CRA duped yet again in Ontario construction tax credit scheme

The Canada Revenue Agency is once again under fire for failing to detect a scam that cost taxpayers tens of millions of dollars. Insiders reveal that a simple Google search or corporate registry check could have easily prevented this fraud from happening.

This time, the scam involved phony businesses claiming Ontario tax credits for renovating or building commercial facilities. The CRA was responsible for processing these tax credits on behalf of the Ontario government, but sources indicate that the agency never bothered to verify any of the claims over a four-year period.

According to briefing notes obtained by The Fifth Estate/Radio-Canada, all claims were accepted and paid out without any review. This raises the question of who will bear the losses from this massive scam – the Ontario or federal government.

Minister of National Revenue Marie-Claude Bibeau has been defending the CRA’s fraud detection systems, insisting that they are robust. However, she has not addressed how the agency was once again duped into paying out fraudulent tax credits without conducting basic verification checks.

The CRA has refused to disclose details about its monitoring strategies in order to preserve the integrity of the tax system. Ontario finance ministry spokesperson Scott Blodgett stated that the CRA is responsible for administering the tax credits on behalf of Ontario, including conducting audits.

The federal agency has acknowledged that it will be challenging to recover the funds that were wrongfully paid out to scammers. Internal memos indicate that the losses are well into the tens of millions and that collection efforts are unlikely to be successful due to the high-risk nature of the claims.

It has been revealed that no department within the CRA was tasked with validating these tax credit claims, and basic information was not requested from applicants to assess any potential risks. This lack of oversight allowed fraudulent businesses to exploit the system and receive payments without any verification.

Minister Bibeau and CRA officials have warned that they will pursue whistleblowers who may have leaked information about the agency’s losses to the media. The scheme to claim bogus tax credits began in October 2020 but was only uncovered in February 2024 after a bank flagged a suspicious deposit to the CRA.

The ease with which fictitious businesses could be created and approved for tax credits was a major concern for CRA officials. No reviews were conducted to validate the legitimacy of new corporations, and no verification was sought for the renovations claimed by these businesses.

The revelations of this latest scam highlight the urgent need for stronger oversight and verification processes within the CRA to prevent further losses of taxpayer dollars to fraudsters.