There are a few remaining schemes that promise “investors” a charitable tax receipt for amounts greater than their cash investment. These are known as abusive charity gifting tax schemes. The estimated amount of receipts issued as part of abusive charity schemes over the last 12 years is about $7 billion. There have been over 200,000 filings by taxpayers claiming inflated receipts issued by these abusive charity gifting tax shelters. Not only has the Canadian and provincial governments lost billions in tax revenue, which either results in the reduction of services provided or increased taxes, but schemes such as these are damaging the credibility of the charitable sector.

The good news is that the Canadian government and specifically the CRA has made a concerted effort to eliminate these schemes and they have been successful in their efforts.  In 2006, $1.3 billion worth of receipts were issued by abusive charity gifting tax schemes.  According to CRA these schemes have dropped by about 99%.

The Canada Revenue Agency has taken a hard-line on these abusive schemes. On numerous occasions, CRA has provided notices cautioning Canadians to avoid such schemes.

Charities should avoid any involvement with these schemes. First, these schemes are undercutting the charitable sector. Second, they are shifting the tax burden onto other law-abiding citizens. Third, the charity, in the end, will get very little out of the scheme except for the possible revocation of its status, financial penalties and a multi-year headache. Also, donors should realize that these schemes don’t work and taxpayers should not invest in them.