Leaked Files Show CRA Mistakenly Refunded Millions
Leaked internal records have revealed that the Canada Revenue Agency (CRA) accidentally issued a $4.99 million refund to a struggling Quebec auto body company — a payment now at the centre of a Federal Court battle.
According to documents obtained by CBC’s The Fifth Estate and Radio-Canada, the money was sent to Distribution Carflex Inc. in 2023 through the CRA’s automated processing system — with no human oversight. The amount fell just below a $5-million threshold that would have triggered a manual review.
“There should be eyeballs on that transaction, but there isn’t,” said a source familiar with the CRA’s internal operations.
The refund was based on a supposed tax payment for a large capital gain, but auditors later found no record of any such payment. The issue first came to light not at the CRA, but at TD Bank, where the suspicious cheque was deposited.
A costly mistake and a deeper problem
The Carflex case is part of a broader pattern of automated CRA payouts allegedly issued without sufficient checks. Insiders say some fraudsters exploit the agency’s internal review limits by filing refunds just below threshold levels to avoid scrutiny.
“The CRA cannot police itself,” said one source, calling for an external investigation into the agency’s automated systems. Another added, “It doesn’t matter who the minister is — this behaviour is entrenched.”
Officials connected to the agency argue that oversight gaps in its automated systems have allowed millions in suspicious refunds to slip through undetected.
Federal Court showdown
In court filings, the CRA alleges that Carflex “did not have a right to this refund” and that the payment was “generated artificially.” The company’s owner, Yvan Drapeau, denies wrongdoing.
Court documents show that after receiving the $4.99 million, Drapeau withdrew $1.5 million toward a $2-million Montreal condo, later transferred to a trust controlled by a business associate, Jean-François Malo. The CRA froze the remaining funds after TD Bank raised red flags.
Judge Yvan Roy ruled in June that Drapeau’s transactions appeared to be “questionable and potentially fraudulent,” ordering Malo to respond to CRA’s inquiries.
Experts question CRA safeguards
Tax law experts at McGill University, who reviewed the court documents, said the refund could have been prevented if the file had undergone a simple manual check.
“There was not a real person from the CRA looking at the case — it was all done by computers,” said tax lawyer Raphaël Clément. “If a human had looked, they would have noticed the problem immediately.”
The CRA says it is now taking “all available measures to ensure compliance,” though it declined to comment directly on the Carflex case.
