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30 months in jail for facilitating false donation tax scheme

false donation tax schemeThe Court of Appeal for Ontario has just upheld the conviction and 30-month jail sentence of a tax return preparer who facilitated false charitable donation claims. The Court in R. v. Ajise considered a situation where Mr. Ajise prepared tax returns claiming that his clients had made over $5 million in cash and in-kind donations to a Canadian registered charity called Tractors for Daily Bread (the “Charity”). The Canada Revenue Agency (“CRA”) concluded that none of these supposed gifts made their way to the Charity, taking into consideration the Charity’s T3010 information return which showed a few hundred dollars of income in the period. Mr. Ajise worked out of the Charity’s offices. In addition to fees paid to him by his clients for preparing their tax returns, he also received payments from the clients of 10-15% of their supposed donations.

Mr. Ajise may well seek to appeal his conviction to the Supreme Court of Canada in light of there being a dissent at the Court of Appeal based on the reliance of the trial judge on opinion presented by the CRA investigator. However, this decision shows the increased willingness of the CRA to prosecute donation tax fraud in the criminal courts and the willingness of the courts to convict. While donors to fraudulent donation schemes may not be morally innocent, their culpability does not reach the level of the promoters of these schemes; and it is refreshing to see the CRA prosecuting those responsible, rather than merely reassessing and penalizing taxpayers.

By Robert B. Hayhoe, Miller Thomson

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In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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