Promoter of PIC scam jailed 7 months for fraudulent PIC claims

12 Feb 2018

Xu Feng Jia (“Xu”), a business owner of several tuition agencies, was charged and convicted for submitting false information to the Comptroller of Income Tax in order to obtain Productivity and Innovation Credit (PIC) cash payouts totalling $70,130.40. The court sentenced Xu to 7 months’ jail and ordered him to pay a penalty of $257,436, three to four times the amount of the various cash payouts wrongfully obtained.

Facts of the Case

Between September 2012 and December 2012, Xu orchestrated the submission of nine fraudulent PIC claims to IRAS.

  1. Entities directly under Xu’s control

Four of these claims were made by entities directly under Xu’s control, which included Edward Home Tuition Agency, Edward Education Consultancy Pte Ltd, A Tick For That! Education School LLP and Friends! Learning Centre. At these entities, he was either a sole proprietor, partner or director, and he made all corporate decisions.

Xu had fraudulently misrepresented to IRAS that these entities were entitled to make PIC claims by stating that these entities had three local employees when they were in fact, volunteer tutors; he also represented that these entities had made qualifying PIC expenditures when the expenses were either fictitious or personal expenses made by volunteer or part-time tutors under these entities.

  1. Entities to whom Xu sold his software

The five remaining fraudulent PIC claims were made by entities to whom Xu had sold his tuition-matching software titled “iManage”. He assured them that they would be able to get reimbursement from the government for the purchase of the software by way of a PIC cash payout.

Xu assisted the sole proprietors of the five entities to qualify for the PIC cash payouts by providing them with particulars of individuals unrelated to the businesses to be listed as their local employees on their PIC forms. To make these individuals appear to be legitimate employees, Xu used the respective sole proprietors’ SingPass accounts to make Central Provident Fund (“CPF”) contributions for these listed “employees”.

The five sole proprietors were convicted at the end of 2016 and ordered to pay two times the amount of the cash payouts that had been wrongfully obtained, as well as a maximum fine of $5,000.

 XFJ

PIC Promoters Abusing the PIC Scheme

The PIC scheme was introduced to encourage productivity and innovation activities in Singapore. It is meant for qualified businesses with real productivity-enhancing investments.

In a typical fraudulent PIC scam, the PIC promoter may assist claimants by providing false documentation to help support the expenditures declared in their PIC cash pay-out applications. Such documentation may include false employment contracts, working timesheets, payment vouchers, product flyers or brochures, quotations and invoices.

In addition, where the claimants do not fulfil the PIC application condition of three local employees, the PIC promoter would provide the names and particulars of up to three unrelated persons just for the purpose of falsely representing to IRAS that the claimants have met the prerequisite of three local employees. These false employees could include friends, relatives, retirees and unemployed persons. Some of these false employees might not have known that their names had been used for PIC claims.

In return for facilitating the false PIC claims, the PIC promoter may take a cut from the PIC cash pay-outs given to the claimants.

Severe Penalties for Abusing the PIC Scheme

IRAS takes a serious view of any attempt by claimants, vendors or consultants to defraud the government. Offenders convicted of PIC abuse will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained, and a fine of up to $50,000 and/or imprisonment of up to five years.

Reporting of Malpractices

Businesses that wish to report malpractices or potential abuses of the scheme can write to:

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

Email: ifd@iras.gov.sg

 

Inland Revenue Authority of Singapore