The Canada Revenue Agency is facing renewed scrutiny after issuing another nearly $5-million tax refund based on what it now alleges was a falsified and “illogical” return.
According to court documents, the refund was paid in May 2025 to a B.C. businesswoman who typically reported an annual income of about $54,000. The agency later determined it had failed to properly review the claim despite it being flagged for manual verification.
Auditors allege the woman falsely declared nearly $10 million in foreign income for 2023 and claimed to have paid the same amount in Canadian taxes — an implausible 100 per cent tax rate. Based on that information, she requested a refund of almost $5 million for an alleged overpayment, even though the CRA now believes no such taxes were ever paid.
Despite multiple red flags, the return was approved by an assessor and quickly cleared by a second reviewer, leading to a payout of approximately $4.96 million.
The agency only revisited the file more than two months later, identifying it as an “outlier” and concluding the refund had been issued in error. The CRA is now seeking to recover the full amount, along with interest and penalties, bringing the total owed to nearly $7.9 million.
In January, the CRA obtained a court-ordered asset freeze, securing about $4.2 million from the recipient’s bank accounts while recovery efforts continue.
The case follows earlier revelations that the agency approved millions of dollars in questionable refunds with limited oversight. A source familiar with the CRA’s internal processes described the situation as a systemic failure, citing repeated breakdowns in checks and balances.
Tax experts have also raised concerns, questioning how such an implausible return passed through multiple levels of review without being flagged earlier.
The CRA says it is continuously updating its safeguards to address evolving fraud tactics but declined to comment on specific cases.
