Revenue Canada probe finds small pharmacies not following tax laws

An initial probe by the Canada Revenue Agency into incentives paid by generic companies to pharmacies has found smaller pharmacies are more likely to break tax rules by not declaring the income.

This is according to a federal government lawyer who appeared in courtin Halifax on Tuesday. The revenue agencyasked a judge to sign orders requiring five drug companies hand over information on which pharmacies they pay and how much.

• Canada Revenue Agency probes pharmacy incentives from drug makers

In all, the Canada Revenue Agencyhas requested information from 19 generic drug makers. Most of them have consented to hand it over.

Generic drug companies pay pharmacies incentives in return for stocking their products. Such incentives include rebates, but also perks like concert tickets and trips.

The revenue agency's initial audit centred on Atlantic Canada after auditors stumbled on 13 Newfoundland pharmacies that weren't declaring the incentives.

"The problem with compliance so far were with the small pharmacies or pharmacists,"federal lawyer Caitlin Ward said in court Tuesday.

In December, the Canada Revenue Agencysaid its audit of Atlantic Canada pharmacies had unearthed $18 million in undeclared income.

Pharmacies had also been encouraged to come forward and voluntarily declare previously unreported income. If they did so, the revenue agency said they would not be penalized.