13 May 2009

The best investment going?

The following is extracted from today's edition of “globeandmail.com”.

It's perhaps the unlikeliest place to park your money but Canada Revenue Agency has turned out to be just the ticket for dozens of companies that, recently at least, have been earning better-than-market rates on tax overpayments.

Corporations have balked when the taxman tried to refund the money, refusing to part with what seemed like a short-term investment sweet spot - at least until Auditor-General Sheila Fraser blew the whistle yesterday, saying Ottawa is now on the hook for $90-million in "unnecessary interest costs."

In her latest quarterly report, Ms. Fraser revealed yesterday that Canada Revenue Agency has run up this bill over three years by paying premium interest rates on what her office said were unnecessary amounts of corporate tax overpayments….

About 50 firms account for two-thirds of the $4-billion in overpayments on deposit - and it was their accounts that were audited.

Ms. Fraser suggested these companies are intentionally balking at refunds of the money because they are earning premium interest rates. For instance, the Canada Revenue Agency noted its overpayment interest rate for December, 2008, was 5 per cent, but the average 90-day treasury-bill rate that month was just over 1 per cent….