Company has never made cuts before
By Ahmad Hathout
MARKHAM – Iristel is preparing to lay-off staff in charge of its wireless expansion plans, its president told Cartt.ca, as the Federal Court is set to hear its case for the release of tax refunds withheld by the CRA pending its completion of an audit of the company.
Ongoing litigation since late March against the CRA, which has refused to release tax refunds to Iristel on an allegation the company is using illegitimate suppliers for its long distance call business, has stalled the company’s ability to pay suppliers and curbed its plans to expand wireless service in certain areas of the country.
Last month, Iristel CEO Samer Bishay told Cartt.ca $30 million of withheld refunds were slated to go toward expansion and improvements in Newfoundland and Labrador, Quebec and the Arctic.
In a phone interview on Thursday, Bishay said some employees of the company working on those projects will now be terminated, a first for the company, but did not provide details as to when that will happen or how many face unemployment.
The impending layoffs will come against a backdrop of quickly-moving legal developments in the tax case. On Wednesday, the Federal Court of Appeal dismissed a cross-appeal by the CRA arguing Iristel’s case was the exclusive jurisdiction of the Tax Court. The decision means that the Federal Court will rehear the case – Bishay said he hopes next month – and will make a determination on relief for the full amount of $79 million Iristel said it’s owed by the agency.
The Tax Court will look at the case in parallel as the CRA completes its audit.
Wednesday’s decision also dismissed Iristel’s appeal to compel the CRA to release, on an interim relief basis, at least $62 million out of that $79 million, upholding the lower court’s decision in April.
Had the court ordered the CRA to disburse the funds, Bishay said the company would still need to make the cuts to continue operating.
The cuts reveal, in part, some of the concerns Iristel had with the withheld funds. Last month, the CRA and a judge of the appeal court pondered the veracity of a claim made by Iristel that said the company would not be able to survive through mid-April if it does not obtain relief, citing a default on its payments to suppliers.
The net result of the appeal court’s decision is good, Bishay said in a press release.
“I’m confident we will one day win in Tax Court, but the actions of the CRA to use their power in bad faith oversteps the boundaries of good governance and the Court has effectively said so.” – Samer Bishay Iristel
“Yes, we wanted interim relief but this is still a win because the Federal Court will hear our case and whenever the CRA uses these aggressive and intimidating tactics on other taxpayers, our case will be cited,” Bishay said. “I’m confident we will one day win in Tax Court, but the actions of the CRA to use their power in bad faith oversteps the boundaries of good governance and the Court has effectively said so.”
The CRA had previously withheld funds from Iristel as it performed an audit of the company in 2018, but due to Iristel’s financial position, the agency released the funds. It completed the audit in October 2019 and did not make any adjustments to the returns.
Two days later, the CRA commenced a second audit covering January 1, 2019 to February 29, 2020 and withheld the funds in question. When Iristel asked for the funds to be disbursed in the interim, the CRA refused, citing an alleged carousel scheme where tax is collected but not remitted to the government somewhere in the supply chain.
The court noted the agency refused to release the funds despite the fact it didn’t finish the audit, nor did it find anything definitive with respect to foul play.
Iristel also claims the CRA provided “misinformation” to the administrators of the Canada Emergency Wage Subsidy (CEWS) program, which denied a relief request from the company. The company had also applied for loans from the export development fund and the business development bank.
The CRA also slapped Iristel with penalties and interest of roughly $67 million while it conducted its audit of the company. Last month, the agency filed a document with the Federal Court seeking the sheriff of York region to seize property of Iristel’s in Markham, Ontario in that amount to pay down the debt.
Bishay, however, said that the CRA would not enforce the collections pending the court proceedings. The CRA had already enacted a suspension on collections due to the Covid-19 pandemic.
A spokesperson for the CRA said it would not be able to immediately answer a request for comment on Thursday.
