IRAS Cuffs for the First Time in Island-Wide Raids

13 Nov 2019

10 suspected key members of a criminal syndicate were arrested by tax investigators of the Inland Revenue Authority of Singapore (IRAS) during the raids conducted on 23 to 24 Oct 2019 and 12 to 13 Nov 2019. This is the first time that IRAS exercised its newly acquired powers of arrest under Section 83E(1) of the Goods and Services Tax (GST) Act. 

The 4-day island-wide operation was targeted at criminal syndicates suspected of perpetuating GST carousel fraud. The operation involved simultaneous raids on 36 business entities and 73 locations including Kallang Pudding, Tampines and Choa Chu Kang. About 200 electronic devices and business records were seized during the operations [see photos in Annex A (412KB)]. 41 individuals are assisting IRAS in investigations.  

Lawrence Eng, Assistant Commissioner of IRAS’ Investigation and Forensics Division, said, “The profile of tax evaders is changing. In the past, we investigated mainly businessmen who failed to report their income fully, or who claimed certain expenses not allowable for tax purposes. Today, we deal with more syndicated groups whose members may have been involved in past criminal activities. Some suspects can be very uncooperative; they try to destroy paper documents or refuse to hand over evidence. With our new powers of arrest, our investigators can be more effective in bringing the perpetrators to justice.”

 

GST Carousel Fraud

Generally, in carousel fraud, the same goods are traded through contrived supply chains which eventually result in the export of the goods. While these supply chains involve seemingly unrelated multiple companies, they are typically controlled by one mastermind.

To illustrate, a GST-registered Company A acquires the goods and then sells them to GST-registered Company B charging GST on the supply of the goods. Instead of accounting and paying over the GST to IRAS, the Director of Company A (also known as the fraudster) would go missing. The goods are further sold to bogus businesses acting as “buffer” companies before they are finally exported. The exporter company would then claim input GST paid on the exported goods, which is effectively seeking a refund of the GST amount on a fraudulent supply chain -- GST that the tax authority never received in the first place. The goods could even be recycled through subsequent import and onward sales through new supply chains before final export, where the director behind the originating company of the new supply chain would go missing without accounting for GST.  

In some instances, no goods are actually exported and the business transactions are merely a paper exercise, with the sole aim of claiming fraudulent GST refunds. There are also some cases where some of these supposedly exported goods are subsequently sold in the domestic market without GST, which give the fraudsters an unfair advantage over other legitimate businesses which charge GST on the sale of their goods.  

Annex B (165KB) shows a graphic illustration of a carousel fraud.


Severe Penalties for GST Fraud 

IRAS takes a serious view of such fraud and will not hesitate to take stern enforcement actions against the offenders. Anyone who commits the offence of wilful intent to evade or assist any other person to evade GST faces a penalty of up to 3 times the amount of tax undercharged and a fine not exceeding $10,000, and/or imprisonment of up to 7 years.

   

Inland Revenue Authority of Singapore