Decision Date: October 28, 2013
Link: Case Summary Document
Citation: [2013] TCC 343 (Federal Taxation Court of Canada, Woods J.)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.


This Canadian case was an appeal against assessments of taxation made against Vo in the 2004 and 2005 taxation years. The assessments denied charitable donation claims of $13,612 and $17,136 in the respective tax years. The case was related to yet another charitable donation tax scam operating in Canada.

In 2009 the Canada Revenue Agency (CRA) had begun an investigation into an extensive charitable donation scam that was propounded by two individuals, Festus Bayden and Eric Armah. In the upshot, Bayden fled the jurisdiction and Armah pleaded guilty and was sentenced to three years in prison. The CRA estimated that almost $10 million of false tax reductions and refunds were claimed under the scheme.

The scheme involved the preparation of tax returns claiming false donations. Taxpayer clients were told by Armah or Bayden, who were preparing their returns, that they could get a larger refund or pay reduced taxes if the client made a charitable donation to a certain charity. The client paid Armah and Bayden for this charitable donation in an amount far less than the amount that actually appeared on the charitable donation receipt or on the tax return as the amount claimed. Armah and Bayden charged their clients approximately 10 percent of the face value of the false charitable donation amount claimed on each return. This was the amount the clients actually paid for their false charitable donations. Armah and Bayden also generally charged each client an additional $40 to $50 for the preparation of each return.

If required, Armah and Bayden provided their clients with false charitable donation receipts in support of the donation credits reported. These donation receipts were in the names of various charitable organisations including, but not limited to:  International Aid and Support Organization, Ave Development Foundation, Jesus is the Answer, The Redemption Power International Ministry, Jesus Healing Center, All Nations Full Gospel, City Chapel Ministries International, Peace Light Ministries, Liberty Parish, Canafrica International Foundation, Redeemer’s Victory Church and Pentecostal Assembly Church International and Christ Power Mission.

Vo’s alleged donation receipts were in the name of the Ave Development Foundation (the Foundation). After proffering several versions of events, Vo testified that he gave donations in the form of cash to an individual who prepared his tax returns. The purported donations were roughly $1,300 and $1,700 respectively, which was ten percent of the donations claimed.  Vo stated that he wanted to help poor children in Africa, and that he did not know how this would impact his taxes.

In Canada, section 118.1 of the Income Tax Act sets out the legal framework for individuals to claim credits for charitable donations made during a taxation year. The question on appeal was simply stated: Did Vo make gifts to a charitable organisation in 2004 or 2005? Her Honour had no difficulty in answering this question in the negative. The Foundation was not a registered charity in the relevant taxation years (though it was registered later), and it was clear that Vo had only contributed a fraction of his claimed donations in cash.  In addition, there was no evidence that any of this cash was actually received by the Foundation.  In Her Honour’s view, it had no doubt been pocketed by the promoters of the scheme. Her Honour rejected the notion that Vo had a charitable motive in his ‘donations’, and that he did not understand the implications of the scheme. The appeal was dismissed with costs.

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