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Privately held telecom Iris Technologies Inc. is suing the Canada Revenue Agency and several of its agents for $275-million, alleging the agency’s actions have forced the company to lay off workers and scale back its expansion plans, costing it significant business opportunities.

The lawsuit filed in the Federal Court on Monday by Markham, Ont.-based Iristel is the latest development in a two-year-long legal battle over tens of millions of dollars in GST and HST refunds that the company says it is owed.

The CRA has alleged that Iristel may be using a “carousel scheme” to wrongly claim GST and HST refunds for taxes that were never actually paid, an allegation that Samer Bishay, president and CEO of both Iristel and Ice Wireless, has denied. (Ice Wireless is a Northern wireless carrier owned by Iristel.)

In a statement of claim, Iristel, which operates a voice network in all of Canada’s provinces and territories, alleges that the CRA has “engaged in a pattern of persistent cat-and-mouse obfuscation and delay” for more than two years, has withheld information from Iristel, and has not granted the telecom “procedural fairness.”

“The defendants negligently, intentionally and maliciously ignored their statutory obligations and misused the audit and assessment powers granted by statute,” the document reads. The CRA’s auditors were “motivated by self-interest, including the impact on their compensation,” the lawsuit alleges.

A spokesperson for the CRA said that the confidentiality provisions of the act that the agency administers prevent it from disclosing information about taxpayers. The agency also does not comment on ongoing court cases, the spokesperson added.

As a result of the agency’s actions, Iristel has incurred interest and penalties on late payments to its customers, suppliers and service providers, the lawsuit claims. The telecom has also scaled back expansion plans, laid off employees, lost customers and suppliers, and was unable to acquire the wireless airwaves it needs during the most recent spectrum auction, the company said.

Exporters are permitted to claim refunds on sales of goods and services made outside of Canada, which is what Iristel has done. The company, which generates the majority of its revenue from the U.S., claims it is owed more than $80-million in refunds for the period between Sept. 1, 2019, and Feb. 29, 2020.

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

Under such a 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.

Mr. Bishay has said he is not engaged in fraudulent activity and that the agency does not understand the complexities of Iristel’s international long-distance business.

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