A leaked internal file has revealed a stunning error by the Canada Revenue Agency (the “CRA”): a $4.99 million tax refund was paid to a financially struggling Québec body shop, Distribution Carflex Inc., based on a capital gain that the CRA now says never occurred.
Because the refund amount fell just under the CRA’s $5 million threshold for manual review, it was processed automatically, without human oversight. Internal records show the CRA had “no existing mitigations in place to prevent” this type of error, and only after TD Bank flagged suspicious activity was the problem uncovered. By then, $1.5 million had already been withdrawn and used toward a condo purchase.
The matter is now before the Federal Court, where the CRA is trying to recover the funds. The judge has already commented that the refund appears to have been “generated artificially,” and the CRA has called the company’s transactions “questionable and potentially fraudulent.”
This isn’t an isolated case: investigative reporting suggests a broader pattern of large, questionable refunds being issued by the CRA due to flaws in their automated systems. Experts and insiders are now calling for an external investigation into the CRA’s refund and oversight mechanisms.
At Milot Law, we represent clients in disputes involving erroneous refunds, reassessments, and compliance reviews. If you’ve received a refund you’re unsure about, or if you’re being challenged by the CRA on refund eligibility, we can help protect your rights and resolve the matter strategically.
