‘If the CRA gives me money, who are you to f- - -ing question it?’: Conspiracy theorist who claimed $40M in tax refunds prompts CRA process questions

What finally stopped it was his bank, not the tax agency. The case raises uncomfortable questions — how does a claim this outrageous slip through; who covers the loss and what happens when people follow online “no-tax” gurus.

How did a $40-million bogus tax refund get approved?

So how did an ironworker living in northern Ontario convince the CRA he was owed millions in tax refunds? Producers on the CBC’s the fifth estate, an investigative news program, uncovered the answer to this question when the investigation was broadcast earlier in October. According to the fifth estate, the CRA didn’t check or review the refund filings — and started issuing tax refund installment to Pearce within two weeks of receiving his income tax forms.

In total, the CRA paid Pearce $10-million on Aug. 8, 2023; two more scheduled ‘refund’ installments of $10 million and $20 million were issued but halted after Pearce’s bank alerted the CRA to the unusual payments.

There were warning signs the CRA should have caught

According to the CBC investigation, there were warning signs the CRA should’ve caught.

Pearce called a CRA call centre 10 days before the refund arrived and outlined his conspiratorial beliefs. Then there was the refund claim, itself. Turns out his claims for the outsized tax returns were made when he filed a T4A slip — a tax form used to amend past returns. The slip showed no new income and confirmed that no tax had been paid in the first place, but Pearce’s T4A slip did show an update: The tax refund claim for $40 million.

CRA representatives did not immediately respond to Money.ca’s request for comment.

Does a CRA deposit mean the refund is legit?

According to Pearce his claim is vindicated and legitimate because of the CRA’s decision to issue the refund and deposit the money into his bank account. Speaking to fifth estate co-host Steven D’Souza, Pearce bluntly shot down the reporter’s questions stating: “If the CRA gives me money, who are you to f- - -ing question it?”

However, Pearce is incorrect in his assertion.

In practice, a CRA refund can be reversed.

In response to the bank’s flag, the CRA eventually conducted a review of the tax refund claim and, as Pearce told D’Souza, the CRA searched his home two years ago and is continuing to garnish his wages.

What was the rationale behind the out-sized tax refund claim?

According to Pearce, he is owed the $40 million by the CRA as he is a “tax protestor” — an individual who uses false, pseudolegal arguments to claim they are legally exempt from paying income tax CRA.

And Pearce isn’t the only case. The CRA now alleges a woman in British Columbia’s interior received a bogus $5 million refund in 2024.

As one CRA auditor wrote: there is no validation process to verify the legitimacy of these tax refund requests. And, according to CRA documents released by the fifth estate, the tax agency has no idea how much money has paid out in bogus returns to tax protestors, because the CRA does not track fraudulent returns by “personal views or intent.”

Leaked CRA records show that nearly $300 million in bogus “tax protestor” claims have been made between May 2023 and January 2024. It’s uncertain how much was actually paid out.

Cost of making false CRA claims

For any Canadian, the financial cost and legal exposure of making a false tax claim is serious.

If a tax claim is deemed fraudulent, the CRA can impose a gross negligence penalty as high as 50% of the unpaid tax or improperly claimed benefit. Plus, anyone convicted of tax evasion can face fines of 50% to 200% of the evaded taxes and up to five years in jail, while a Criminal Code fraud conviction can bring up to 14 years in prison.