A $100-million lawsuit has just been launched against the Canada Revenue Agency (CRA) by a company audited for what the agency calls “tax shelter gifting schemes.”
On Friday, a statement of claim was filed at the Ontario Superior Court of Justice by Ken Gordon, founder of EquiGenesis Corporation, a service that helps high-net-worth investors with tax incentive investment opportunities.
The lawsuit claims that Gordon’s business has experienced over two decades of “harassment and abuse” by bureaucrats at the CRA focused on shutting it down and “punishing everyday taxpayers.”
Ken Gordon, founder of EquiGenesis Corporation (Equigenesis.com)
According to the statement of claim, the “repeated harassment” began in 2003 when the CRA launched an audit on “gifting tax shelters,” or what the agency calls “tax shelter gifting schemes.”
The government has issued warnings to Canadians about these schemes when a taxpayer is presented with a strategy where the tax benefits and deductions they can claim from their donation will equal or be more than their first donation.
“This could take the form of an inflated donation receipt or in some more sophisticated arrangements involve a number of transactions,” explained a CRA notice.
All tax shelter promoters must have an identification number from the agency for administrative purposes. There are tax shelters that offer legal ways to reduce taxes or increase tax credits.
“However, it is important to know that a CRA tax shelter identification number does not guarantee that a tax shelter is legitimate or that the donor is entitled to receive the tax benefits promised by the promoter,” reads the notice.
According to the lawsuit, EquiGenesis’ tax-saving investment plan was approved by the agency and the Tax Court of Canada.
It claims that the audit’s purpose was not to ensure compliance with the law but instead to make “investments unfeasible” by deterring investors from participating and creating “administrative nightmares for thousands of Canadian taxpayers.”
The lawsuit adds that EquiGenesis’ investment programs are only being targeted because of its similarities with “gifting tax shelters.”
It argues that the programs don’t fit the mould of the tax scheme because the business has cooperated with every CRA request for audits and has been “repeatedly determined to be authentic investment businesses that generate legitimate tax benefits.”
The statement of claim adds that EquiGenesis has made the effort to vet programs with the agency, which includes requesting Advance Tax Rulings for the programs. It says the agency has refused to consider them, contrary to historical practice.
“Filing a lawsuit is not a step that we take lightly and one that comes at great cost, but the situation faced by taxpayers is dire,” said Gordon in a statement.
“Many Canadians have their own stories of abuse at the hands of the CRA. It’s about time somebody fought back. This is about holding the unelected bureaucrats at the CRA accountable for their dismal treatment of taxpayers.”
Gordon is suing for $ 100 million in damages for “misfeasance,” or wrongful use of lawful authority, and “negligence.” He’s also suing for $10 million in punitive damages.
The CRA said that it has no response at this time.
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