1. IFTA Fraud Prepared by: Georges Sansfaçon Revenu Quebec Inspector IFTA LEC Member Mesa, Sept. 2005

2. IFTA Fraud IFTA Fraud Topics of discussion; -Joint Canadian / USA fuel tax compliance initiative, -Dyed fuel abuses, -Illegal use of Ifta permits, -Types of violations, -Repeated offenders, -Revenue or taxes losses, -Cases or examples,

3. Let’s dive into the subject !

4. JOINT CANADIAN / USA MOTOR FUEL TAX COMPLIANCE INITIATIVE Overview Governmental agencies in the northern and eastern regions (Canadian provinces and American state representatives) participating in joint compliance activities Governmental agencies in the northern and eastern regions (Canadian provinces and American state representatives) participating in joint compliance activities On the American side - Federal (IRS) and State Revenue Agents assisted by D.O.T. agents, Customs Officials & State Police On the American side - Federal (IRS) and State Revenue Agents assisted by D.O.T. agents, Customs Officials & State Police On the Canadian Side - Provincial Revenue Inspectors, D.O.T. Agents, Customs Officials, RCMP, Provincial Police. On the Canadian Side - Provincial Revenue Inspectors, D.O.T. Agents, Customs Officials, RCMP, Provincial Police. Members from different agencies perform road side inspection at determined sites Members from different agencies perform road side inspection at determined sites Focused on: Focused on: fuel activity in general and with relation to IFTA fuel activity in general and with relation to IFTA Visibility; support the efforts and respect of the Fuel Tax Laws; and Visibility; support the efforts and respect of the Fuel Tax Laws; and Public awareness: information given to carriers in regards to fuel tax laws, Public awareness: information given to carriers in regards to fuel tax 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)

5. Results – 2003/04 Enforcement Type 20032004 Total vehicles inspected? 3,8943,590 Average 2290 non- compliance What is this? 82%N/A Total fuel sample inspections 3,8943,590 Total Dyed Fuel violations 615 Suspected “bleached fuel” samples 11N/R IFTA Citations issued 5754 (33 missing an IFTA decal, permit or licence, on board the vehicle) Fuel Tax Violations Quebec : 22

6. Dyed Fuel Abuse (Specific Examples) A small carrier from a neighbouring jurisdiction, during the2004 Cranberry Project phase II, was caught using dyed fuel. First, he was fined for illegal use of coloured fuel and the through Ifta understanding had a surprise after an assessment. A small carrier from a neighbouring jurisdiction, during the2004 Cranberry Project phase II, was caught using dyed fuel. First, he was fined for illegal use of coloured fuel and the through Ifta understanding had a surprise after an assessment. $ 5000.00 A carrier, not registered in his base jurisdiction, but should have been is caught in a neighbouring jurisdiction using dyed fuel. First, the company was cited for Ifta, by using a prescribed vehicle, and not detaining a temporary permit or being registered. A carrier, not registered in his base jurisdiction, but should have been is caught in a neighbouring jurisdiction using dyed fuel. First, the company was cited for Ifta, by using a prescribed vehicle, and not detaining a temporary permit or being registered. Secondly, was fined for the illegal use of dyed fuel. Once the information shared, the provincial inspectors went back to the company. Once the information shared, the provincial inspectors went back to the company. Another truck was caught in the company’s yard during the friendly follow-up 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 $1,000. The file has now been transferred to the audit dept. and the company is under assessment. The audit should generate some tax dollars “$$$” with all the information received by the inspectors. Note;I know for a fact that another company using the same M.O. describe her above, was recently assessed for $89,000.00. The company was caught within a short period of time, but at two separate locations and with 2 different units (truck). What a deal!

7. Dyed Fuel Abuse (Specific Examples) A truck belonging to a construction company was stopped for 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 vehicles, it was assigned to the field audit section. An assessment of $160,000 was raised against this company. This offence was found because of cooperation of enforcement agencies in a blitz scenario. A truck belonging to a construction company was stopped for 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 vehicles, it was assigned to the field audit section. An assessment of $160,000 was raised against this company. This offence was found because of cooperation of enforcement agencies in a blitz scenario. 2003. An inter jurisdictional company located in New York State, crossing 2003. An inter jurisdictional company located in New York State, crossing 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 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 an increase of penalty. 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 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 an increase of penalty. 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 $35,000. 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 an inspector. The running tank of the vehicle was found to contain coloured fuel. An assessment of $200,000 was raised on the tax owing on the fuel used. Additional penalties were added for subsequent offences, but were overturned on appeal. This company now complies and uses tax paid fuel in all on-road vehicles. 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 an inspector. The running tank of the vehicle was found to contain coloured fuel. An assessment of $200,000 was raised on the tax owing on the fuel used. Additional penalties were added for subsequent offences, but were overturned on appeal. This company now complies and uses tax paid fuel in all on-road vehicles.

8. Repeated offenders; Yes they exist ! I cannot reveal the methods that we all utilize to catch these offenders. We have different tools available to us while performing our inspection duties. You will get the odd case, where a total “Non” compliance will occur. Call them: HOT Shots or what ever! It may be different, once the company receives a large assessment from his; Provincial or State, Revenue agency. It is not a guaranty that the company will comply eventually. SOLUTIONS: Let us not forget the possibilities of; SuspendingRevoking and even Cancelling, their Ifta licenses. their Ifta licenses. Flagging their account until the situation is cleared or payment has been received!

9. OUT THERE!

14. Repeated offenders; -continued- Road side enforcement personnel must be informed of these types of offenders. Sharing information threw IFTA channels can improve such special cases. Does it work? Yes you can be sure it does. I have mentioned several examples and given some actual 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. Our main goal is to have companies and/or carriers respect the laws and regulations. What is that ; “famous saying”? The pen is mightier than the sword! Write reports and collect data. Advise your fellow workers, management, Ifta personnel and the auditing staff of your findings. Do follow ups. You will be surprised of the long term results. (Better tax returns!) $$$$$$$$$$$$$$$$$ $$$$ $$$$$$$$$$$$$$$$$ $$$$ $$$$$$$$$$$$ $$$$$$$$$$$$ $$$$ $$$$ $$$$$$$$$ $$$$$$$$$ END. $ END. $

15. That’s all Folks !