CRA settles case with Fiera Foods

Tax agency approves $20M in deductions after bakery filed appeal

Federal agency agrees to allow $20 million in tax deductions after appeal by North York industrial bakery,

After a series of reassessments found a North York industrial bakery made $25 million in false tax deductions, the Canada Revenue Agency has conceded to an appeal and allowed $20 million of those deductions.

In a settlement reached with Fiera Foods Monday, tax authorities agreed to allow the business expense deductions claimed on temporary labour — after previously finding the claims could not be verified because the temporary employment agencies supplying workers had “no office locations, management nor administrative personnel.”

David Gelbloom, general counsel for Fiera Foods, said the company would continue with the appeal process “for any remaining amounts and are confident that we have complied with all legal requirements.”

Lawyers for Fiera said in court filings that tax authorities had “no proper basis” to deny its business expense deductions or tax credit claims.

In its appeals, the company said it “had a robust system of internal controls and record keeping” to appropriately track temp agencies and ensure they were in good standing.

Tax authorities had alleged in court filings that they were previously unable to reach 80 per cent of the temporary workers Fiera said were supplied through the agencies to confirm their employment and also had difficulty in reaching the temp agencies.

“The sampled agencies had no office locations, management nor administrative personnel,” the revenue agency’s court filings said.

The settlement reached Monday also removed more than $2 million in penalties issued during the CRA’s reassessments in 2015 and 2018.

In a separate but related case, the CRA found Fiera wrongly claimed more than $5.7 million in input tax credits based on unsubstantiated payments to 13 temp agencies between 2010 and 2014.

Input tax credits allow companies to recover sales taxes from purchases and operating expenses related to their business.

In court filings related to the tax credit claims, the CRA said the temp agencies used by Fiera

“had no offices or management team” to “support the amounts claimed on invoices.”

Tax authorities also said the factory’s payments to temp agencies were “below minimum hourly payroll costs” and would not be “commercially realistic” for the agencies to accept.

As a result of those discrepancies, the CRA found Fiera owed $8 million in taxes, interest, and penalties.

Gelbloom said in a statement to the Star Wednesday that the company “strongly believe we complied with all applicable tax laws and that input tax credits were properly claimed.”