The Canada Revenue Agency has stripped an Ottawa-area charity of its charitable status after a damning two-year audit showed it was a front for a tax shelter scam offering big receipts for small donations.

The CRA ruling found that Healing and Assistance Not Dependence Canada expended a “proportionally negligible amount” of its income on charitable activities, making it ineligible to grant tax receipts.

The law says a charity must act exclusively for a charitable purpose to give tax receipts.

The charity purports to “encourage and assist and serve alcoholics, chemically dependent persons and their families, friends and associates primarily, but not exclusively within the Jewish community.” It has no website and no listing in the Yellow Pages.

Tax shelters allow people to avoid paying income tax. Tax-free savings accounts and RRSPs are examples of legal tax shelters.

Illegal, so-called aggressive shelters promise inflated tax receipts for nominal donations.

A company might ask you for a donation of $100 and promise you a tax receipt for $1,000. The company might claim your money is buying bulk supplies that,

if purchased individually, would be worth $1,000.

Aggressive tax shelters essentially sell receipts, pocketing the donations and bilking the federal government out of millions.

CRA spokeswoman Caitline Workman said tax receipts can be revoked if the government believes the donor should have realized the return was too good to be true, however, she would not say if the agency would revoke receipts donated to Healing and Assistance Not Dependence Canada.

The CRA audit, which took place between Sept. 1, 2006, and Aug. 31, 2008, showed the charity received almost $2.8 million from the Canadian International Aid Program, a registered tax shelter fronted by the Canadian Organization for International Philanthropy (COIP). Healing and Assistance Not Dependence Canada transferred 70 per cent of the money it received to other participants in the scheme, keeping $900,000 for itself. Of this, only $282,000 was devoted to charitable programs.

Even this figure is doubtful. Healing and Assistance Not Dependence Canada claimed to contract out its treatment services to American and Swiss treatment centres, but the CRA found there were no descriptions of how programs were to be delivered on the charity’s behalf.

The auditor wrote “the charity did not, in fact, deliver any of the charitable addiction counselling, treatment, or education programs for which it was ostensibly raising funds.

The CRA also found that 79 per cent of the charity’s income was spent on fundraising, which far exceeds the “reasonable” amount proscribed by law.

The true purpose of the charity, said the CRA, was to receive and transfer donations on behalf of the tax shelter program.

The money the charity funnelled out landed in questionable pockets. Almost $2 million was transferred to the Orion Foundation and PanAggregate Financial Corporation. Orion was the subject of an investigation by the Toronto Star, which found that its head, James Arion (who has gone by many other names), was giving $2,000 tax receipts for $1,000 donations. The CRA is challenging many of those receipts.

The Star showed the Orion Foundation is also connected to the Canadian International Aid Program and COIP, which claims to provide AIDS drugs to infected Africans.

No one from Orion, PanAggregate or COIP would provide comment to the Citizen.

http://www.ottawacitizen.com/business/fp/Charity+loses+status+over+shelter+scam/1675746/story.html

Reviewed by Moishe Alexander