IRAS can appoint banks to recover overdue taxes

WE THANK Mr Lim Tong Wah for his feedback and the opportunity to clarify whether banks can step in to recover tax arrears owed by their customers ("Do banks have absolute authority over customers' funds?"; last Thursday).

The vast majority of taxpayers in Singapore fulfil their social obligations by paying their taxes, thereby enabling the

Government to provide public goods and services for citizens' benefit.

A small proportion of taxpayers fail to do so, and refuse to work out alternative arrangements such as instalment plans. To be fair to all taxpayers and to maintain the very high tax compliance rate in Singapore, the Inland Revenue Authority of Singapore (IRAS) needs to recover the outstanding tax payments from such taxpayers.

Under the law, the IRAS is empowered to appoint banks to transfer to the authority the amount of tax owed, drawn from funds held for or on behalf of the errant taxpayer. This form of recovery of overdue taxes is a common practice adopted by the tax authorities around the world, including those in Hong Kong, Australia and the United States.

Any bank in Singapore can be authorised to do so. The Central Provident Fund Board can also be appointed to recover the amount of tax owed by the individual from any monies that are payable to him when he applies to withdraw his CPF savings.

We therefore encourage taxpayers to pay their taxes on time, including via Giro to enjoy up to 12 months of interest-free instalment payments and to avoid missing due dates. Taxpayers can also sign up for SMS alerts at myTax.iras.gov.sg, to be alerted when their income tax bills are issued. We also advise those who face financial difficulties to contact the IRAS to discuss alternative payment arrangements.

Jackalin Er (Ms)
Director (Corporate Communications)

Inland Revenue Authority of Singapore
ST Forum, 8 Jul 2014

Banks legally obligated to make deductions in certain cases

WE ASSURE customers that banks operate based on customers' mandate ("Do banks have absolute authority over customers' funds?" by Mr Lim Tong Wah; last Thursday). Banks do not unilaterally transfer funds without any authorisation from customers.

However, there are exceptions provided under relevant tax Acts when banks can be appointed by the Inland Revenue Authority of Singapore to act as collecting agents to deduct unpaid taxes from the taxpayers' accounts with the banks.

In such circumstances, the banks are legally obligated to make the deductions. We hope this clarifies the situation.

Ong-Ang Ai Boon (Mrs)
Director
The Association of Banks in Singapore
ST Forum, 8 Jul 2014

Other instances when banks move customers' funds without notice

BANKS must generally comply with the customer's mandate and authorisation regarding funds in an account.

However, as stated in the letters ("IRAS can appoint banks to recover overdue taxes" by the Inland Revenue Authority of Singapore and "Banks legally obligated to make deductions in certain cases" by The Association of Banks in Singapore; both published on Tuesday), the IRAS can appoint banks as its agents to collect overdue taxes from account holders.

There are other situations where a bank can move funds from a customer's account without notifying him.

When a customer opens an account with a bank, among the documents he executes is consent for the bank to consolidate and combine accounts, and set off a credit balance in one account against a debit in another account.

So, if the customer has some funds in a savings account but is in default with his credit card account, the bank has the right to transfer the funds in the savings account to offset the amount owing in the credit card account.

Indeed, many defaulting customers have had the unpleasant surprise of having salaries banked in their accounts taken by their banks without any notification to them.

Another situation is where a creditor has issued a garnishee order against a bank for funds in a debtor's account. The bank is legally obliged to hold the funds of the debtor and to pay the funds so seized to the creditor.

Kuo How Nam

President
Credit Counselling Singapore
ST Forum, 10 Jul 2014

Do banks have absolute authority over customers' funds?

I WAS shocked to learn that DBS Bank can transfer funds from account holders to pay outstanding property tax without the customers' authorisation ("Fail to pay tax despite reminder? Bank can step in"; last Thursday).

Are other banks in Singapore, including foreign ones, also allowed to do this?

This is a wake-up call for Singaporeans, to find out that banks can transfer money from their accounts without authorisation.

Do banks have absolute authority over customers' funds?

Is the Central Provident Fund Board also allowed to do the same with members' Ordinary Accounts, especially if they have accumulated more than the Minimum Sum?

The big question is: Where is the safest place to keep our money?

Should I store my savings in a "biscuit tin", or turn to banks in neighbouring countries like Malaysia and Indonesia?

I hope the authorities can clarify the rights of the people. Government agencies should not have unfettered access to citizens' assets and properties.

Lim Tong Wah
ST Forum, 3 Jul 2014

Fail to pay tax despite reminder? Bank can step in
By Nur Asyiqin Mohamad Salleh, The Straits Times, 26 Jun 2014

SINGAPORE'S taxman and DBS Bank yesterday gave an explanation for a retiree's claim that her bank account was hacked into when she forgot to pay her property tax.

The Inland Revenue Authority of Singapore (IRAS) said that when a person fails to pay property tax even after a reminder has been sent, it will appoint a bank to use the person's money which it holds to pay on his behalf. DBS added that it will inform the person in writing before it makes the deduction.

Both organisations were responding to queries from The Straits Times after retiree Irene Yap, 76, claimed at a Central Provident Fund (CPF) dialogue on June 14 that her DBS account was hacked into after she forgot to pay her property tax.

The former teacher said the bank had "scoured" her account for money to give to the IRAS, and questioned whether it was ethical.

But under Section 38 of the Property Tax Act, banks can pay overdue taxes from money held for or on behalf of the taxpayer, DBS said yesterday.

The IRAS said when a taxpayer does not pay taxes by the due date, it will send the person a "notice to pay", with a 5 per cent penalty added.

"The penalty will be waived if (the) taxpayer has genuine reasons for failure to pay," it said. "A taxpayer who is stretched in his or her finances should contact IRAS to work out an instalment plan."

The IRAS website shows payment must be made within 14 days of the reminder.

Yesterday, the IRAS said it will appoint a bank to pay taxes owed to the Government by a person only if he does not respond to the "notice to pay'' reminder. The bank is released as agent only after the tax and penalty are fully paid, said its website.

At the same dialogue, which was conducted by Member of Parliament Hri Kumar Nair, Ms Yap also claimed she was not able to withdraw money from her CPF Retirement Account (RA).

Last Friday, the CPF Board and Senior Minister of State for Manpower and Health Amy Khor cleared the air about her situation. The Board said it will send CPF members who reach their drawdown age a letter to inform them that they can apply to receive monthly payouts from their RA.

Ms Yap was notified four months before her drawdown age in 1998, but she did not respond. In 2012, the CPF Board reminded her again that she could start receiving her monthly payouts. Again, they did not receive any instructions from Ms Yap, said Dr Khor.

The CPF Board said it is in contact with Ms Yap to help her withdraw her RA savings if she wants to. Ms Yap could not be reached for comment yesterday.