IRAS Investigating 43 Individuals on Suspected GST Carousel Fraud

18 Aug 2016

Investigators of the Inland Revenue Authority of Singapore (IRAS) have, in a two-day island-wide operation on 15 and 16 Aug 2016, conducted simultaneous raids at multiple locations including Tannery Lane, High Street and Kallang Pudding. Computers, mobile phones, SIM cards and business records were seized during the operation. 43 individuals are assisting IRAS in the investigations for their suspected involvement in a Goods and Services Tax (GST) Carousel Fraud. Investigations into the suspected fraud are on-going.    

GST Carousel Fraud  

Generally, in a carousel fraud, the same goods are traded around contrived supply chains within and in some instances beyond Singapore. These supply chains are typically controlled by one mastermind.  

To illustrate, Company A imports goods and then sells the goods to Company B and charges it GST for the supply of the goods. The Director of Company A (aka the fraudster) would go missing without accounting for the GST that he should have transferred to the tax authority. The goods are further sold to bogus businesses acting as “buffer” companies in the supply chains. The goods could be recycled through a series of companies, each liable to GST, and finally exported. The exporter would then claim input GST paid on the exported goods, which is effectively seeking a refund of the GST amount that the tax authority never received. 

In some instances, no goods were actually exported and the business transactions were 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 then sold in the domestic market without GST which gives the fraudsters an unfair advantage compared to other legitimate businesses which charge GST on the sale of their goods. 

Annex A shows a graphic illustration of a carousel fraud.  

Severe Penalties for GST Fraud   

IRAS takes a serious view on such GST Carousel Fraud. IRAS will not hesitate to take stern enforcement actions against these traders and any intermediaries helping them. 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.  

Reporting of Malpractices  

Businesses or individuals are encouraged to immediately disclose any past mistakes. IRAS will treat such disclosures as mitigating factors when considering action 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 

Cash Rewards for Informant

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

Inland Revenue Authority of Singapore

Annex A

Annex A - Graphic Illustration of GST Carousel Fraud