In the past, some charities have involved themselves with tax shelters and issued inflated receipts far in excess of the actual donation. Taxpayers who participated in these shelters were reassessed, their charitable donation claims were either denied or limited to their actual donation and hit with backtaxes, penalties and interest. But the principals involved in both the charity and the tax shelter simply move on and launch new charities and new tax shelters as CRA revokes the charitable status of the ones that issued inflated receipts.
Budget 2011 proposes to clamp down on these abuses in the charitable sector by allowing CRA the discretion to refuse or revoke the registration of a charity organization, or to prevent it from issuing official donation receipts if an individual who controls or manages the charity has been found guity of a criminal or civil offense or was a principal of a charity whose registration was revoked within the past five years or who at any time was a promoter in a gifting or any other tax shelter and the registration of the participating charity was revoked within the past five years.
It is all but certain that Budget 2011, which Finance Minister Jim Flaherty tabled yesterday will not survive a vote in Parliament and the measures contained in it are of academic interest now. Still, one hopes that a future Government will reintroduce the measure contained in Budget 2011 that cracks down on abusive charities.