Officials say safeguards need improvement
The Canada Revenue Agency is facing renewed scrutiny after court records showed it paid out another nearly $5-million tax refund based on what it now alleges was a bogus return containing “illogical” and “falsified information,” raising fresh questions about the agency’s internal controls and review processes.
According to documents obtained by CBC’s the fifth estate and Radio-Canada, the refund was issued in May 2025 to Teresa Wallace, a businesswoman from Silverton, B.C., whose hemp and grain processing business reportedly generated about $54,000 a year. The CRA later concluded that the return behind the refund should never have been approved, despite having been flagged for manual review.
“Here we go again. I mean, how many times do you have to learn a lesson?” said a source familiar with the agency’s internal operations, who was granted confidentiality because they were not authorized to speak publicly. “We clearly don’t have the right people or we don’t have the right checks and balances.”
The case is the latest in a series of revelations suggesting the CRA has approved multimillion-dollar refunds without sufficient scrutiny. CBC and Radio-Canada began reporting in late 2024 that the agency had repeatedly paid out large refunds tied to questionable or potentially fraudulent claims. The Wallace payment, according to the reporting, was issued about six months after senior CRA officials and then revenue minister Marie-Claude Bibeau had already been called before a parliamentary committee to explain similar failures.
Federal Court records filed by the CRA in January suggest Wallace’s claim was implausible from the outset. Agency auditors allege that she falsely reported earning $9,999,999 in foreign income in 2023 and claimed to have paid the same amount in Canadian taxes — an “illogical” tax rate of 100%. Based on that, the CRA says, she sought a refund of nearly $5 million on the supposed overpayment, even though the agency now believes no such taxes were paid and the income never existed.
Auditors also noted that Wallace claimed to be both a resident and non-resident of Canada and offered only a vague two-word explanation for the source of the claimed foreign income: “United Nations.” Even so, an assessor approved the return in April 2025, and a second reviewer signed off shortly afterward, allowing a payment of $4,958,716.63 to be released.
The CRA said it only identified the refund as an “outlier” more than two months later, after a senior program officer reviewed the file and determined that one of the forms used to justify the refund was invalid. The agency then reassessed Wallace and concluded that she owed the full amount back, along with interest and penalties, bringing the total alleged debt to $7.9 million.
In January, the CRA successfully obtained a “jeopardy order” from Federal Court to freeze Wallace’s assets in Canada without prior notice. Court records show the agency was able to freeze about $4.2 million in her bank accounts, roughly 54% of the amount it says is owed. Wallace, in court filings, denied trying to move or conceal the funds and asked that the freeze be modified to allow her to conduct ordinary business operations. The court has not yet ruled on that request.
Tax law expert Raphaël Clément said he was baffled that the return had been approved at all. “I’m concerned about this case,” said Clément, a tax lawyer at HEC Montréal business school. “Why wasn’t it [caught] in the first place by the assessor and by the reviewer? How is it possible that she was able to get a refund even with those forms?”
Asked about the case, the CRA said it could not comment on individual taxpayers but maintained that it is continually improving its safeguards. Finance Minister François-Philippe Champagne said he would follow up with the agency. “There’s no two ways about it: We have to do better,” he said.
