Iristel Sues Canada Revenue Agency for $275 Million: ‘Abuse of Power’ Says CEO

Markham, Ontario-based Iris Technologies, which owns northern carrier Ice Wireless, has filed a $275 million lawsuit against the Canada Revenue Agency and numerous agents, over allegations the latter has hurt its business over the past two years.

A lawsuit was filed on Monday in Federal Court, with Iristel alleging the CRA has caused the company to lay off workers and reduce its expansion plans, as a result of a two-year legal battle over GST and HST refunds it is owed, reports The Globe and Mail.

Iristel says in its statement of claim the CRA was “engaged in a pattern of persistent cat-and-mouse obfuscation and delay” for over 24 months, while also withholding information from Iristel, while failing to grant the telecom “procedural fairness.”

“The defendants negligently, intentionally and maliciously ignored their statutory obligations and misused the audit and assessment powers granted by statute,” says Iristel’s filing. Meanwhile, CRA auditors were alleged to have been “motivated by self-interest, including the impact on their compensation,” claims Iristel.

Samer Bishay, CEO of Iristel, said on Tuesday, “Canadian tax payers probably never heard of TEBA. It’s a bonus paid to auditors for assessments. “Tax Earnings by Audit”. Something seems so wrong for an auditor to get a bonus based on assessing. Specially that you’re guilty until proven innocent in tax court unlike other courts.”

Bishay tweeted Bob Hamilton, the Commissioner of the CRA, to say “for the sake of Canadian tax payers, please correct the mess that’s in your [aggressive] tax planning group before this thing blows up any further.”

The Iristel leader also reached out to Diane Lebouthillier, the Minister of National Revenue. “For the sake of Canadian tax payers, please don’t let this abuse of power and process happen under your watch. I know you wouldn’t accept it if you knew the truth. Have your team check the court documents,” said Bishay.

The CRA claims Iristel is possibly using a “carousel scheme” to falsely claim GST and HST refunds on taxes that were not paid, allegations the company has denied.

Iristel’s lawsuit claims it has suffered from interest and penalties on late payments to its suppliers, while also laid-off employees and has lost customers, due to the CRA.

The telecom, which has the bulk of its business from the U.S., says it is owed $79.6 million in GST and HST refunds from business outside Canada, from September 1, 2019 and February 29, 2020. The money owing caused Iristel to scale back its spectrum auction acquisition plans.

The manager of the CRA’s Aggressive GST/HST program, Vance Smith, claimed in a previous court filing that Bishay’s business resembles “many of the hallmarks of being a long-distance carousel scheme.”

Here’s how the CRA describes a carousel scheme:

In a carousel scheme, a fake supply chain is created by a group of GST/HST registrants who work in collusion. Within the fake supply chain, the same goods are sold over and over among the registrants. At one point during the purchase and sale of goods, at least one of the registrants involved in the scheme collects the GST/HST, but then does not remit the tax to the Government (the so-called “missing trader”).

Iristel has denied it has engaged in any fraudulent activity, noting the CRA does not fully comprehend the complex nature of Iristel’s business.

“This malicious CRA audit has not only cost Iristel hundreds of millions of dollars but more importantly, cost many Canadians access to the internet, the lifeline of the 21st century,” said Bishay in a statement to iPhone in Canada.