The Canada Revenue Agency paid out $37 million in taxpayer money to alleged telecom scammers, according to a recently unsealed affidavit.
Documents obtained by CBC show that a CRA litigation officer alleged that Gold Line Telemanagement, a Toronto-based company made “material misstatements” on tax returns and was “part of a group of companies that participated in sham transactions.”
The affidavit was kept from the public for 10 months because lawyers at KPMG ,the legal branch of Gold Line, said its release could cause “irreparable harm” to the company.
Pressure from the CBC caused the law firm to eventually reverse its decision to keep the affidavit confidential.
Gold Line has provided prepaid long distance cards as well as other telecom services for decades and denies the CRA allegations.
According to its own court filings, the company stated “there was no deceit, intentional or otherwise,” instead claiming that Gold Line was solely engaged in the long-distance telecom business.
The CRA alleges that Gold Line began acting as a middle party in the telecom industry in 2016, claiming to buy and sell international phone call minutes which were really just “sham” transactions.
Gold Line claimed $37 million in sales tax refunds and received the money from the CRA.
Certain companies involved with Gold Line’s supply chain were already the subject of fraud accusations last year, where the CRA admitted to paying out over $63 million in what the agency now calls “illegitimate” tax refunds.
The CRA now claims to have wrongly distributed $100 million in fraudulent payment since last year to carousel schemes, also known as “missing trader fraud.”
These schemes involve “a group of entities who work together to sell goods to each other, or, at times, provide the appearance of selling goods” and Canadian tax authorities have been aware of this practice for years now.
The scheme involves supply chains of fake companies and invoices which creates the appearance of numerous legitimate business transactions having occurred, then the companies submit fake tax refund claims to be paid out by the government.
Court filings in the case state the KPMG provided Gold Line with external “accounting support” as well as audited financial statements but did not prepare any of the GST returns that are in question.
Gold Line sold over 10 million more minutes than it purchased, according to a CRA analysis.
“There is overwhelming evidence that Gold Line was colluding with its suppliers and customers to deceive the CRA” reads the affidavit.
The CRA alleges that Gold Line either became involved in the scheme through “grossly negligent” practices or knowingly dealt with Canadian suppliers who were not registered to collect GST or HST.
These companies also don’t have proper telecom licences and “had no business location, had no telecommunications experience and had no employees other than the shareholder/director.”
The CRA alleges that “the purchase and sales transactions” made by Gold Line were a “sham,” however the other companies involved in the supply chain also deny these allegations, none of which have been tested in court.