8 November 2011
Mr Tan Kim Teck (“Tan”) thought he could shake IRAS off his trails by burning his business records to destroy evidence of fraud, but IRAS brought him to task for creating false GST claims to defraud the Comptroller of GST. Tan was sentenced to eight months and two weeks’ jail, as well as fined $413,880 in court.
No time-limit on fraud charges
Tan was charged in court with intent to evade tax via TKT Trading (“TKT”) to defraud the Comptroller of GST of $219,596.42 in taxes over an eight-year period from 2000 to 2007. He had made fictitious entries in 29 GST returns and failed to keep proper records as required under the law1.
IRAS can take to task tax evaders for periods beyond the seven-year statutory time-bar where fraud has been committed.
Tan began his business as the sole-proprietor of TKT in 1996. The principal business of TKT is wholesale of parts and accessories for vehicles. He registered for GST in 1998 and was responsible for submitting the GST declarations for TKT since registration.
Fictitious GST entries and destruction of evidence
GST-registered persons can offset the GST they pay on their purchases against the GST they charge on sales, and pay the net difference to IRAS. If a business incurs more GST on purchases than it collects from sales, it can claim a refund of the shortfall from IRAS. Refunds can arise in exports, because exports are zero-rated (i.e. the business need not collect GST on exports) but the GST is incurred on purchases.
Businesses can only claim input tax if they have indeed exported the goods, incurred the GST on purchases and also satisfied the essential conditions for making claims. Businesses may refer to www.iras.gov.sg for details.
IRAS’s investigations revealed that Tan had declared fictitious input tax claims in his GST returns from September 2000 to September 2007, by adding transhipments goods of TKT (these goods were transferred from importing vessels to the exporting vessels and therefore, did not enter Singapore) into the GST returns under the value of taxable purchases when in fact, no GST was incurred. Investigations further revealed that Tan had burned the physical copies of the records so as to impede IRAS’s investigations when he realised that IRAS requested records to assess the amount of tax undercharged.
Subsequently, Tan admitted that he had obtained fraudulent refunds from the Comptroller of GST due to greed.
Tan, the sole-proprietor of TKT, pleaded guilty to the 11 charges of creating false entries in his GST returns to evade tax, and 3 charges for destruction of supporting documents. 18 charges of creating false entries were taken into consideration for sentencing. He faced a penalty of $413,880, which is 3 times the amount of tax undercharged.
Voluntary Disclosure Programme
IRAS takes a serious view of GST-registered businesses that wilfully make false claims for GST refunds or under-charge GST on sales. Tax evasion is a criminal offence punishable under the law and the Court imposes severe penalties for such offences. Businesses or individuals should disclose any past tax evasion immediately. IRAS will treat such disclosure as a mitigating factor when considering the penal charges.
IRAS is also aware that some businesses and individuals could be negligent or unaware of their tax obligations, resulting in mistakes. IRAS views such mistakes differently from tax evasion. In the spirit of encouraging voluntary compliance, IRAS imposes lower penalties for such mistakes disclosed voluntarily by taxpayers.
Those who wish to disclose past mistakes or evasion or report malpractices that might indicate tax evasion should write to:
The Comptroller of GST
Inland Revenue Authority of Singapore
55 Newton Road, Revenue House
Tel. No.: 1800-356 8633
Fax No.: 6351 3553
IRAS would ensure that the identities of informants are kept confidential.
Inland Revenue Authority of Singapore
1 With effect from 1 January 2007, businesses are required to keep records pertaining to prescribed accounting periods ending on or after 1 January 2007 for 5 years. However, businesses are required to keep records pertaining to prescribed accounting period ending before 1 January 2007 for 7 years.
Any person whom without reasonable excuse fails to comply with this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 6 months or to both and, in the case of a second or subsequent conviction, to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both.