Written on behalf of Feigenbaum Consulting
Over the last few years, a tax shelter known as the Global Learning Gifting Initiative (GLGI) made headlines when tens of thousands of Canadian taxpayers were notified that a program they were participating in was not legal, resulting in reassessments and taxes owed. Taxpayers and people involved in the fraudulent program have made headlines since it was discovered. In February, 2020, we wrote about an unsuccessful appeal made by one taxpayer, while more recently we covered news about a class action against some of the program’s organizers. The story continues to work its way through the courts. Just last month, one taxpayer appeared before the Tax Court of Canada to ask the court to let her out of an agreement she made to accept the outcome of one of the appeals.
What was the Global Learning Gifting Initiative?
The GLGI has been referred to as the largest tax scam in Canadian history. Taxpayers were asked to make cash donations to a charity known as Millennium. They would then apply to be beneficiaries of the GLGI, which would result in their receiving educational software licenses with market values assigned at up to eight times higher than the amount of their donation. They would then donate those licenses to a second charity called Canadian Charities Association, which would issue tax receipts to the taxpayers. Taxpayers could then record the donations on their tax returns and receive money back as a result.
Taxpayers are issued two choices
The government gave taxpayers options in how to proceed in responding to their reassessments. One option was to accept a settlement offer and waive their right to appeal. This was referred to in the decision as the “settlement agreement.” The second option was to be bound by the outcome of the lead cases which were appeals selected to proceed to trial. This option was referred to as the “agreement to be bound.” Taxpayers could also do nothing, or appeal directly to the court.
In this situation, the taxpayer chose to accept the outcome of the appeals, which were ultimately unsuccessful. She appeared before the court asking to not be bound by that decision.
Can the taxpayer’s waiver of rights to appeal be overturned?
The court noted that three tests must be met for a waiver of a taxpayer’s rights of appeal to be valid. The first is that the waiver must be in writing. The second is that the taxpayer must have full knowledge of their rights. Lastly, the taxpayer must have an unequivocal and conscious intention to abandon those rights.
In this situation, the taxpayer’s decision met all of the requirements. The waiver was provided to her in writing, and the letter also provided her with her options.
The taxpayer told the court that she was not completely clear on what the option of doing nothing entailed. The CRA had a couple of options to pursue against people who chose not to act, including applying to have them bound to the appeals. However, the court did not agree that the ambiguity associated with that option was enough to overturn the taxpeyer’s waiver of rights. As a result, the appeal was denied.
Contact the experienced lawyers at Feigenbaum Law to develop a custom solution to your personal tax planning needs while looking to avoid traps like those encountered by the appellant in this case. We offer services to clients in the US, Canada and around the world. Contact us online to learn more about how we can help or call us at (905) 695-1269 or toll-free at (877) 275-4792.