Fraud Awareness Month – A Tax Scam Worthy of a Seinfeld episode. You don’t just sit back and enjoy a good tax scam story… Or do you?
This March was the 18th Anniversary of the government’s Fraud Prevention Month in Canada, aimed at raising awareness for different types of frauds, the risks associated with them, early detection and protection against them.
Tax fraud affects every Canadian. It affects our way of life.
You may not be the victim, but in case you get tempted to do some shady business, you may end up in some serious trouble. And on that note, here is a story of epic proportions, about four housewives from Nova Scotia who almost managed to pass a $3.6 million tax fraud scheme by the CRA.
Running a successful business selling cookbooks, lasagna and salad dressings does not seem suspicious to the least, does it? Especially a family business run by a mother and her three daughters. The elaborate tax scheme that reported $56 million in sales involved fake invoices, expenses and sales reports, and claimed $3.6 million in GST/HST refunds.
There was no evidence of contracts with suppliers or customers, the business did not have employees or a manufacturing facility. Crown witnesses who testified during the trial denied ever ordering from them despite invoices submitted by the accused for a refund.
A women’s clothing store was listed as purchasing $10,000 worth of salad dressing and $8,000 in cookbooks from the accused, but the owner denied any knowledge of such orders. Another business denied their claim of $70,000 worth of sales for 195 cases of lasagna and $40,000 worth of salad dressing.
"The magnitude of the fiction in this case is breathtaking," Justice Gogan of Nova Scotia Supreme Court said. "… When the CRA began to review, and later audit the credit returns, the defendants doubled down on their fraud by supplying fictitious invoices and amending claims in an attempt to hide the massive scale of their fraud."
The women cashed in $276,000 in refunds, but when the claims were at about $3 million, CRA auditors became suspicious and started investigating. During the closing remarks to the court by the accused, the description of housewives making cupcakes was used.
"There were absolutely no cupcakes being made. What was being baked here was a scam of epic portions, made with equal measure of deceit, arrogance, gall and massively misguided creativity. “- said Justice Gogan. "It is my hope that the Canadian public will never be subjected to this recipe ever again."
According to Crown prosecutor Mark Donohue, who is seeking prison time for the accused, this conviction will act as a deterrent for people wanting to commit tax crimes. "That it's not their money, that it's taxpayer money, and that you can't fund your life through fraud, essentially."
Sentencing is now scheduled for May 24 for all four women.