CRA paid out  million to a company it now accuses of carousel fraud
CRA paid out  million to a company it now accuses of carousel fraud

A Markham, Ont. company is at the centre of a multimillion-dollar tax dispute with the Canada Revenue Agency, which accuses it of being part of an alleged fraudulent scheme to claim bogus refunds.

Iris Technologies, which sells and exports internet telephone minutes, received more than $120 million worth of refunds between 2016 and 2019, according to CRA records. 

The agency alleges that Iris was involved in a carousel scheme, a type of tax fraud that involves moving goods around a circle of companies to collect tax refunds without paying taxes.

According to CBC’s The Fifth Estate, the CRA says it initially paid out $63 million in “illegitimate” refunds to Iris after facing “pressure” from the company to end an audit. 

The agency later reversed its decision and demanded the money back, along with penalties and interest.

Iris denies any wrongdoing and says it was unaware of any fraudulent activity in its supply chain. 

The company’s CEO, Samer Bishay, has filed several appeals and lawsuits against the CRA, seeking to overturn the reassessments and claiming damages for alleged misconduct by the agency.

The alleged case is one of many examples of carousel schemes that have been uncovered in recent years. 

These schemes have cost Canadian taxpayers hundreds of millions of dollars and have been linked to international criminal networks. The CRA says it is cracking down on them and has increased its audits and investigations.

The CRA said in a statement that it has identified more than $1.1 billion in tax fraud through audits targeting “carousel schemes” since 2017-2018. Carousel schemes involve moving goods or services among several entities to create artificial transactions and inflate the value-added tax (VAT) refunds.

The Fifth Estate, a CBC investigative program, obtained and analyzed documents related to the case. 

The records show that Iris received $600 million US in payments from a single company, LDI Networks, based in Florida, from Oct. 2019 to Mar. 2020 via cryptocurrency exchanges. 

Iris then allegedly used those payments to claim tens of millions of dollars in tax refunds from the CRA, which were denied.

The records also reveal that the payments were circular, meaning that they went from LDI Networks to Iris and its suppliers, then through eight unknown entities, and finally back to LDI Networks. This suggests that the payments were not genuine, but rather part of a scheme to inflate the VAT refunds.

The CRA said it is working with its international partners to combat carousel schemes involving cryptocurrencies.

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