced from their original village in the 1980s to make way for an archaeological site, they rebuilt on adjacent farmland they own. Yet, in the eyes of Israeli authorities, their existence is illegal. Meanwhile, the modern Israeli settlement of Susya, visible on a nearby hill, expands. 

For residents like Nasser Nawaj’ah, who documents violence for the Israeli human rights group B’Tselem, the situation is a stark lesson in international hypocrisy. “On the one hand, Canada respects international legality while on the other hand, the Canadian charities are breaking the law by funding and boosting Israeli settlements,” he asserts. From his perspective, the Canadian taxpayer, through a system they likely know nothing about, is becoming a silent stakeholder in his community’s precarious existence. 

The Charitable Conduit: How the Money Flows 

The mechanism is where the legal and ethical lines blur. Canadian charity law is clear on two fundamental principles: 

• A charity must have direction and control over how its funds are used abroad. 

• It cannot act as a mere conduit, simply funneling money to a foreign organization to spend as it sees fit. 

• It is illegal to provide resources to a foreign military. 

The investigation reveals that these principles are being tested, if not outright breached. Charities like the Mizrachi Organization of Canada have sent tens of millions of dollars to Israel over the years. Recent tax filings, unearthed by researchers like academic Miles Howe, show that more than $4 million went to dozens of groups supporting settlement activity in the West Bank. 

The case of the Mount Hebron Fund is particularly illuminating. This Israeli entity was sanctioned by Canada in 2024 for supporting violence against Palestinians. Yet, as recently as June, an online Israeli fundraising platform, JGive, was offering Canadian tax receipts for donations to the fund—receipts that were to be issued by Mizrachi Canada. This suggests a model where a Canadian charity provides the tax-receipt infrastructure for overseas groups, raising serious questions about who truly has “direction and control.” After the fifth estate began asking questions, the donation was refunded and labelled a “technical error,” but the campaign remained open for other currencies. 

“How is this not a conduit?” asks Howe. “It’s not a legal activity under the Income Tax Act. Acting as a conduit is not a charitable purpose.” 

The Soldiers’ Share: When Charity Meets Military 

Further complicating the issue is the funding of entities linked to the Israeli military. The Canadian Zionist Cultural Association (CZCA), another registered charity, sends millions to organizations like the “Association for Israeli Soldiers” and “Friends of the IDF.” 

“Canadians by and large are not aware that their money is going over and is being used to subsidize the Israeli army. If they knew what was happening, I think most people would be outraged,” states Shane Martinez, a Toronto lawyer who has filed complaints with the CRA. The outrage is twofold: first, the potential violation of charity rules, and second, the millions in foregone tax revenue that otherwise would have contributed to Canada’s public coffers, effectively creating a public subsidy for a foreign military apparatus. 

The Government’s Guarded Response 

When confronted with these contradictions, the official response is one of procedural confidence rather than substantive engagement. Finance Minister François-Philippe Champagne, when asked by the fifth estate, defended Canada’s “very stringent laws,” asserting they are in line with other G7 nations and that the CRA ensures compliance. 

This stance rings hollow to critics who point to the CRA’s own actions. The agency recently revoked the charitable status of the Jewish National Fund of Canada, citing a failure to maintain control over donations and support for non-charitable causes, including projects in the occupied territories. The JNF is appealing, but its case demonstrates that the CRA is aware of the problem. Yet, other charities with similar operational models continue to function, suggesting a system that is either slow-moving, inconsistently applied, or lacking the political will for a comprehensive crackdown. 

A View from the Inside: Warnings of Moral and Legal Peril 

The most damning indictment comes from within the Israeli establishment itself. Former Prime Minister Ehud Olmert, who has become an outspoken critic of the settlement project, frames the issue in stark terms. He distinguishes the war in Gaza from the situation in the West Bank, where, he says, Israel has “absolutely no defence.” 

“One day we will be brought to the [International Criminal Court in the Hague], not because of Gaza, because of what happens in the West Bank and we will have no good defence,” Olmert warns. “Because it happens in front of our eyes and no one seems to care.” His commentary reframes the issue from a political dispute to a potential legal liability, one in which Canadian charitable dollars could be implicitly entangled. 

The Human Cost and the Path Forward 

Back in Khirbet Susiya, the theoretical becomes tangible. For Hiyam and Nasser Nawaj’ah, the fear is a constant companion. The sleep lost to anxiety over the next attack or the sound of bulldozers is a cost that no tax receipt can quantify. The attack on their relatives, Khader and Fatima, resulted in no arrests, no justice—just another entry in a ledger of violence that feels increasingly sanctioned by international inertia. 

The solution is not simple, but it begins with transparency and accountability. It requires the Canada Revenue Agency to aggressively enforce its own rules on direction, control, and conduit relationships. It demands that Canadian donors ask sharper questions about the ultimate destination of their generosity. And it forces a national conversation about the alignment of our laws with our stated foreign policy and values. 

When a nation’s system for promoting good in the world becomes enmeshed in a conflict that perpetuates suffering, it betrays not only those suffering but the very principles the system was built upon. The gap between Canada’s words on the world stage and the reality of its charitable flows is more than a policy discrepancy; it’s a fissure through which hope for peace and justice is slowly crumbling, one tax-deductible dollar at a time.