Ontario’s Iristel says CRA battle prevented it from spending on airwaves in rural areas

Iris Technologies Inc. says a continuing battle with the Canadian Revenue Agency over tens of millions of dollars in GST and HST refunds the company says it is owed has prevented it from acquiring the airwaves it needs to expand into more rural communities.

Markham, Ont.-based Iristel, a privately held telecom that owns northern wireless carrier Ice Wireless, won eight blocks of the coveted spectrum in the recent auction, which generated $8.91billion in revenue for the federal government. The mid-band airwaves, which are in the 3,500megahertz range, are considered beachfront property for 5G services because they’re able to carry larger volumes of data over long distances.

During the highly competitive auction, Iristel won a block of spectrum in western Newfoundland, one in Labrador, two in Nunavat, two in Northwest Territories and two in Yukon. The company was eligible to bid on spectrum licences that were set aside for smaller carriers, a policy introduced by Ottawa to encourage new entrants into the wireless market.

However, Iristel says that if the CRA were not withholding more than $80-million of its money amid an audit that has lasted nearly two years, it could have bid on many more spectrum licences in Northern and Eastern Quebec, Newfoundland, New Brunswick and rural Ontario.

Iristel, which operates a voice network in all of Canada’s provinces and territories, is in the midst of a legal battle with the CRA, which alleges that Iristel may be using a “carousel scheme” to wrongly claim refunds of GST and HST that were never actually paid. Samer Bishay, president and CEO of both Iristel and Ice Wireless, denies the CRA’s allegations.

“While we’re delighted with these eight blocks, the CRA has deprived us of potentially landing 80 other blocks that would serve hundreds more rural communities, many of which are Indigenous,” Mr. Bishay said in a statement. “On the one hand, the federal government is wisely setting policy to bolster competition, and on the other hand, its tax department is doing the opposite.”

A spokesperson for the CRA said that confidentiality provisions in the Excise Tax Act prevent the agency from discussing details of a specific file. A spokesperson for Industry Minister François-Philippe Champagne declined to comment, noting that the matter is currently before the courts.

Exporters are permitted to claim refunds on sales of goods and services made outside of Canada, which is what Iristel – which generates the majority of its revenues from the U.S. – has done. The company claims it is owed more than $80-million in refunds for the period between Sept. 1, 2019, and Feb. 29, 2020, and is seeking an interim court order for the CRA to refund it $62.3-million immediately while the agency continues its audit of that time period.

Under a carousel scheme, businesses working in collusion with one another create a fake supply chain and then sell the same goods over and over among themselves. At least one of the companies collects GST and HST, but does not remit the tax to government.

In an affidavit, Vance Smith, the manager of the CRA’s Aggressive GST/HST program, said Iristel’s wholesale long-distance business “bears many of the hallmarks of being a long-distance carousel scheme.”

However, an affidavit from Richard Ainsworth, an expert witness for Iristel and professor of tax law at Boston University and New York University, said Mr. Smith has mistaken the “very normal, consistent, globally recognized attributes of a normal VoIP wholesale market” for hallmarks of fraud. (VoIP refers to Voice over Internet Protocol, a cheaper alternative to traditional telephone service that relies on a user’s internet connection.)

Mr. Bishay has previously said the CRA does not understand the complexities of his company’s international long-distance business and that he is not engaged in fraudulent activity. He has written to senior government officials, including Mr. Champagne, Revenue Minister Diane Lebouthillier and Deputy Prime Minister Chrystia Freeland, asking for the funds to be released, but has received no response.

“This currently tied-up money in the CRA’s coffers could have been used to invest even more heavily in spectrum to bring stronger competition and affordability to more rural communities in Canada,” Mr. Bishay said in a statement.

On the one hand, the federal government is wisely setting policy to bolster competition, and on the other hand, its tax department is doing the opposite.

SAMER BISHAY PRESIDENT AND CEO OF IRISTEL AND ICE WIRELESS