IFTAIFTA FraudFraud

Prepared by:Prepared by:Georges SansfaçonGeorges Sansfaçon

Revenu Revenu Quebec Quebec InspectorInspectorIFTA LEC MemberIFTA LEC MemberMesa, Sept. 2005Mesa, Sept. 2005

IFTA Fraud IFTA Fraud

Topics of discussion;Topics of discussion;

-- Joint Canadian / USA fuel tax compliance Joint Canadian / USA fuel tax compliance initiative, initiative,

-- Dyed fuel abuses,Dyed fuel abuses,-- Illegal use of Ifta permits,Illegal use of Ifta permits,-- Types of violations,Types of violations,-- Repeated offenders,Repeated offenders,-- Revenue or Revenue or taxestaxes losses, losses,-- Cases or examples,Cases or examples,

Let’s dive Let’s dive into the subject !into the subject !

JOINT CANADIAN / USA MOTOR FUEL JOINT CANADIAN / USA MOTOR FUEL

TAX COMPLIANCE INITIATIVETAX COMPLIANCE INITIATIVE OverviewOverview

Governmental agencies in the northern and eastern regions Governmental agencies in the northern and eastern regions (Canadian provinces and American state representatives) (Canadian provinces and American state representatives) participating in joint compliance activities participating in joint compliance activities

On the American side - Federal (IRS) and State Revenue Agents On the American side - Federal (IRS) and State Revenue Agents assisted by D.O.T. agents, Customs Officials & State Policeassisted by D.O.T. agents, Customs Officials & State Police

On the Canadian Side - Provincial Revenue Inspectors, D.O.T. Agents, On the Canadian Side - Provincial Revenue Inspectors, D.O.T. Agents, Customs Officials, RCMP, Provincial Police.Customs Officials, RCMP, Provincial Police.

Members from different agencies perform road side inspection at Members from different agencies perform road side inspection at determined sites determined sites

Focused on:Focused on: fuel activity in general and with relation to IFTAfuel activity in general and with relation to IFTA Visibility; support the efforts and respect of the Fuel Tax Laws; andVisibility; support the efforts and respect of the Fuel Tax Laws; and Public awareness: information given to carriers in regards to fuel tax Public awareness: information given to carriers in regards to fuel tax

laws,laws, Always held at specific period of time, during 1 week in September Always held at specific period of time, during 1 week in September

( The time period is flexible) ( The time period is flexible)

Results – 2003/04Results – 2003/04Enforcement TypeEnforcement Type 20032003 20042004

Total vehicles inspected? Total vehicles inspected? 3,8943,894 3,5903,590

Average 2290 non-Average 2290 non-compliancecompliance

What is this?What is this?

82%82% N/AN/A

Total fuel Total fuel samplesample inspectionsinspections

3,8943,894 3,5903,590

Total Total DyedDyed Fuel violations Fuel violations 66 1515

SuspectedSuspected “ “bleachedbleached fuel” fuel” samplessamples

1111 N/RN/R

IFTA Citations issued IFTA Citations issued

5757 5454

(33 missing an IFTA decal, (33 missing an IFTA decal, permit or licence, on permit or licence, on board the vehicle)board the vehicle)

Fuel Fuel TaxTax Violations Violations Quebec :Quebec :

22 22

Dyed Fuel AbuseDyed Fuel Abuse (Specific Examples) (Specific Examples) A small carrier from a neighbouring jurisdiction, during the2004 A small carrier from a neighbouring jurisdiction, during the2004 Cranberry Cranberry

ProjectProject phase phase IIII, was caught using dyed fuel. First, he was fined for illegal , was caught using dyed fuel. First, he was fined for illegal use of coloured fuel and the through Ifta understanding had a surprise after use of coloured fuel and the through Ifta understanding had a surprise after an assessment.an assessment.$ $ 5000.005000.00

A carrier, not registered in his base jurisdiction, but should have been is A carrier, not registered in his base jurisdiction, but should have been is caught in a neighbouring jurisdiction using dyed fuel. First, the company caught in a neighbouring jurisdiction using dyed fuel. First, the company was cited for Ifta, by using a prescribed vehicle, and not detaining a was cited for Ifta, by using a prescribed vehicle, and not detaining a temporary permit or being registered. temporary permit or being registered. Secondly, was fined for the illegal use of dyed fuel. Secondly, was fined for the illegal use of dyed fuel.

Once the information shared, the provincial inspectors went back to the Once the information shared, the provincial inspectors went back to the company.company.Another truck was caught in the company’s yard during the friendly follow-up Another truck was caught in the company’s yard during the friendly follow-up mission.mission.

Surprisingly, this company is not at their first dyed fuel offence.Surprisingly, this company is not at their first dyed fuel offence.This time, the fines started at $This time, the fines started at $1,0001,000. The file has now been transferred to . The file has now been transferred to the audit dept. and the company is under assessment. The audit should the audit dept. and the company is under assessment. The audit should generate some tax dollars “$$$” with all the information received by the generate some tax dollars “$$$” with all the information received by the inspectors.inspectors.

NoteNote;; I know for a fact that another company using the same M.O. I know for a fact that another company using the same M.O. describe her above, was recently assessed for describe her above, was recently assessed for $89,000.00$89,000.00. The company . The company was caught within a short period of time, but at two separate locations and was caught within a short period of time, but at two separate locations and with 2 different units (truck). What a deal! with 2 different units (truck). What a deal!

Dyed Fuel AbuseDyed Fuel Abuse (Specific Examples) (Specific Examples) A truck belonging to a construction company was stopped for A truck belonging to a construction company was stopped for

inspection.  It was found to have coloured fuel in the running tank and a inspection.  It was found to have coloured fuel in the running tank and a ticket for $440 was issued to the company.  Because of the number of ticket for $440 was issued to the company.  Because of the number of vehicles, it was assigned to the field audit section.  An assessment of vehicles, it was assigned to the field audit section.  An assessment of $$160,000160,000 was raised against this company.  This offence was found was raised against this company.  This offence was found because of cooperation of enforcement agencies in a blitz scenario.because of cooperation of enforcement agencies in a blitz scenario.

   2003.  An inter jurisdictional company located in New York State, 2003.  An inter jurisdictional company located in New York State,

crossingcrossingin to Ontario on a frequent basis, but fail to register with IFTA. This in to Ontario on a frequent basis, but fail to register with IFTA. This company was observed 14 times, and instead of issuing an offence company was observed 14 times, and instead of issuing an offence notice for $440, the inspector chose to lay information before the court.  notice for $440, the inspector chose to lay information before the court.  This meant the company had to appear before the court and allowed for This meant the company had to appear before the court and allowed for an increase of penalty. an increase of penalty. The magistrate was so un-impressed with this company and their refusal The magistrate was so un-impressed with this company and their refusal to comply; they were fined $2,500 for each charge, for a grand total of to comply; they were fined $2,500 for each charge, for a grand total of $35,000$35,000..  

2001.  A pick-up truck, with a coloured fuel skid tank in the back, 2001.  A pick-up truck, with a coloured fuel skid tank in the back, belonging to a landscaping company was stopped in a routine check by belonging to a landscaping company was stopped in a routine check by an inspector. The running tank of the vehicle was found to contain an inspector. The running tank of the vehicle was found to contain coloured fuel.  An assessment of coloured fuel.  An assessment of $200,000 $200,000 was raised on the tax owing was raised on the tax owing on the fuel used.  Additional penalties were added for subsequent on the fuel used.  Additional penalties were added for subsequent offences, but were overturned on appeal. This company now complies offences, but were overturned on appeal. This company now complies and uses tax paid fuel in all on-road vehicles.and uses tax paid fuel in all on-road vehicles.

Repeated offenders;Repeated offenders;Yes they exist ! Yes they exist !

I cannot reveal the methods that we all utilize to catch these offenders.I cannot reveal the methods that we all utilize to catch these offenders.We have different tools available to us while performing our inspection We have different tools available to us while performing our inspection duties.duties.You will get the odd case, where a total “Non” compliance will occur.You will get the odd case, where a total “Non” compliance will occur.Call them: HOT Shots or what ever!Call them: HOT Shots or what ever!It may be different, once the company receives a large assessment from his;It may be different, once the company receives a large assessment from his;Provincial or State, Revenue agency. Provincial or State, Revenue agency.

It is not a guaranty that the company will comply eventually.It is not a guaranty that the company will comply eventually.

SOLUTIONS:SOLUTIONS:Let us not forget the possibilities of; Let us not forget the possibilities of;

SuspendingSuspendingRevoking Revoking

and even and even Cancelling, Cancelling,

their Ifta licenses.their Ifta licenses.

Flagging their account until the situation is cleared or payment has been Flagging their account until the situation is cleared or payment has been received!received!

OUT THERE!OUT THERE!

OUT THERE!OUT THERE!

OUT THERE!OUT THERE!

OUT THERE!OUT THERE!

OUT THERE!OUT THERE!

Repeated offenders;Repeated offenders;

-continued--continued-Road side enforcement personnel must be informed of these types of Road side enforcement personnel must be informed of these types of offenders.offenders.Sharing information threw IFTA channels can improve such special cases. Sharing information threw IFTA channels can improve such special cases. Does it work? Does it work? Yes Yes you can be sure it does.you can be sure it does.I have mentioned several examples and given some actual cases. I have mentioned several examples and given some actual cases. I’m confidant that you could all supply me with some similar cases. I’m confidant that you could all supply me with some similar cases. We are out there in the field and see all kinds of situations.We are out there in the field and see all kinds of situations.Our main goal is to have companies and/or carriers respect the laws and Our main goal is to have companies and/or carriers respect the laws and regulations. regulations. What is that ; “famous saying”?What is that ; “famous saying”?

The pen is mightier than the sword! The pen is mightier than the sword! Write reports and collect data. Advise your fellow workers, management, Ifta Write reports and collect data. Advise your fellow workers, management, Ifta personnel and the auditing staff of your findings.personnel and the auditing staff of your findings.Do follow ups. Do follow ups. You will be surprised of the long term results. (Better tax returns!)You will be surprised of the long term results. (Better tax returns!)

$$$$$$$$$$$$$$$$$$ $$ $$ $$$$$$$$$$$$ $ $ $$ $$ $$ $$ $$$$$$$$$$$$$$$$ $$$$$$ $$ $$ $$ $$ $$ $$ $$ $$$$$$$$$$$$

END. $END. $

That’s That’s all all Folks !Folks !