Another example of a taxpayer's appeal to the federal government and response from Minister of National Revenue
December 7, 2016
Honourable Diane Lebouthillier
Minister of National Revenue
555 Mackenzie Ave.
Ottawa Ontario
K1A 0L5
Dear Honourable Minister,
I am writing with regards to the outstanding balance of my personal income tax for the taxation years 2004 – 2007. This outstanding balance arose as a result of my involvement in the Global Learning Gifting Initiative Donation Program (GLGI), Canada Revenue Agency’s re-assessment of my contributions, my subsequent appeal and, ultimately on October 19, 2015, the Tax Court of Canada’s decision to disallow any contributions under this program. As of September 27, 2016, my outstanding tax debt is $84, 767.44, of which $37, 371.57 is arrears interest accrued over the past 10+ years.
First let me say that, as disappointed as I am in the decision of the Tax Court, as a Canadian citizen I will, to the best of my ability, abide by the laws of the land - whether I totally agree with them or not. I have earned income and filed returns since 1974, and during that time have never knowingly avoided reporting or paying my fair share of tax. My involvement in the GLGI program, as thousands of others across Canada, was based primarily on advice given by financial advisors. Many of us also verified that GLGI was issued a tax shelter number and the donation receipts we received were from registered Canadian charities. However, in our limited knowledge of the workings of CRA, we did not know that the issuance of said tax shelter number or being a registered charity was not an acknowledgement by CRA of its legitimacy. Further adding to our misunderstanding was the receipt of updates from GLGI on the benefits our donations were having. I have enclosed copies of letters from the Prime Minister of Canada and the Premier of Ontario from 2006 that again led us to believe this was nothing else but legitimate.
I understand that the rule of due diligence fell on our shoulders, but I also believe we displayed due diligence to the best of the abilities of the reasonable and average taxpayers we are.
Further demonstrating my, and I’m sure countless others’, intention to be within CRA guidelines, once the Notice of Assessments were received in October of 2008, I did not participate in any other GLGI tax shelter programs, even though they were still being promoted to us.
I realize this information had no bearing on the Tax Court decision, however, I feel that it is important that the Canada Revenue Agency knows that the majority of people involved in this program were “average”, “middle class” individuals definitely looking to save tax, but also with no willful or malicious intent to defraud CRA. This is especially important to keep in mind with the imminent CRA collection action of the outstanding debt.
I have some specific concerns with regards to my debt that I would like to share with you.
Firstly, I feel the length of time taken to resolve this matter, and the subsequent accrued interest charge, is excessive. I am not alone in feeling this way, as even Auditor General Michael Ferguson stated in his fall 2016 Report released November 29, 2016 that CRA “is failing to deal with income tax objections …. In a timely manner” and that “the delays are costing taxpayers significant sums of money, as they have to pay interest on the amounts in dispute.” In my case, my original tax debt was approximately $48,000 while the accrued interest charge was approximately $36,000 bringing the total debt to over $84,000.
Another example of this excessive delay is the fact that the Tax Court of Canada ruled on October 19, 2015 that taxpayers who participated in the GLGI donation program were not entitled to any credit, yet it took until September 20, 2016, a full eleven months, before I received Canada Revenue Agency’s Notice of Confirmation of this ruling and then until December 7, 2016 before I received letter from a collections officer demanding full payment or my response within fourteen days.
Secondly, I feel that, contrary to all taxpayers being treated equally, CRA, in fact, treats us differently. Specifically, this refers to CRA’s offer to settle this case while it was still in tax court. Taxpayers who accepted the offer were granted credit for their cash contributions, while those of us who chose to see the case to the end, are told our cash contribution is worthless. I had been involved in this objection for a number of years, why would I not see it out to its conclusion? Furthermore, how can one taxpayer’s contribution be acceptable and another’s not, especially when they are made to the same organization with exactly the same intent? To me, this reeks of a “Monty Hall – Let’s Make a Deal” philosophy. An “are you feeling lucky?” scenario rather than equal treatment for all taxpayers.
Thirdly, I filed a Request for Taxpayer Relief for the taxation years 2004, 2005 and 2006 because of the delays. These were received and acknowledged by CRA in January 0f 2016 with the statement that “they will take [my] tax relief request into consideration while resolving the objection or appeal.” The objection has been ruled upon but to this date I have heard nothing regarding my request. What is its status?
I believe that the vast majority of taxpayers who participated in the GLGI program made these charitable donations in good faith, and at the very least should be given credit for the amount of our contributions. In addition, because of the length of time to resolve this issue, an adjustment to interest should be made, as per the Request for Taxpayer Relief.
As I mentioned at the beginning of my letter, I intend to abide by the laws of the land that should apply equally to everyone and will do my best to pay my debt. However, owing over $84, 000 cannot be paid all at once, at least in my world as a retired teacher. As a demonstration of my good faith, I have made payments of over $12,400 since September, 2016 and will continue to make them, however, I would like my concerns to be given thoughtful consideration and hopefully some type of compromise can be reached which will satisfy both CRA and myself.
Thank you for your consideration,
Cc: Hon. Ralph Goodale
MP – Regina Wascana
Cc: J.Sharma
Collections Officer
Section 1227-462-18
Surrey Taxation Office
Response
Minister of National Revenue
Ottawa, Canada K1A OA6
MAR O1 2017
Mr.
Post Office Box
SK SOG 4HO
Dear Mr:
Thank you for your correspondence about your income tax affairs. The offices of the Honourable Bill Morneau, Minister of Finance, and the Right Honourable Justin Trudeau, Prime Minister of Canada, sent me a copy of your letter as well. Thank you also for your understanding regarding the delay of this response.
As you mention, the Canada Revenue Agency (CRA) published many warnings for taxpayers about participating in tax shelter donation arrangements like those that promise big tax savings through charitable tax receipts. The CRA also recommended that anyone considering participating in tax shelter donation arrangements get legal and tax advice from a professional who is not connected to the promotion and sale of the tax shelter.
The CRA warnings were published in a series of fact sheets and alerts still available at cra.gc.ca/nwsrm. There is also more information at cra.gc.ca/donors and at cra.gc.ca/tax shelters. The CRA encourages taxpayers who have concerns about giving money to a particular charity to check the charity's website before making the donation. Audits that the CRA did in the past have shown that in many cases there was no gift made.
The CRA does not approve tax shelter arrangements or give its opinion on the legitimacy of any specific promoted and sold tax scheme. Also, the CRA cannot know if a specific tax scheme respects the tax laws until it audits the charity's books, records, and related transactions.
The CRA uses the tax shelter number only to identify the tax shelters and their investors. The identification number does not offer any guarantee that taxpayers will receive the tax benefits the tax shelter proposes. Under the Income Tax Act, promoters of tax shelters must include on all their written communications a statement explaining that the identification number does not in any way confirm an investor's entitlement to claim any tax benefits associated with the tax shelter.
The CRA registers all charities which demonstrate on their application that they fulfill the legal criteria that apply at the time of their registration. The CRA audits registered charities when it finds out that they do not respect the law. An audit's goal is to make sure the charities' programs continue to meet the requirements of the Act. While the CRA strives to make sure charities work within the rules, taxpayers should not consider
a charity's registration as an absolute proof of its credibility. To date, the CRA has revoked the registration of many charities because of serious non-compliance associated with their participation in tax shelter arrangements.
Charities must be registered to be able to give donation receipts to taxpayers. However, the Act does not allow the CRA to accept the value of any incorrect donation receipt. If a receipt is incorrect, the CRA can deny the donation credit even if the registered charity's identification number is on the receipt. Only an audit can prove the true value of a donation receipt.
I note your concern about the delay in assessing your income tax and benefit return. The Act requires the CRA to process returns promptly. However, when a return needs a more detailed review, the CRA will assess it only after it completes the review. Because the information in your file showed you took part in the Global Learning Gifting Initiative (GLGI), the CRA needed to verify your donation claims under the Act.
CRA officials tell me you filed objections to the reassessments of your 2006, 2007, and 2008 returns, which included donations promoted by the GLGI. They confirm that on December 15, 2014, Mr. Sunil Vijh, former Chief of Appeals at the Toronto West Thunder Bay Tax Services Office, sent you a letter explaining the options available to you to resolve your 2006, 2007, and 2008 objections. You had 30 days to advise the CRA of your decision. On January 12, 2015, the CRA received your signed binding agreement for the 2006, 2007, and 2008 tax years. I note your comments about being forced into this decision without understanding. However, the letter the CRA sent you offered a toll-free telephone number in case you had any questions about the offer of settlement.
CRA officials also tell me that your 2013 return included donations promoted by the GLGI as well. In a letter dated September 16, 2016, Mr. John Marquis, former Chief of Appeals at the Vancouver Tax Services Office, informed you that your objection related to an issue shared by several other taxpayers. The CRA will postpone any decisions on your file until it reviews all the related objections.
I am also told you asked for consideration under the taxpayer relief provisions of the Act for the 2006, 2008, and 20 13 tax years. These provisions give CRA officials the discretion to waive or cancel all or part of the interest and penalties it charged to an account. Officials generally exercise this discretion when taxpayers did not respect the Act because of circumstances beyond their control or because of CRA errors or delays. Officials can also consider cases where taxpayers have financial difficulties and cannot pay their debt in full. On January 24, 2017, the Appeals Division at the Winnipeg Tax Centre sent you a letter acknowledging receipt of your relief request. The letter explained that your relief request will be reviewed with the objection.
If you have more questions about your objections or your relief request, I invite you to contact Ms. Swati Kinkar, an appeals officer at the Toronto West-Thunder Bay office, by writing to 5800 Hurontario Street, Mississauga ON L5R 4B4, or by calling 905-615-2672. Please note that the CRA accepts collect calls. Ms. Kinkar is aware of our correspondence and will be pleased to help.
Regarding the debt on your tax account, the CRA does not usually take action to collect amounts under objection. Taxpayers can put off paying amounts for which they filed valid objections. However, the amounts will accumulate interest. The CRA will occasionally send taxpayers an updated account balance. At any time, taxpayers can pay their debt in full to avoid more interest charges. If an objection is resolved in the taxpayer's favour, the CRA will pay back any interest it charged on the amount under objection. Also, the CRA will refund any amount under objection that the taxpayer has already paid, with the calculated credit interest that applies from the date of payment.
The CRA recognizes the generous nature of Canadians. I assure you that its audit efforts are not intended to stifle legitimate donations.
Thank you for bringing this matter to my attention. I trust the information I have provided is helpful.
Sincerely,
The Honourable Diane Lebouthillier, P.C., M.P.
December 7, 2016
Honourable Diane Lebouthillier
Minister of National Revenue
555 Mackenzie Ave.
Ottawa Ontario
K1A 0L5
Dear Honourable Minister,
I am writing with regards to the outstanding balance of my personal income tax for the taxation years 2004 – 2007. This outstanding balance arose as a result of my involvement in the Global Learning Gifting Initiative Donation Program (GLGI), Canada Revenue Agency’s re-assessment of my contributions, my subsequent appeal and, ultimately on October 19, 2015, the Tax Court of Canada’s decision to disallow any contributions under this program. As of September 27, 2016, my outstanding tax debt is $84, 767.44, of which $37, 371.57 is arrears interest accrued over the past 10+ years.
First let me say that, as disappointed as I am in the decision of the Tax Court, as a Canadian citizen I will, to the best of my ability, abide by the laws of the land - whether I totally agree with them or not. I have earned income and filed returns since 1974, and during that time have never knowingly avoided reporting or paying my fair share of tax. My involvement in the GLGI program, as thousands of others across Canada, was based primarily on advice given by financial advisors. Many of us also verified that GLGI was issued a tax shelter number and the donation receipts we received were from registered Canadian charities. However, in our limited knowledge of the workings of CRA, we did not know that the issuance of said tax shelter number or being a registered charity was not an acknowledgement by CRA of its legitimacy. Further adding to our misunderstanding was the receipt of updates from GLGI on the benefits our donations were having. I have enclosed copies of letters from the Prime Minister of Canada and the Premier of Ontario from 2006 that again led us to believe this was nothing else but legitimate.
I understand that the rule of due diligence fell on our shoulders, but I also believe we displayed due diligence to the best of the abilities of the reasonable and average taxpayers we are.
Further demonstrating my, and I’m sure countless others’, intention to be within CRA guidelines, once the Notice of Assessments were received in October of 2008, I did not participate in any other GLGI tax shelter programs, even though they were still being promoted to us.
I realize this information had no bearing on the Tax Court decision, however, I feel that it is important that the Canada Revenue Agency knows that the majority of people involved in this program were “average”, “middle class” individuals definitely looking to save tax, but also with no willful or malicious intent to defraud CRA. This is especially important to keep in mind with the imminent CRA collection action of the outstanding debt.
I have some specific concerns with regards to my debt that I would like to share with you.
Firstly, I feel the length of time taken to resolve this matter, and the subsequent accrued interest charge, is excessive. I am not alone in feeling this way, as even Auditor General Michael Ferguson stated in his fall 2016 Report released November 29, 2016 that CRA “is failing to deal with income tax objections …. In a timely manner” and that “the delays are costing taxpayers significant sums of money, as they have to pay interest on the amounts in dispute.” In my case, my original tax debt was approximately $48,000 while the accrued interest charge was approximately $36,000 bringing the total debt to over $84,000.
Another example of this excessive delay is the fact that the Tax Court of Canada ruled on October 19, 2015 that taxpayers who participated in the GLGI donation program were not entitled to any credit, yet it took until September 20, 2016, a full eleven months, before I received Canada Revenue Agency’s Notice of Confirmation of this ruling and then until December 7, 2016 before I received letter from a collections officer demanding full payment or my response within fourteen days.
Secondly, I feel that, contrary to all taxpayers being treated equally, CRA, in fact, treats us differently. Specifically, this refers to CRA’s offer to settle this case while it was still in tax court. Taxpayers who accepted the offer were granted credit for their cash contributions, while those of us who chose to see the case to the end, are told our cash contribution is worthless. I had been involved in this objection for a number of years, why would I not see it out to its conclusion? Furthermore, how can one taxpayer’s contribution be acceptable and another’s not, especially when they are made to the same organization with exactly the same intent? To me, this reeks of a “Monty Hall – Let’s Make a Deal” philosophy. An “are you feeling lucky?” scenario rather than equal treatment for all taxpayers.
Thirdly, I filed a Request for Taxpayer Relief for the taxation years 2004, 2005 and 2006 because of the delays. These were received and acknowledged by CRA in January 0f 2016 with the statement that “they will take [my] tax relief request into consideration while resolving the objection or appeal.” The objection has been ruled upon but to this date I have heard nothing regarding my request. What is its status?
I believe that the vast majority of taxpayers who participated in the GLGI program made these charitable donations in good faith, and at the very least should be given credit for the amount of our contributions. In addition, because of the length of time to resolve this issue, an adjustment to interest should be made, as per the Request for Taxpayer Relief.
As I mentioned at the beginning of my letter, I intend to abide by the laws of the land that should apply equally to everyone and will do my best to pay my debt. However, owing over $84, 000 cannot be paid all at once, at least in my world as a retired teacher. As a demonstration of my good faith, I have made payments of over $12,400 since September, 2016 and will continue to make them, however, I would like my concerns to be given thoughtful consideration and hopefully some type of compromise can be reached which will satisfy both CRA and myself.
Thank you for your consideration,
Cc: Hon. Ralph Goodale
MP – Regina Wascana
Cc: J.Sharma
Collections Officer
Section 1227-462-18
Surrey Taxation Office
Response
Minister of National Revenue
Ottawa, Canada K1A OA6
MAR O1 2017
Mr.
Post Office Box
SK SOG 4HO
Dear Mr:
Thank you for your correspondence about your income tax affairs. The offices of the Honourable Bill Morneau, Minister of Finance, and the Right Honourable Justin Trudeau, Prime Minister of Canada, sent me a copy of your letter as well. Thank you also for your understanding regarding the delay of this response.
As you mention, the Canada Revenue Agency (CRA) published many warnings for taxpayers about participating in tax shelter donation arrangements like those that promise big tax savings through charitable tax receipts. The CRA also recommended that anyone considering participating in tax shelter donation arrangements get legal and tax advice from a professional who is not connected to the promotion and sale of the tax shelter.
The CRA warnings were published in a series of fact sheets and alerts still available at cra.gc.ca/nwsrm. There is also more information at cra.gc.ca/donors and at cra.gc.ca/tax shelters. The CRA encourages taxpayers who have concerns about giving money to a particular charity to check the charity's website before making the donation. Audits that the CRA did in the past have shown that in many cases there was no gift made.
The CRA does not approve tax shelter arrangements or give its opinion on the legitimacy of any specific promoted and sold tax scheme. Also, the CRA cannot know if a specific tax scheme respects the tax laws until it audits the charity's books, records, and related transactions.
The CRA uses the tax shelter number only to identify the tax shelters and their investors. The identification number does not offer any guarantee that taxpayers will receive the tax benefits the tax shelter proposes. Under the Income Tax Act, promoters of tax shelters must include on all their written communications a statement explaining that the identification number does not in any way confirm an investor's entitlement to claim any tax benefits associated with the tax shelter.
The CRA registers all charities which demonstrate on their application that they fulfill the legal criteria that apply at the time of their registration. The CRA audits registered charities when it finds out that they do not respect the law. An audit's goal is to make sure the charities' programs continue to meet the requirements of the Act. While the CRA strives to make sure charities work within the rules, taxpayers should not consider
a charity's registration as an absolute proof of its credibility. To date, the CRA has revoked the registration of many charities because of serious non-compliance associated with their participation in tax shelter arrangements.
Charities must be registered to be able to give donation receipts to taxpayers. However, the Act does not allow the CRA to accept the value of any incorrect donation receipt. If a receipt is incorrect, the CRA can deny the donation credit even if the registered charity's identification number is on the receipt. Only an audit can prove the true value of a donation receipt.
I note your concern about the delay in assessing your income tax and benefit return. The Act requires the CRA to process returns promptly. However, when a return needs a more detailed review, the CRA will assess it only after it completes the review. Because the information in your file showed you took part in the Global Learning Gifting Initiative (GLGI), the CRA needed to verify your donation claims under the Act.
CRA officials tell me you filed objections to the reassessments of your 2006, 2007, and 2008 returns, which included donations promoted by the GLGI. They confirm that on December 15, 2014, Mr. Sunil Vijh, former Chief of Appeals at the Toronto West Thunder Bay Tax Services Office, sent you a letter explaining the options available to you to resolve your 2006, 2007, and 2008 objections. You had 30 days to advise the CRA of your decision. On January 12, 2015, the CRA received your signed binding agreement for the 2006, 2007, and 2008 tax years. I note your comments about being forced into this decision without understanding. However, the letter the CRA sent you offered a toll-free telephone number in case you had any questions about the offer of settlement.
CRA officials also tell me that your 2013 return included donations promoted by the GLGI as well. In a letter dated September 16, 2016, Mr. John Marquis, former Chief of Appeals at the Vancouver Tax Services Office, informed you that your objection related to an issue shared by several other taxpayers. The CRA will postpone any decisions on your file until it reviews all the related objections.
I am also told you asked for consideration under the taxpayer relief provisions of the Act for the 2006, 2008, and 20 13 tax years. These provisions give CRA officials the discretion to waive or cancel all or part of the interest and penalties it charged to an account. Officials generally exercise this discretion when taxpayers did not respect the Act because of circumstances beyond their control or because of CRA errors or delays. Officials can also consider cases where taxpayers have financial difficulties and cannot pay their debt in full. On January 24, 2017, the Appeals Division at the Winnipeg Tax Centre sent you a letter acknowledging receipt of your relief request. The letter explained that your relief request will be reviewed with the objection.
If you have more questions about your objections or your relief request, I invite you to contact Ms. Swati Kinkar, an appeals officer at the Toronto West-Thunder Bay office, by writing to 5800 Hurontario Street, Mississauga ON L5R 4B4, or by calling 905-615-2672. Please note that the CRA accepts collect calls. Ms. Kinkar is aware of our correspondence and will be pleased to help.
Regarding the debt on your tax account, the CRA does not usually take action to collect amounts under objection. Taxpayers can put off paying amounts for which they filed valid objections. However, the amounts will accumulate interest. The CRA will occasionally send taxpayers an updated account balance. At any time, taxpayers can pay their debt in full to avoid more interest charges. If an objection is resolved in the taxpayer's favour, the CRA will pay back any interest it charged on the amount under objection. Also, the CRA will refund any amount under objection that the taxpayer has already paid, with the calculated credit interest that applies from the date of payment.
The CRA recognizes the generous nature of Canadians. I assure you that its audit efforts are not intended to stifle legitimate donations.
Thank you for bringing this matter to my attention. I trust the information I have provided is helpful.
Sincerely,
The Honourable Diane Lebouthillier, P.C., M.P.