Sole Proprietor Penalised for Under-declaring More Than $2 Million in Income

24 May 2021

Ng Sen Yoon (“Ng”), the 75-year-old sole-proprietor of Kong Heng Metal Polishing Co (“KHMPC”), had under-declared over $2 million in his personal Income Tax returns for the Years of Assessment (YAs) 2009 to 2012, by incorrectly reporting lower taxable profits for KHMPC. The under-declarations had resulted in $461,753 in taxes undercharged.

Incorrect Charging of Expenses

KHMPC’s taxable profits for YAs 2009 to 2012 were lowered, by charging the following three categories of expenses to its account. These expenses amounted to $2,265,693, and were non-deductible for tax purposes. 

(a)  Private expenses

These expenses were incurred by Ng and his children in their private capacities.

(b)  Capital expenses

These expenses, which included payment for commission fees, insurance premiums and work done on KHMPC’s workers’ dormitories, were capital in nature.

(c)  Expenses unsupported by documents

These expenses were not substantiated by relevant documentation.

Court Sentences

Ng pleaded guilty to four proceeded charges for giving, without reasonable excuse, incorrect information in relation to a matter affecting his liability to tax under Section 95(2)(b) of the Income Tax Act. The Court ordered him to pay a fine of $16,000 and a penalty of $923,506, which is two times the amount of tax undercharged. 

Penalties for Non-Compliance - Giving Incorrect Information Affecting Liability to Tax

Any person who, without reasonable excuse or through negligence, gives any incorrect information in relation to any matter affecting his own liability to tax, or the liability of any other person or of a partnership, will be liable to a penalty that is twice the amount of tax undercharged. A fine and/ or a jail term may also be imposed.

Reporting or Disclosure 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, 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, 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 will ensure that the identities of informants are kept strictly confidential.

 

Inland Revenue Authority of Singapore