Wednesday 18 September 2013

Some firms abusing productivity grants

IRAS: 1 in 3 claims audited had mistakes; a few were out to cheat
By Toh Yong Chuan, The Straits Times, 17 Sep 2013

MORE companies are using government grants and subsidies to boost their productivity, new figures show.

But the authorities are concerned by a small number of companies that have made fraudulent claims on these schemes.

Last year, about 44,000 small and medium-sized enterprises (SMEs) tapped the Productivity and Innovation Credit (PIC) scheme. That was a 21 per cent jump from 36,400 in 2011, said the Inland Revenue Authority of Singapore (IRAS) yesterday.

The taxman audited a sample of the claims and found one-third had mistakes. It declined to say how many it audited, but added that the firms were warned and told not to repeat the errors.

While most mistakes were the result of carelessness, IRAS said that a handful were out to cheat.

IRAS said it had investigated 60 cases in the past two years and two had been hauled to court. "We want to send the message that there is zero tolerance for any abuse of the PIC scheme," said IRAS assistant commissioner Loh Lee Kim.

The PIC scheme, introduced in 2010, gives tax deductions or cash payouts to firms if they take steps to boost productivity. This includes automation and training.

One company hauled to court was IT firm Greenit. Its owner and director, Khoo Tzyh Shin, was convicted two weeks ago in the Subordinate Court of fabricating invoices totalling more than $193,000, to cheat Iras of PIC cash grants. It is the first conviction for PIC-related cheating.

The permanent resident, in his 30s, is due to face the court later this week. Penalties include a fine of up to $50,000 and up to five years' jail.

Another technology firm, Exel Mitsui Technologies, was charged in July with lying to Iras. Its director, Alex Rajan, faces a fine of up to $10,000 and up to three years' jail.

The IRAS yesterday singled out consultants and vendors as being behind some of the fraudulent claims. They would dangle carrots such as not having to pay any cash upfront and get the firms to sign blank forms in advance to be used to inflate their claims.

These consultants are careful enough "not to leave a paper trail" but their actions are still "akin to fraud", said IRAS' Ms Loh.

She warned that firms are ultimately responsible for the claims and urged those who need help to approach IRAS instead.

Consultants told The Straits Times they frown on such abuses, but some said competition and the lack of compulsory accreditation has allowed bad hats into the sector. "Those who have the Practising Management Consultant certification would have attended ethics classes," said Ms Josephine Teo, 45, a consultant with Bootstrap. The certification by the Singapore Business Advisors and Consultants Council is voluntary.

Mr Ben Tan, 46, owner of consultancy firm ConsultingOne, suggested that IRAS set up a register of consultants which can make PIC grant applications. This is similar to Spring Singapore, which maintains a list of consultants that it partners with to run various SME help schemes.

Association of Small and Medium Enterprises president Chan Chong Beng said smaller SMEs tend to depend more on consultants to do the paperwork.

"Some are genuinely ignorant and they want to focus on running their day-to-day businesses."

"But SMEs should use the PIC schemes to improve their productivity and not buy equipment just because there is a cash grant," he said. He added: "And they should not abuse the scheme, which is designed to help them in the first place."

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