Canadian tax officials have also been cracking down on charities that use tax shelters. Those shelters have become big business in recent years, pulling in close to $1-billion in contributions in 2007. That represented nearly 12 per cent of all giving in Canada.
Many shelters operate on a so-called “buy low, donate high” basis. For example, some shelters used to buy massive amounts of artwork at a discount, have it appraised for a much higher amount and then donate the art to a charity. Participants in the shelter would receive a charitable tax receipt based on the appraisal value.
The Canada Revenue Agency (CRA) has been cracking down on these shelters, arguing they are tax dodges that serve no charitable purpose.
Last year, for example, the CRA shut down International Charity Association Network (ICAN), which issued more than $400-million worth of tax receipts in one year. CRA alleged ICAN was a tax shelter that provided inflated tax receipts to donors and offered few if any charitable services. Tax officials are now auditing more than 34,000 Canadians who participated in a related ICAN donation program.
Same old same old. Governments structure a tax incentive to encourage cash flow to a program or sector such as real estate investments, charities, oil and gas etcetera and usually sooner rather than later the “sharpies” come out of the woodwork.
It if sounds like it is too good to be true, it always is……
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