A CBC News investigation has revealed questionable practices by a Canadian company that promises bigger tax refunds in exchange for charitable contributions to an HIV-AIDS concern in Africa.
Fight AIDS Save Taxes! (FAST) claims to help people suffering from HIV-AIDS in sub-Saharan Africa through a tax shelter scheme fuelled by money from Canadians willing to circumvent federal tax laws for the sake of philanthropy and profit.
Headquartered out of a strip mall in a remote part of St. Albert, Alta., the organization solicits donations and uses that money to obtain loans to purchase anti-retroviral drugs for African AIDS patients.
Donors are issued tax receipts for the full amount of the loan that they can then use to claim large tax credits on annual income tax returns.
'All we're doing is exploiting an anomaly in commerce.' —FAST presenter
FAST claims that in the last five years, they've recovered $165 million for Canadians by exploiting the tax system.
The company hosts information sessions across the country to pull in new donors.
A complimentary supper is served at company meetings. FAST also conducts internet-based clinics on its services, according to its website.
A CBC News investigative unit attended a recent FAST session in Edmonton with a hidden camera in tow.
There, a company spokesperson tells attendees that their tax-shelter tactic is no different than ones used by the wealthy to exploit tax loopholes.
"This is not the Income Tax Act of the rich, ladies and gentlemen, this is the Income Tax Act of Canada," the presenter says.
The company also says that due to the complexities of financial arrangements made to secure loans from a donor's gift, they may not ever have to repay the debt.
"I find from speaking with people in the audience, a lot of people have thought … that tax shelters are trying to navigate through grey areas of the law or that we're doing something shady," the presenter says.
"All we're doing is exploiting an anomaly in commerce."
'You're not gonna go to jail. They're not gonna come and take your house or your kids.' —FAST presenter
The company admits it tries to drag out any assessment of its tax shelters by the Canada Revenue Agency for as long as possible, claiming that the CRA only has three years to audit donors.
"By the time they're [CRA] done auditing the tax shelter itself, the statute bar is passed and they can no longer audit your personal finances," attendees are told.
"Worst-case scenario is that you pay back the money. That's it. You're not gonna go to jail. They're not gonna come and take your house or your kids," the presenter says.
According to the CRA, there is no shield from an audit. If the agency has reason to believe there has been misrepresentation or fraud, it can conduct a reassessment at any time.
"It could happen, but Canada Revenue Agency doesn't have the time energy or resources to go after somebody they could maybe squeeze $1,000 out of," the presenter says.
In 2007, the CRA issued the following warning on its website:
"Taxpayers should be aware that the CRA plans to audit all tax shelter gifting arrangements. Every audit completed to date has resulted in a reassessment of tax, plus interest," the CRA said.
The agency says it has denied more than $3.5 billion in donation claims from Canadians who invested in similar plans.
'You're looking at potentially being reassessed for the whole amount of your donation receipt, plus interest, plus tax penalties on top of all that.' —Peter Glowacki, Winnipeg lawyer
And a Winnipeg-based lawyer who specializes in charity law says the FAST scheme should be considered too risky.
"You're looking at potentially being reassessed for the whole amount of your donation receipt, plus interest, plus tax penalties on top of all that," said Peter Glowacki.
"You could be out a lot of money at the end of the day. Plus that you might find yourself after the fact having to retain an accountant and a lawyer," Glowacki said.
The federal government had tabled a bill in 2003 making it so that people could only be issued tax receipts for the actual amount they donated, but the bill died after Parliament was dissolved in 2008 for an election.
Bill C-10 would also have limited the tax benefits of charitable donations made under certain tax shelter and other gifting arrangements.