Towards a deeper understanding of tax evasion: a script analysis of schemes involving donation and tax saving

• In Event: WG-PLACE 5: Crime Scripting

Abstract

Tax evasion results in significant revenue losses for governments that rely on these funds to support social programs and infrastructures. This crime involves various strategies designed to evade tax obligations. Despite the known vulnerability of charitable organizations to fraudulent practices, donation schemes remain an understudied form of tax evasion. These schemes allow individuals to claim tax credits that exceed their actual donations, thereby generating illicit profits. Understanding the different stages of donation schemes is essential for developing effective prevention measures and safeguarding organizations originally established for charitable purposes. Using the crime script approach, this study examines donation schemes to enhance the understanding of tax evasion and its prevention. The study also highlights key actions, actors involved, and the necessary or facilitating conditions that enable these schemes. A thematic analysis of 52 court documents related to 36 cases led to the development of a crime script with five main steps in executing this fraudulent practice: (1) identifying charitable organizations, (2) recruiting investors, (3) preparing the tax return, (4) making the donation and receiving the donation receipt, and (5) cashing profits. Three further steps were identified, expanding the original script from five to eight steps and enabling greater financial gains: (1) obtaining a tax shelter identification number, (2) recruiting promoters, (3) conducting “paper-to-paper” transactions. The findings provide insights for developing targeted prevention strategies, including the oversight of financially distressed charitable organizations, as they are vulnerable to such fraudulent practices.

Authors

• Mylène Mailhot, Université de Montréal

• Étienne Blais, Université de Montréal

• Masarah Paquet-Clouston, University of Montréal