Transcript

Moving on to our next slide, what we're seeing in the sector -- the charitable sector, is some issues that become prevalent. So, we shifted our focus in recent years, the Charities Directorate has seen two issues in particular, that have become a significant concern. The first is tax shelter arrangements and fraudulent donation receipts. As a result of this concern, we've shifted our focus to look at these issues.

So, let's jump right into the first one which is tax shelter arrangements. A tax shelter gifting arrangement is, like I said, a serious concern and these arrangements are generally schemes that involve donation receipts worth three or four times the actual cash payment. As a result, charities are being exploited for their tax receipting privileges to the benefit of the promoters associated with these schemes. Little to no benefit is flowing to the charities or to the charities intended beneficiaries. So, you can see why it's a concern. In fact, generally based on some of our findings, generally only 1% is retained by the charity. That is, the advantages flowing through to the charity. The prevalence of these schemes of course is a detriment to the charity but also to the integrity of the charitable sector. Registered charities that get involved in the schemes may be suspended or revoked.

The next slide, we're going to talk a little bit more about the tax shelters. What we've done is in order to inform the public, the CRA has issued many fact sheets and tax alerts on the issue of tax sheltered gifting arrangements. The CRA is also publicly expressed that it intends to audit tax shelter arrangements and those registered charities involved. In most cases, the CRA has denied the gift completely which means that the donors are not even getting credit for their cash outlay. Canadian courts have also continued to confirm our position, the CRA's position, with respect to these tax schemes. As a result, there have been -- excuse me, a 75% decrease since the peak of participation in 2006. Not only in donor participation but also in the amounts donated. However, these issues continue to be concerns so we are advising charities, be cautious and you should avoid becoming involved in these types of arrangements.

A final note on our next slide regarding tax shelters, registered tax shelters are given tax shelter I.D. numbers by the Canada Revenue Agency. The tax shelter I.D. number, however does not legitimize these arrangements or guarantee that the donor is entitled to receive the proposed tax benefits. The I.D. numbers simply allow us here at the CRA to identify the participants, as well as the value number of the transactions entered into. To date, the CRA has reassessed more than 100,000 taxpayers and denied over 4 1/2 billion dollars in donations in respect of these tax shelter gifting arrangements. Not only may the charities face revocation, but those involved in promoting these arrangements may face monetary penalties.

So, that's the tax shelter arrangements, there's also something else that's cropping up in the sector.

I moved on to the next slide and that's Unregistered Tax Shelters. Unregistered Tax Shelters arrangements are becoming more popular as a means to kind of get under CRA's radar. Charities should, in this case, as with registered tax shelters, the same goes for unregistered tax shelters. Charities should be cautious and should avoid participating in these arrangements. We've listed a couple of tips on that slide for identifying these types of unregistered tax shelter arrangements. The first point talks about there being justified with legal opinions and the second point is that they usually involve gifts in kind, often in the forms of shares or lesser known foreign public stock exchange. The message here again is whether it's a registered tax shelter or an unregistered tax shelter, charities should be cautious and should avoid becoming involved in these schemes.

The next issue is Fraudulent Donation Receipts. This type of scheme works in a variety of ways. For example, a charity can be set up to sell inflated tax receipts but perform little to no charitable work. Charities fraud can also be performed with the help of unscrupulous tax preparers. This happens when registered charities sell false donation receipts to taxpayers for a commission and the taxpayers, in turn, are selling these false donation receipts to taxpayers themselves. There's a higher incidence of individuals and other organizations falsifying receipts of registered charities in recent times and that's why we've stepped up our monitoring of this particular sector. The volume of the fraudulent receipting is more difficult to measure, but we estimate that this could involve between 100,000 and 135,000 donors between the years 2004 and 2008 and more than $290 million during that time has been reassessed or denied to date. The best offense in this regard is diligence, especially in maintaining full and accurate books and records. The CRA , in order to ensure that the charity is not involved in these types of arrangements, what they could be keeping -- charities should be keeping, bank records and the receipt books in order to verify that the receipts that they are issuing are accurate.

And then, moving on to another slide, I'm just going to cover off, again this fraudulent receipting again, but we're going to talk about proof of payment. As a result of these receipting schemes, the CRA, as mentioned, is aggressively pursuing and verifying donation amounts. That is, the actual amounts on the receipts issued. You should be aware that the CRA may request proof from either the donor or the charity for the particular donation that was made. Charities may be contacted by the CRA to verify that a particular receipt was issued and to verify the amount on the donation -- or the amount of the donation. Donors may be contacted and asked to provide the receipt and other supporting documentation. Examples of this could include cancelled checks, credit card slips, statements, credit card slips or statements or bank statements. Again, the best defense for charities in this regard is diligence, especially in regarding the books and records, as I mentioned. Do ensure that you are keeping your bank records, receipt books, in order to avoid these kinds of troubles.

Thank you very much and I hope you enjoyed the webcast.

If you would like more information about webinars, we encourage you to visit our Charities website, in particular, the Educational Resources for Charities section. Also, if you haven't already signed up for our electronic mailing list, we encourage you to do so. Just go to our website by selecting "Educational Resources for Charities" and then the electronic mailing list, you'll be able to register there. Once registered, we send out about one or two emails per month, and it gives you such information as future webinars that we will be holding.

If you would like more information on non-compliance issues and how to avoid them, we invite you to call our Client Assistance Line at 1-800-267-2384.