The CRA alleges this firm was part of a $63M tax ‘sham.’ Why isn’t it trying to get the money back?

The Canada Revenue Agency and the federal Department of Justice have made a behind-the-scenes deal with a company they continue to allege was part of a tax refund “sham” that tricked authorities into paying out tens of millions of dollars of public money.

Earlier this year, the CRA agreed to suspend efforts to seize assets of Iris Technologies, a Mississauga, Ont., telecom company, and Iris in turn removed the names of specific CRA officials from a lawsuit against the agency.

The Fifth Estate caught wind of the deal when reviewing Federal Court records.

This suspension occurred despite the CRA’s allegations in court that the company was involved in a “sham … designed to deceive,” as well as a writ issued by the Federal Court of Canada in 2020 authorizing authorities to “seize and sell” the company’s assets.

The CRA has alleged in Tax Court filings that Iris was the “banker” in an international scheme that preyed on weaknesses in the Canadian tax system, resulting in the payment of $63 million in illegitimate tax refunds.

As recently as March, the Department of Justice stated in a court filing that the company participated in a scheme to “defraud” the Minister of Revenue, and therefore Canadian taxpayers.

Katrina Miller, executive director of Canadians for Tax Fairness, says that Canadian taxpayers have a right to know more about why the CRA would make a deal with a company it continues to allege was involved in a scheme to “defraud” the government.

“It challenges reason, frankly, to understand how those two things can be true,” said Miller, whose non-profit organization focuses on advocacy around tax policy.

The CRA has declined to answer questions about the agreement. A spokesperson said that the agency does “not comment on the specific details of court cases.”

In an interview last year, Samer Bishay, Iris Tel’s president and CEO, said the CRA’s allegations that Iris was involved in the scheme are without merit, and “if I really did that, why am I not in handcuffs? There is no proof.”

In April 2020, the CRA assessed that tens of millions it wrongly refunded to Iris Tel needed to be paid back, alongside gross negligence penalties. In response, the telecom firm launched more than a dozen court actions related to the issue, hired a lobbyist and initiated a letter-writing campaign.

Lawsuit dropped against CRA officials

Bishay told The Fifth Estate in February that he is prevented from discussing specific details of his agreement with the CRA and Justice Department.

In an email dated Feb. 16, Bishay said Iris Tel “dropped” the names of specific CRA officials from its lawsuit, “in return for [the CRA] not to collect.”

“We continue to sue the minister of revenue though,” he added.

The agreement stands until the conclusion of Iris’s tax court proceedings, according to Bishay.

Four years into the legal battle, no trial dates have been set.

The case has been bogged down over what the Department of Justice called a refusal by Iris Tel to produce emails and attached invoices related to the alleged tax refund claim that “intended to defraud” the government.

The CRA also did not respond to questions about why the deal with Iris Tel would be in the public interest or whether its commissioner, Bob Hamilton, had signed off on the agreement.

Asked last week if he had any additional comment on why the CRA would strike such a deal, Bishay said: “I do not agree with your characterization of the facts. Iris Technologies Inc.’s litigation with the Canada Revenue Agency and attorney general of Canada is a matter of public record, as is the dispute on the correctness and legality of any assessment of any tax or penalty.”