What In FRAP Is Going On Under Part 11.1 Of The 'Forest Act' ?!?!?!
Part 11.1 of the Forest Act authorizes the "Forest Revenue Audit Program," or FRAP, as it is sometimes called without much affection. Unless you have encountered the business end of FRAP up-close, you may not even have heard of it. Yet to date, FRAP has waged a number of existential battles with those it has suspected of underreporting stumpage, and FRAP can pursue its suspicions with surprising zealotry.
Part 11.1 of the Act authorizes "forest revenue officials" to conduct audits in relation to stumpage revenue. Forest revenue officials possess broad powers to enter a premises to inspect records or demand production of records. If, based upon an audit, an official known as the 'commissioner' determines that stumpage was underreported, the commissioner may estimate the outstanding stumpage and make an assessment against the licensee for that amount. If the commissioner determines that underpayment was willful, he or she may also impose a penalty of up to 100% of the assessment and may impose a penalty of up to 25% of the assessment regardless of willfulness.
The problem is with how an "assessment" is sometimes made and what happens afterwards. For example, FRAP may make an assessment based upon cruise information for a stand of timber, notwithstanding that anyone with any experience in the forest sector will tell you that the difference between what is reported in a cruise and what is actually in a stand of timber may vary dramatically. FRAP may also rely upon check-scales of timber from a given cutting authority, even though a check scale of a particular load of timber is unlikely to represent the timber from the stand at issue as a whole. An assessment based upon these types of evidence is inherently unreliable.
An appeal of a commissioner's assessment is available to the Minister of Finance. Yet, once the commissioner makes an assessment, "the onus of proving otherwise is on the person liable to pay the amount assessed." In other words, the licensee must prove that FRAP is wrong, not the other way around. Even more problematic, an appeal does not delay government's entitlement to commence collection proceedings that could substantially interfere with a licensee's wherewithal to defend itself. There is no time limit for the Minister to complete an appeal and experience indicates that an appeal...
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