Taxman has recovered or blocked $3m in payouts for fake productivity claims
By Theresa Tan, The Sunday Times, 6 Apr 2014
A scheme that gives businesses cash payouts when they act to boost productivity has turned up a growing number of cheats.
Since the Productivity & Innovation Credit (PIC) scheme was introduced in 2010, the tax authority has probed 158 cases and either recovered or blocked payouts in 49 cases involving a total of almost $3 million.
Under the PIC scheme, companies qualify for tax deductions or cash payouts if they invest in areas such as staff training, information technology or automation equipment, as well as research and development.
The Inland Revenue Authority of Singapore (IRAS) caught businessmen trying to cheat by:
Using fake documents to claim for non-existent purchases or inflating how much they had spent;
Creating a shell company to claim for purchases of equipment, when there was no business activity and no such purchase;
Listing relatives and friends as staff, when they did not work for the company, to meet the minimum number of local staff required to qualify for the scheme.
As more such cases surfaced, IRAS set up a nine-member task force last August to focus on busting PIC fraud.
Miss Loh Lee Kim, IRAS assistant commissioner of investigation and forensics, told The Sunday Times: "The task force often visits businesses to check on them. For some businesses, the minute we arrive at their office, they withdraw their claims."
So far, two men have been jailed for PIC fraud.
Last September, the director of an IT firm was jailed for two months for fraudulently claiming a cash payout of about $58,000.
The 34-year-old had used fake invoices and lied that his firm spent almost $200,000 on computer equipment it never bought.
He had to pay a penalty of about $232,000 - four times the sum fraudulently claimed - and the firm had to pay the same amount, plus a $10,000 fine.
In February, a 47-year-old man was jailed for five weeks for faking a $60,000 claim on automation equipment costing almost $170,000 he had never bought. In fact, the company he set up was never in business either. He and the firm had to pay a penalty of $180,000 each and the firm was fined a further $8,000.
Miss Loh said IRAS will be prosecuting more suspected cheats, but declined to elaborate. She warned those trying to abuse the scheme that "they should really sit up because we are looking at them".
Businessmen interviewed said some may try to cheat because the scheme is broad-based, applies to all businesses and offers generous cash payouts.
For example, if a company buys $100,000 worth of IT equipment, it can apply to get back $60,000 in cash - or 60 per cent, subject to a maximum expenditure of $100,000 a year.
Mr Chan Chong Beng, chief executive of interior furnishings firm Goodrich Global, said he would not be surprised if there were vendors who inflated their prices on paper to let their clients claim larger PIC payouts.
"Small and medium-sized enterprises are facing a cash crunch now and some people who are desperate for cash would resort to anything to solve their problem," he said.
In its last five financial years, IRAS investigated 691 cases involving all types of tax fraud, and recovered about $248 million in taxes and penalties.
Many decline reward for exposing tax cheats
Tax authority finds that most whistle-blowers just want to right wrongs or are out for revenge
By Theresa Tan, The Sunday Times, 6 Apr 2014
Most whistle-blowers who report tax cheats are not doing it for the money.
Eight in 10 people who tip off the Inland Revenue Authority of Singapore (IRAS) do not want a reward, now worth up to $100,000.
Since 1992, when the cash reward for whistle-blowers was introduced, only three have accepted $10,000 each.
Miss Loh Lee Kim, IRAS assistant commissioner of investigation and forensics, told The Sunday Times: "We think most informants don't want the reward because they feel that something wrong is happening and they just want the right thing to be done."
But some may be out for revenge against the tax cheat for some personal reason, she said. Tip-offs come from business rivals, employees, family members, neighbours and cheated spouses, among others.
IRAS receives about 900 tip-offs each year, looks into all of them, but investigates only about 5 per cent as the bulk turn out to be unfounded allegations.
"It's very common for people to tell us, 'Mr A is very rich, I think he didn't declare his taxes, go and check on him'," said Miss Loh. "Of course, we will do our due diligence, but what we want is a very specific description of the modus operandi and, where possible, documentary evidence."
The whistle-blower reward used to be 10 per cent of the tax recovered subject to a maximum payout of $10,000. In 2010, the reward was raised to 15 per cent of the tax recovered, or up to $100,000.
Nobody has received the bigger payout, but Miss Loh expects a few whistle-blowers to be offered about $100,000 each soon. She declined to say more.
She said IRAS guards the identity of informants closely and only a few officers handling a case know who they are. Whistle-blowers are paid a reward only if the information they provide leads to tax being recovered.
One whistle-blower who did not ask for monetary compensation alerted IRAS to a Filipino salesman working in a jewellery shop.
He was the mastermind of a syndicate targeting the Electronic Tourist Refund Scheme that lets tourists claim a refund of GST paid for purchases.
He printed receipts from genuine jewellery sales to forge refund tickets, then got his Filipino accomplices to use them to claim the GST refund.
The scam went on for about a year and the salesman made at least $14,000 before he was caught. He was jailed for a year in 2012 and had to pay a penalty of about $43,000 - three times the sum cheated. One accomplice was also fined.
The whistle-blower could have received a reward of close to $2,500 if he or she had wanted it.
Dr Ernest Kan, chairman of the Singapore Institute of Accredited Tax Professionals, said the effectiveness of the whistle-blowing programme lies in getting people to report suspected abuse, but awareness remains generally low.
Whistle-blowers can e-mail ifd@iras.gov.sg or write to Inland Revenue Authority of Singapore, Investigation & Forensics Division, 55 Newton Road, Revenue House, Singapore 307987.
To inform the taxman of your tax errors or omissions made in the past, e-mail iit_compliance@iras.gov.sg
When high-value purchases exceed income
By Theresa Tan, The Sunday Times, 6 Apr 2014
When the taxman goes after potential tax cheats, all sorts of human situations get uncovered.
Like people who admit they have a "sugar mummy" or "sugar daddy" providing cash for large purchases they are unlikely to be able to afford on their income.
Or a married man who pays for an apartment in his lover's name.
So if you buy a condominium apartment or a car that is priced completely out of proportion to your income, expect the taxman to pop by asking where the money came from.
You could receive a "Source of Funds" letter from the Inland Revenue Authority of Singapore (IRAS). Since 2009, it has been sending such letters to people suspected of under-declaring their income.
IRAS assistant commissioner of investigation and forensics division Loh Lee Kim told The Sunday Times: "If you buy assets and we compare the value of your assets and the amount of income you have declared and they are not in sync, you will be on our radar."
IRAS has sent out 4,285 letters over the past five years to query individuals about the source of their money.
These taxpayers had bought "high-value" assets such as property and cars between 2008 and 2012, yet declared small incomes that made such purchases unlikely, Ms Loh said.
They are advised to check their past income declarations and come clean if they had erred or omitted declaring some income, she said.
Most people have been able to justify their purchases, she added. They said their family or loved ones had given them the money. Or they had made money from investments, or were tapping on savings.
As for those with "sugar mummies" or "sugar daddies", Miss Loh said: "These people tell us they have someone who gives them money. But I wouldn't say their numbers are very large."
Take, for example, a woman in her late 30s who did not declare any income for several years, then bought a property in the eastern part of Singapore.
Queried by IRAS, she said a married man in his 50s had bought the property for her and that she was his "second wife".
She produced the bank loan agreement showing that she and the man were borrowers. IRAS established that her lover had the means to finance the mortgage.
From its audits, only 6 per cent of the taxpayers queried had under-declared their income.
They include a married couple who run employment agencies. The couple bought a property even though their declared income suggested they could not afford it.
Queried, they claimed they had savings but could not produce any evidence to back this up. IRAS investigated and found that they had omitted almost $2 million from their declared income over six years.
They were made to pay taxes and penalties amounting to $258,000.
Mr Chiu Wu Hong, a partner at auditing firm KPMG, said that IRAS has wide powers to check on individuals' income and assets.
It can get data from banks and other agencies if it is investigating someone. It can also seize documents it needs.
Mr Wu said: "These 'Source of Funds' letters should serve as a warning to potential tax cheats that tax evasion is an offence and they should come clean and report any under-declaration of income."
The tax filing period is until April 18.
Related
No comments:
Post a Comment