30 December 2011
A local promoter and organiser of shows and other entertainment acts failed to ensure that its tax returns were accurate. Consequently, Unusual Entertainment Pte Ltd (“UEPL”) was found guilty of wrongly stating the output tax in its Goods and Services Tax (GST) returns, resulting in an underpayment of $502,922.27 in GST. UEPL was ordered to pay a penalty of $601,632.72 and a fine of $10,000.
UEPL pleaded guilty to four charges of under-declaration of GST without reasonable excuse. Four remaining charges were taken into consideration for sentencing.
Wrong output tax amount submitted
GST-registered businesses must charge GST output tax on the sale of their goods and services at the prevailing GST rate.
IRAS’ investigations revealed that UEPL had wrongly declared its output tax for 2005 and 2006. The discrepancy was noticed when IRAS investigators found that sales figures submitted by UEPL for income tax purposes did not tally with the sales figures reported for output tax for 2005 and 2006. Further checks revealed that UEPL had not included the GST collected on tickets sales for both years as output tax in its GST returns.
UEPL was aware that it was required to account for the GST on the tickets sales. Under the Ticket Sales Agreements signed with SISTIC1, it was clearly stated that the responsibility of accounting for GST on ticket sales lies with UEPL. However, UEPL failed to check the GST returns prepared by its tax agent, which resulted in incorrect tax returns. The total sales reported in the GST returns were much lower than the amount for ticket sales over the same period. For example, the sales revenue declared for 2005 income tax was $9,136,361.00, against the $2,810,668.00 declared as total sales in their GST returns in the same year. A comparison would have shown the vast difference between the two sets of figures (more than $6 million), when they should have been close, if not the same. Yet, the mistake went unnoticed as UEPL did not check its GST returns. As a result, UEPL had understated $502,922.27 of GST output tax.
UEPL also made similar under-declarations of output tax in other years. The total amount of tax and penalty involved is $983,859.90.
Accuracy of Tax Returns
Many businesses engage tax agents to prepare tax returns on their behalf. However, these businesses should be mindful that the final responsibility for all tax returns still lies with the business itself. Businesses should work closely with their tax agents to ensure that their tax returns are accurately completed within the prescribed time-frame.
Tax agents have extensive knowledge and understanding of tax laws and are responsible for giving tax advice to help taxpayers fulfil their tax obligations. IRAS believes that majority of them perform their duties professionally. IRAS will not hesitate to take harsh actions against those who help their clients evade taxes or abuse the tax system.
Businesses and individuals could have made mistakes in their tax returns because they were negligent or were unclear about their tax obligations. IRAS does not view such mistakes as tax evasion. Should businesses or individuals discover any errors or omissions, IRAS encourages them to come forward voluntarily so we may help them resolve the issues. IRAS will reduce the penalties for such voluntary disclosures. More information on the Voluntary Disclosure Programme is available in IRAS’ e-Tax Guide (www.iras.gov.sg/irashome/vdp.aspx).
Taxpayers who wish to disclose errors made in their declarations can write to:
Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Reporting of tax evasion
Taxpayers who wish to report malpractices of others that might indicate tax evasion can also write to IRAS at the same address above. IRAS will ensure that the identities of informants are kept confidential.
Inland Revenue Authority of Singapore
1 SISTIC was appointed by UEPL to sell tickets for events and concerts organised by UEPL.