Canada’s tax agency paid out millions in bogus refunds tied to conspiracy theories

Floyd Brenz., Philippine Canadian Inquirer
October 17, 2026

Photo Courtesy: CBC News

An investigation into Canada’s tax refund system has uncovered major gaps in fraud detection after the Canada Revenue Agency (CRA) issued more than $40 million in questionable refunds to an Ontario ironworker who followed a debunked conspiracy theory.

Jonathon Pearce, who lives in Temiskaming Shores in northern Ontario, submitted false tax returns in the summer of 2023, claiming he was owed refunds for several previous years. Internal records obtained by CBC’s The Fifth Estate show that the agency began depositing the money into his bank account just weeks after the claims were filed, including a $10-million payment on August 8.

Pearce said he was surprised the payments went through, explaining that he had expected the agency to reject his claims. He later acknowledged that the process appeared to offer an easy way to generate money.

The investigation found that Pearce was part of the so-called “sovereign citizen” movement, whose followers promote unfounded legal theories, including claims that Canada is not a legitimate country and that citizens can access secret government trust funds worth millions of dollars.

Records also showed that Pearce contacted the CRA’s call centre about 10 days before the payments began. According to an investigator who reviewed the call, Pearce discussed both the proposed tax scheme and his beliefs. Despite the warning signs, the agency proceeded with the transfers.

The case was not isolated. Leaked records indicated that nearly $300 million in fraudulent claims connected to the same scheme were identified between May 2023 and January 2024. However, the total amount actually paid out remains unclear.

An internal auditor later noted that the agency lacked a process to verify the legitimacy of the refund requests before issuing payments. The CRA has since said it cannot determine the total amount distributed through such schemes because it does not track fraud according to the personal beliefs or intentions of claimants.

The investigation also identified other people allegedly connected to the movement. In British Columbia, the agency is seeking to recover a reported $5-million refund allegedly received by Teresa Wallace in 2024. Wallace and her partner did not respond to requests for comment.

Some individuals promoting these theories reportedly charge followers or solicit donations while offering guidance on how to claim refunds. Pearce credited Vancouver-based figure AJ DeSwart with reviewing his documents before he submitted them.

The findings have raised questions about how large payments could be released without adequate verification, particularly when warning signs had reportedly been brought to the agency’s attention before the money was transferred.

Canada’s finance minister, François-Philippe Champagne, said he was unaware of the specific allegations and would look into them. CRA Commissioner Heather Evans declined to be interviewed for the investigation.

The agency has not provided a total estimate of the public funds lost through the alleged schemes, leaving the full financial impact uncertain.