Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Global Giving, Avoiding 'Charity' Scams
Should CRA do a better job of warning Canadians about abusive charity gifting tax schemes? Well a group of Plaintiffs who participated in the abusive tax shelter gifting scheme Global Learning Group Inc (GLGI) thinks so. "The Plaintiffs made a claim in negligence in 2011 against Her Majesty the Queen, the Canada Revenue Agency [CRA], and the Attorney General of Canada for the CRA’s alleged breach of its duty of care by failing to properly warn the Plaintiffs in a timely fashion of the consequences that could follow from their participation in the GLGI program."
Here is a link to the case Scheuer v. Canada, 2015 FC 74 (CanLII). I am conflicted about the case. On the one hand I argue for more transparency and CRA sharing more information. On the other GLGI is an abusive scheme and you would think that people would know that it is very risky and the likelihood of ultimate success is negligible.
According to the Judgment " The Plaintiffs allege in the Amended Statement of Claim that CRA was aware of potential issues surrounding the charitable donations made to GLGI as early as the year 2000, but took no steps to warn or inform Canadian taxpayers, and in particular the Plaintiffs, of its concerns with the program. The Plaintiff Scheuer alleges that he relied upon the fact that CRA had issued a valid tax shelter number to GLGI and made various donations to GLGI for the years 2004 to 2007, for which he claimed charitable donation tax credits. The CRA later reassessed the Plaintiff Scheuer and disallowed those charitable donation tax credits. The Plaintiffs claimed damages from the Defendants for the CRA’s failure to properly warn and protect them." In fact CRA appears to have been issuing warnings about these tax shelter schemes since 2009 - you can see the CRA page on tax shelters at http://www.cra-arc.gc.ca/gncy/lrt/vshlt-eng.html which has copies of the warnings. There have been a recent Taxpayer Ombudsman report that have commended CRA for the warnings they provide on abusive charity gifting tax shelters - but lets remember that the sort of person who would invest in such a scheme is probably not that interested in CRA's view on the risk of the schemes - especially when the promoters are saying that this or that scheme is different from other schemes and don't believe the evil CRA with black helicopters and their warnings - CRA just wants your 'hard earned money'.
With the ridiculously narrow ability for CRA to say anything publicly about taxpayer matters under s. 241 of the Income Tax Act, CRA is caught between a rock and a hard place. It will be interesting to see how this case proceeds - however one outcome could be a change to s. 241 or the courts telling CRA to interpret the exceptions to confidentiality more liberally.
The Court concluded at this early stage "It is not clear to me that the Plaintiffs will ultimately succeed in establishing a private law duty of care owed to them by the CRA. However, bearing in mind that at this stage, the pleadings are assumed to be true and must be read generously, and having regard to the evolving nature of the duty of care jurisprudence, it is not plain and obvious that the claim as pleaded is bound to fail for want of a private law duty of care. As such, the Plaintiffs should not be denied the opportunity to argue their case fully".
May be CRA needs to hire Mr. T from the A-Team and buy some black helicopters (assuming they don't have them already) and personally drop in on each of the 204,000 Canadian taxpayers who have invested in those noxious schemes and provide a personal warning to each of those people that charitable donations are not supposed to make you money!
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.