VANCOUVER, B.C. – Truckers who buy rigs are entitled to a special refund of Goods and Services Tax, but to claim that credit, you have to genuinely purchase a truck.
If you cook up phoney truck sales, then try to claim back the GST on them, you’ll be in big trouble with the taxman, a recent court case shows.
He promptly registered with the Canada Customs and Revenue Agency (CCRA) as a GST collector for his trucking business.
After filling out a couple of forms, within three weeks he got a cheque back from the taxman for about $10,400 – representing the GST he’d paid on the vehicle.
But he’d never collected (nor handed over) a penny in GST to the government.
All business people – truckers included – are required to collect GST, but they’re also entitled to claim an “input tax credit” for whatever GST they’ve paid to run their businesses.
That credit is usually deducted from whatever GST they’ve collected, but some truckers are entitled to special GST treatment.
Because the transport of goods often involves “interlining” – the movement of cargo from one carrier to another – it’s only the last carrier in the chain who actually gets paid by the customer, so it’s that carrier who collects (and pays the government) the GST charged on the whole delivery job.
And even though intermediate carriers don’t collect any GST, they’re still entitled to claim their input tax credits – that’s how Rodney managed to get a GST refund without collecting any GST.
The whole transaction seems to have given Rodney an idea: Why actually spend the money to buy the truck when you could create a phoney purchase, then simply fill in the forms and collect thousands in GST refunds?
The CCRA didn’t seem to do much checking.
The big problem with that is it’s fraud.
Rodney, along with his company, ended up in court last September (2003) charged with 63 offences under s. 327 of the Excise Tax Act – mostly for making a false or deceptive statement in a tax return and obtaining a refund to which he wasn’t entitled.
Crown attorney Janna A. Hyman told the court Rodney “engineered” 37 fraudulent GST returns claiming refunds of $177,300.
The CCRA actually paid out $119,509.
Rodney didn’t do this alone, she said.
He had help from Robert Keith Booker, who had an insolvent gift business with a handy GST number.
Booker revived the business and created a company called S&M Trucking – which also started claiming GST refunds on truck purchases.
Booker told the court he had nothing to do with the fraud.
He was broke and on welfare and he basically allowed Rodney and his bookkeeper, Dan Bristow, to use his apartment mailbox as a postal drop.
They had a key and he didn’t know what letters came and went.
But it was a Booker transaction that blew the scam wide open. On July 7, 1999 CCRA auditor Stan Romich became suspicious of a $10,144 tax credit claim from Booker, so gave him a phone call at the apartment, which was his business address.
Someone identifying himself as Booker answered and said he was running a trucking business doing runs between Calgary and Edmonton for a B.C, company called Bayridge Trucking.
Romich asked for a copy of the bill of sale for the truck and the next day received a fax showing Booker had purchased a highway tractor from Volvo Trucks of Vancouver for $144,618 including $10,144 GST.
The document made Romich’s alarm bells go off immediately and he called Booker again.
This time, a man identifying himself as Booker told the auditor he wasn’t in the trucking business, and denied he’d had the prior conversation.
Romich ordered an investigation which two years later, resulted in a raid on Rodney’s and Booker’s residences.
In Rodney’s place, raiders found a blank phoney bill of sale from Volvo Trucks plus a typewriter which matched up to the typeface on a phoney bill of sale.
The court also heard that Rodney had used the same phony GST claim scam with at least five other friends and family members whom he successfully persuaded to “pretend” to operate a trucking business.
GST auditor Lee Lim became suspicious of a March 1999 $10,364 refund claim through a company called Macado Enterprises, operated by Robert Owen, who turned out to be a business associate of Rodney’s.
(A forensic examiner later determined that Owen’s signature on the refund cheque was in fact Rodney’s).
But Lim didn’t spot anything wrong with the phoney bill of sale that “Owen” faxed him, so he authorized the refund.
(John Williams, president of Volvo Trucks of Vancouver testified the document was a compete forgery and no such truck had ever been sold by his dealership).
Rodney attempted to defend himself by blaming everything on Owen and Bristow.
They had access to his apartment and conducted the illegal scheme behind his back while he was absent.
But Vancouver Provincial Court Judge David I. Smyth didn’t believe him.
While Owen and Bristow may have been involved in some of the frauds “the evidence against Rodney is overwhelming that he took part in all of them,” Judge Smyth said in a ruling last Oct. 31 (2003).
What really nailed Rodney was handwriting evidence given by CCRA forensic examiner Samiah Ibrahim, who found his penmanship on most of the phoney paperwork. And at his apartment tax authorities found the typewriter used to forge some documents plus blank dealership sales agreements.
The GST refund cheques were also mostly deposited to Rodney’s bank account.
“Rodney received tens of thousands of dollars in benefits from these frauds,” Judge Smyth noted.
“There is no explanation whatever for why Owen or anyone else would cut him in on the profits except that he was a party to what was going on.
“The whole of the case leads inevitably to the conclusion that he was instrumental.”
The evidence against Booker was less clear but was still damning – especially his dealings with CCRA auditor Romich in July 1999.
It was “absurd,” said the judge, to say it was only a coincidence that a counterfeit sales agreement would be faxed to Romich’s office shortly after he spoke to a man at Booker’s home who told him that the refund claim he was auditing concerned just such a truck.
“The man he spoke to can only have been Booker.”
He found Rodney guilty on all 63 Excise Tax Act charges and Booker guilty on 18. Advance Logic Transport was found guilty on one count.
Gary E. McShane of Dickey, Browning, McShane, Dunne in New Westminster, B.C. represented Rodney and Advance Logic. He did not return Truck News’ calls.
Booker represented himself.
Neither Rodney nor Booker could be reached for comment.
On Dec. 24, 2003 Rodney was sentenced to five years in prison and fined $148,011.
His company, Advance Logic Transport was fined $14,961.
On Jan. 22, 2004 Booker was fined $19,340 for receiving refunds by making fraudulent entries on GST returns.