Citation: 2013 TCC 343
Date: 20131028
Docket: 2012-5059(IT)I
BETWEEN:
NGOC NAM VO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
Ngoc Nam Vo appeals in respect of assessments
made under the Income Tax Act that denied claims for charitable
donations in the 2004 and 2005 taxation years. According to the Crown’s reply,
the claims were for donations in the amounts of $13,612 and $17,136,
respectively.
[2]
In the notice of appeal Mr. Vo
submits that the amounts claimed should be allowed because the donations were
made in good faith.
[3]
The Crown made several arguments
in support of the assessments, including a submission that no donations were
made.
[4]
At the hearing, Mr. Vo testified
on his own behalf. Testimony on behalf of the Crown was provided by John Kajin of
the Canada Revenue Agency (CRA).
Background facts
[5]
In 2009 the CRA began an
investigation into an extensive charitable donation scam that was masterminded
by two individuals, Festus Bayden and Eric Armah. The scheme involved the
preparation of tax returns claiming false donations. The CRA estimates that just
under $10 million of bogus tax reductions and refunds were claimed. Bayden
fled the jurisdiction; Armah pled guilty and was sentenced to three years in
prison.
[6]
The transcript below, from Armah’s criminal proceeding,
describes the essential aspects of the scheme.
The scheme operated
as follows: Taxpayer clients attended at E&F to have their tax returns
prepared. Eric Armah or Festus Bayden indicated to their clients that the
client could get a larger refund or pay reduced taxes if the client made a
charitable donation to a certain charity; the larger the charitable donation
the greater the refund or reduction in taxes. This charitable donation was
false in the following manner: The client paid Bayden and Armah for this
charitable donation in an amount far less than what 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 is 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.
When required Bayden
and Armah provided their clients with false charitable donation receipts in
support of donation credits reported. These donation receipts were in the names
of various charitable organizations 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.
[7]
Mr. Vo was identified by the CRA
as someone who participated in the scheme through documents that were seized
from Bayden and Armah.
[8]
Mr. Vo provided donation receipts
for the amounts claimed which purport to show donations in the amounts of
$13,612 and $17,136, respectively, to Ave Development Foundation (the
“Foundation”), which was one of the organizations listed in the transcript
above.
[9]
Mr. Vo’s testimony at the hearing
was startlingly different from his representations in the notice of objection
and the notice of appeal. Mr. 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 is ten percent of the donations
claimed. Mr. Vo stated that he wanted to help poor children in Africa, and that he did not know how this would impact his taxes.
Discussion and
conclusion
[10]
Section 118.1 of the Act
sets out the legal framework for individuals to claim credits for charitable
donations made during a taxation year. The issue in this appeal can be simply
stated: Did Mr. Vo make gifts to a charitable organization in 2004 or 2005?
[11]
Based on the evidence as a whole,
I have concluded that the appeal should be dismissed because Mr. Vo has not
established that he made any gifts to a registered charity during the 2004 or
2005 taxation years. I support this conclusion based on five reasons.
[12]
First, Mr. Vo stated that the
donations were not made in the particular taxation year at issue but in the
following year. Accordingly, if donations were made, they were made in 2005 and
2006. Since no donations were made in 2004, the appeal with respect to this
taxation year should be dismissed.
[13]
Second, the evidence reveals that
the Foundation was likely not a registered charity during the relevant taxation
years. The Foundation only became registered in the following year. This is
sufficient to dispose of the appeal for both taxation years.
[14]
Third, at the hearing Mr. Vo changed
the position that he had previously taken in his notice of objection and his
notice of appeal. Not only were the amounts that Mr. Vo paid a fraction of what
was first alleged, but also Mr. Vo falsely represented in his notice of appeal
that he was satisfied with the bona fides of the donations because he
checked the charitable status of the Foundation on the CRA’s website. Mr. Vo
acknowledged at the hearing that this was not true. This calls into question
the reliability of Mr. Vo’s testimony as a whole to the extent that it was not
supported by other evidence.
[15]
Fourth, there is no evidence that
any of the cash that Mr. Vo paid found its way to the Foundation or to a
charitable organization. Most, if not all, of these funds were likely pocketed
by Bayden and Armah.
[16]
Fifth, in
his testimony Mr. Vo painted a picture of someone who did not understand any of
the tax aspects of the scheme. He said he simply wanted to help poor children
in Africa. This testimony was simply not credible. Mr. Vo was involved in a
scheme that involved a substantial reduction in tax. He also made false
statements in the notice of objection and the notice of appeal. I do not
believe Mr. Vo’s testimony that he had a charitable purpose and that he had no
knowledge of the tax implications of the scheme.
[17]
Mr. Vo has the burden to establish
that gifts were made to a registered charity. He has not satisfied this burden.
[18]
In light of the conclusions above,
it is not necessary that I consider the other arguments made by the Crown.
[19]
The assessments should be upheld
and the appeal will be dismissed.
Signed at Ottawa, Ontario this 28th day of October
2013.
“J. M. Woods”
Email this Content