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The Trudeau government let more than $67 million in GST go uncollected from a start-up airlines over the past several years.
Now the red-faced government is looking to sweep the matter under the rug, claiming privacy concerns.
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In November, the Federal Court in Ottawa ordered all “real properties and immovables” of Flair Airlines be seized and sold to recoup $67,174,123 in back taxes. When the story broke in January, the company tried to dismiss concerns about the payments as relating to import duties, except airplanes aren’t subject to import duties.
There is however a requirement to pay 5% GST at time of import, something Flair appears not to have done as they brought 20 Boeing 737 MAX aircraft over the past several years. The amount owed by Flair matches the GST due on the aircraft but neither the government nor Flair is willing to say much.
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On Feb. 20, that writ of seizure was quietly rescinded after the government and Flair came to an agreement on paying back the money. The agreement comes after months of high-powered lobbying of several ministries and the prime minister’s office by Liberal insiders.
“We don’t comment on client matters,” wrote Andrew Steele, of Strategy Corp, when asked about the 48 meetings he had with government about Flair, including four with the PMO.
Flair didn’t respond directly to questions about how they were able to import the planes without paying the GST, but they did maintain they are in full compliance with the law.
“Regarding the amount in question, Flair refrains from commenting on the specifics of tax credits or their utilization. We maintain rigorous compliance with Canadian tax regulations and regularly seek professional advice to ensure adherence to all legal requirements,” Flair’s Chief Financial Officer Joseph Lee said in a statement to the Sun via email.
That may be technically true now given that Flair has obviously entered into a repayment agreement with the Canada Revenue Agency, but something was clearly amiss last fall when the order to seize and sell the airline’s property to recoup the money was issued. Courts are not in the habit of giving the government the power to seize the assets of a company and liquidate them without a valid legal reason.
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As for repaying a sum that large, it’s not clear how Flair will be able to do so since there is good reason to believe the company is struggling.
Last March, four of Flair’s planes were seized by the company that was leasing them to the airline – the reason given, non-payment. At the time, Flair launched legal action and claimed the demand for payment was “baseless.” While the court will decide who is right, the dispute raises questions about Flair.
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It’s also clear that Canada’s discount airline sector is hurting with Lynx Air announcing it is shutting down just days after a rumoured merger with Flair hit the headlines. Lynx cited inflation, fuel costs, exchange rates and regulatory costs as their reasons for shutting down – all factors that are affecting Flair as well.
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“The repayment is managed in alignment with confidential agreements made with the Canada Revenue Agency. We remain committed to transparent communication and diligent compliance with all regulatory obligations,” Lee said.
There is a good chance taxpayers will never see this money be repaid, especially if Flair follows Lynx and a long line of other discount airlines that didn’t make it.
While the company obviously has a part in this, the bigger worry for Canadian taxpayers is how the government could allow a situation like this to happen. The planes were imported by Flair over a two-year period and somehow more than $67 million in payments due were never noticed until sometime in 2023.
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If this happened with Flair, how many other times and with how many other companies has it happened?
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“As the protection of taxpayer information is of utmost importance, the confidentiality provisions of the Acts administered by the Canada Revenue Agency (CRA) prevent us from commenting on taxpayer information related to specific cases,” CRA said in a statement.
It was the same response from other departments, including the prime minister’s office, which clearly got involved in this file. And we, the taxpayers may never know exactly how and why this happened.
In Ottawa, secrecy trumps transparency – especially when it comes to covering up mistakes by the Trudeau government.
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