CRA duped yet again in Ontario construction tax credit scheme

The Canada Revenue Agency is being hit again with revelations it failed to detect a scam, one so obvious that, according to insiders, a simple Google or corporate registry search would have prevented it.

But this time there's a twist.

According to sources, the agency learned earlier this year that it wrongly paid out tens of millions to scammers who used phony businesses to claim Ontario tax credits to renovate or build commercial facilities.

The CRA processed the tax credits on behalf of the Ontario government. But sources say the federal agency was responsible for verifying the claims, and in four years never checked any of them.

The "claims were generally all accepted as filed and paid out without review," CRA briefing notes reveal, according to sources. The Fifth Estate/Radio-Canada are not identifying the sources as they are not authorized to speak publicly.

Who's on the hook?

All of which raises the question: If the CRA was so easily duped into paying out bogus provincial tax credits, who incurs the losses — the Ontario or federal government?

Minister of National Revenue Marie-Claude Bibeau did not respond to an email from The Fifth Estate/Radio-Canada with that question.

Bibeau has defended the CRA repeatedly in the past few weeks in Parliament over revelations it had lost hundreds of millions to scammers, stating that the agency's fraud detection systems are "robust." In recent years, fraudsters have hacked into tens of thousands of taxpayers' CRA accounts, sometimes pretending to be tax preparers to obtain fake refunds through a variety of schemes.

The CRA declined to answer questions about how it was duped again, this time by failing to check basic information such as whether the renovations ever happened or if the businesses were even real.

In order to "preserve the integrity of the tax system," the agency said in a statement, it "does not release specific information related to our monitoring strategies that could jeopardize our efforts."

In a statement, Ontario finance ministry spokesperson Scott Blodgett wrote the CRA is "responsible" for the administration of the tax credits on behalf of Ontario, including "conducting audits."

"Ontario and CRA work together to address non-compliance and implement proactive measures to minimize fraud in the tax credits," Blodgett stated.

Blodgett also did not answer the question about whether Ontario or Ottawa will foot the bill for the losses. The tax credit was announced by Premier Doug Ford's  government in 2020.

According to sources, the federal agency concluded it would be difficult to get the money back — an amount the CRA is tabulating but is well into the tens of millions. 

"Given the high-risk claims detected to date were linked to fictitious or illegitimate businesses, collection was unlikely to be successful," one memo stated, according to sources.

The Fifth Estate/Radio-Canada has learned that the CRA realized that no department at the agency was assigned the job of validating the claims and that it did not request even basic information from the applicants to assess any risk.

According to sources, CRA should have verified the claims before they were paid out. Internal notes show that some CRA officials pointed out that "no verification was requested by the Province of Ontario." 

Bibeau and agency officials have vowed to go after any whistleblowers who may have spoken to the media about how the CRA has been losing hundreds of millions of taxpayer dollars to scammers. Bibeau has said that anyone who breached their obligation of confidentiality could face jail time.  

The scheme to receive bogus provincial tax credits began as early as October 2020, but was only detected in February 2024 after a bank contacted the CRA about a suspicious $90,000 deposit.  That's when the CRA determined it had paid multiple bogus tax credits to "fictitious businesses."

According to sources, CRA officials were concerned about "the easiness" to create a fictitious corporation and stated "no review is performed to validate the legitimacy of new corporations whenever a new corporation is registered."

"No address requested for building in question," one internal note stated, according to sources, meaning no one checked to see if the renovations happened at a specific address or even if the company itself was real.

• If you have tips on this story, or if you were the victim of a hacked CRA account, please call 416-526-4704 or email, in confidence, [email protected] or [email protected]