Iras recovers S$1.8b from tax cheats in past five years

SINGAPORE — Some S$1.8 billion has been recovered by the taxman in the past five years, including S$2.3 million in taxes and penalties from two partners of a joss-paper company, revealed the Inland Revenue Authority of Singapore (Iras) on Monday (Oct 10). 

The authority said that besides the under-reporting of income and Goods and Services Tax (GST) collected, another common ruse used by tax evaders included claiming fictitious expenses, such as by using a shell entity and falsified records to under-declare income earned. In the past financial year alone, about S$412 million was recovered from cases audited and investigated by Iras. 

It also disclosed that the biggest case of tax evasion in Singapore in the past five years was committed by Chwee Guan Joss Paper Sticks & Candles Trading Co. For the Years of Assessment (YA) 2009 and 2010, the two partners of the company under-reported their share of the partnership’s profits in their income-tax returns. The duo also understated the amount of GST the company had collected from sales for more than nine years. After their ploy was uncovered, they had to pay S$2.3 million in back taxes and penalties in 2013. One of them was jailed for two weeks.

In a case recently reported, the couple who used to own the famous eatery, Kay Lee Roast Meat Joint, were fined about S$329,500 and they were each jailed for four weeks for tax evasion committed in YA 2010 and 2011.

Another taxpayer caught cheating was a former project manager, who created eight fictitious invoices to claim sub-contracting expenses for his sole proprietorship, which was set up to evade income tax on his share of profits from a project. Through that he under-declared his income by about S$321,000 for YA 2011 and 2012. He was charged in court and sentenced to seven months’ jail and ordered to pay a penalty of about S$166,270.

Iras noted that tax evasion is generally more common in businesses with substantial cash transactions, weak internal controls, and those with no, or poor, record keeping. 

It also cited family-run businesses and those who are self-employed or sole proprietors, for example, as having a higher tendency to make mistakes or omit certain income and/or commission information when submitting tax returns. These self-employed individuals may include insurance or housing agents as well as doctors and lawyers. To enhance tax compliance and ensure good record-keeping, Iras carries out educational and outreach programmes in selected industry groups, and has worked with the Singapore Medical Association, and the Law Society, for example.

Iras said not all cases it investigated or audited led to prosecution. Depending on the facts of the case, it may deal with the matter through a stern warning, a composition or a lower charge. 

In a year, the authority receives an average of about 1,000 tip-offs regarding tax cheating or tax evasion, but only about 5 per cent of these tip-offs turn out to be credible, it said.

To detect non-compliance and evasion, it has also developed capabilities in areas such as data analytics.

“Data analytics enables Iras to make use of advanced statistical techniques to sift through its rich repository of information to identify high-risk cases,” it said. “Although the vast majority of taxpayers and businesses in Singapore comply with the tax laws, there is a small group of non-compliant taxpayers who impose an unfair burden on the honest majority.”