Project Manager Used Shell Entity and Falsified Records to Evade Tax

25 Sep 2015

Tang Lai Seng, 51, a former project manager of Yongsheng Engineering Pte Ltd, was sentenced to 7 months in jail for wilfully omitting $321,968 in his Income Tax Returns for Years of Assessment (“YAs”) 2011 and 2012, thereby evading $41,568.06 in income tax. He was also ordered to pay a penalty of $166,272.24, four times the amount of tax evaded.

Shell Entity and Falsifying Records to Under-Declare Income Earned

Tang Lai Seng was employed as a project manager by Yongsheng Engineering Pte Ltd (“YEPL”) from May 2009 to February 2012. He was to receive a share of profits from a project in Sin Ming Drive (the “Sin Ming Drive Project”) as part of his remuneration. 

In Aug 2010, Tang Lai Seng set up a sole proprietorship, TLS Enterprise, for the sole purpose of evading income tax on his share of the profits from the Sin Ming Drive Project. This was a shell entity without any business transactions.

IRAS’ investigation revealed that Tang Lai Seng had approached representatives from two construction entities, and entered into schemes with them to create fictitious contracts for non-existent construction services, to support claims by TLS Enterprise for expenses. TLS Enterprise would issue invoices to YEPL for sub-contracting works for his share of the profit in the Sin Ming Drive Project, and claim expenses for works allegedly carried out by two construction companies through 8 fictitious invoices over the Years of Assessment 2011 and 2012. As a result, Tang Lai Seng under-declared his income by $321,968, and the amount of tax undercharged was $41,568.06.

Summary of Offences

Tang Lai Seng pleaded guilty to two charges under Section 96A for falsifying records resulting in tax evasion. Section 96A was enacted in 2003 to deter serious tax evasion such as preparation or maintenance of false books of accounts or other records. A person convicted under this section is liable to pay a penalty of four times the amount of tax evaded, and a fine of up to $50,000, or a jail term of up to five years, or both.

Similar Case

In a previous case, a business owner was jailed for six months and ordered to pay a penalty of almost $120,000 for under-declaring income of about $150,000 in the tax returns for two Years of Assessment. IRAS’ investigators uncovered the taxpayer’s elaborate scheme to instruct staff to download the actual income records of the company onto a portable hard-disk daily, after which, some of the payment records were deleted from the hard-disk, in particular those that were transacted in cash terms. The file with the incomplete payment records were then uploaded onto the office’s desktop computer. Tax reporting was based on the incomplete payment records and the consequent under-declaration of the business income for two years. The total tax evaded amounted to about $30,000.

IRAS Warns Against Tax Evasion

IRAS takes a serious view of non-compliance and tax evasion. There will be severe penalties for those who wilfully evade tax. Penalties for tax evasion can be up to four times the amount of tax evaded. Jail terms may also be imposed.

Disclosure of Past Mistakes or Reporting of Malpractices

Businesses and individuals are encouraged to immediately disclose any past mistakes. IRAS will treat such disclosures as mitigating factors when considering the actions to be taken. Those who wish to disclose past mistakes, reveal evaded taxes, or report malpractices that might indicate tax evasion, can write to:

Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Singapore 307987

Email: ifd@iras.gov.sg

Cash Rewards for Informant

A reward based on 15% of the tax recovered, capped at $100,000, will be given to informants if the information and/or documents provided lead to the recovery of tax that would have otherwise been lost. All payments are at the discretion of the Comptroller. IRAS will ensure that the identities of informants are kept strictly secret and confidential.