Machinery Wholesaler Behind PIC Sham Jailed 46 Months and Ordered to Pay $5.75 million in Penalties

27 Mar 2020

Ng Cheow Chai (“Ng”), director of SMS Machinery (S) Pte Ltd (“SMS”) and precedent partner of Adept Machinery (“AM”), was charged with 173 counts of offences for assisting 83 business entities (i.e. PIC claimant) in submitting false information to the Comptroller of Income Tax in order to obtain Productivity and Innovation Credit (PIC) cash payouts totalling $2.7 million. Separately, Ng was also charged with one count of acquiring benefits from criminal conduct under Section 47(3) read with Section 59(1)(a) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, Cap 65A.

Investigations revealed that Ng hatched a scheme to increase his sales by abusing the PIC scheme. He would instruct SMS’ staff to issue two quotations for each sale – one with the actual price and the other showing an inflated price. False invoices with inflated prices would be provided to the PIC claimants so that they could use the details in the false invoices to fill up their PIC cash payout applications. In some instances, there were no sales at all between SMS and the PIC claimants. The PIC claimants would pay SMS the inflated price as stated in the false invoice. SMS would then refund the difference between the inflated amount and the PIC cash payout amount to the PIC claimants by way of a false purchase from the PIC claimants by Adept Machinery (“AM”), a partnership business of which Ng was the precedent partner. Ng had given detailed instructions in order to create payment records that the PIC claimants had made payments to SMS at the inflated price as well as to ensure that if IRAS called for documents to support the PIC claimants’ applications, all payment records would be available. The effect of this arrangement is that, the PIC claimant would get an SMS machine for free.

Between 2013 and 2016, SMS sold 182 machines to 83 business entities at a total sales amount of $11.2 million, of which $4.7 million was inflated. Ng had wilfully with intent assisted these business entities in obtaining PIC cash payouts or higher cash payouts than they were entitled to, by authorising the preparation of 173 false invoices showing the sales of SMS machines when there were no such sales or showing the sales of SMS machines at inflated prices [see illustration in Annex A (PDF, 210KB)].

Court Sentences

Ng pleaded guilty to 57 proceeded charges, with the rest of the charges being taken into consideration for the purposes of sentencing. The court sentenced Ng to 46 months’ jail and ordered him to pay a penalty of $5.75 million, four times the amount of the various payouts wrongfully obtained. In default of payment of this penalty, Ng would need to serve another 31 and a half months in jail.

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 abusing the PIC scheme 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.

Criminal Records for Offenders Convicted of Tax Frauds
From 1 Jan 2020, tax offences involving fraud and/or obstruction of justice have been included as Registrable Crimes in the 1st Schedule of the Registration of Criminals Act (Cap. 268). Offenders convicted on or after 1 Jan 2020 for registrable tax offences will have their convictions reflected in their criminal records maintained by the Criminal Records Office [see Factsheet in Annex B (PDF, 17KB)].

Reporting of Malpractices

Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering action to be taken. Those who wish to disclose past mistakes or report malpractices 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 a 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 confidential.

 

Inland Revenue Authority of Singapore