IRAS WARNS AGAINST TAX EVASION
IRAS takes a serious view of errant taxpayers, who do not comply with the need to submit proper tax returns or have wilful intent to evade tax. In the most recent case, Xing Wang Ji Roasted Meat Wholesale Pte Ltd (“XWJ”) was convicted in Court on 21 November 2014 of tax evasion. One of its directors was also convicted of assisting XWJ to evade tax and in addition to paying fine and penalty; he was sentenced to 6 weeks’ jail.
In this article, we explore what is tax evasion, why IRAS takes tough stance against tax evaders and how acts of tax evasion are detected by IRAS. Last but not least, we also revisit some of the publicised prosecutions in 2014 to better understand what constitute tax evasion and its consequences.
IRAS generally believes that the majority of the taxpayers are compliant and errant taxpayers belong to the minorities who intentionally cheat or evade tax. Tax evasion is defined as “a deliberate action by someone to provide inaccurate and incomplete information about their activities in order to reduce their tax liabilities or to obtain tax credits and refunds that they do not qualify for”.
As such behaviour is unfair towards compliant taxpayers who are contributing their fair share towards nation building; IRAS do not hesitate to take action against tax evaders. Penalties for tax evasion can be up to four times the amount of tax evaded and in certain situations, like in the case of XWJ, jail terms may also be imposed. It is also pertinent to note that where fraud has been committed, IRAS can even take the tax evaders to task for periods beyond the five-year statutory time-bar.
Acts of tax evasion are normally uncovered by IRAS through regular audits whose objective is to identify individuals and businesses that do not comply with the relevant tax laws. During such audits, IRAS utilises data analytics, including data-mining and profiling, industry comparison, etc, to detect and identify taxpayers who omit or under-declare their taxes.
In order to better illustrate what constitute an offence and the consequences thereof, a summary of some recent prosecution cases in 2014 is compiled in Table 1. It can be noted from Table 1 that some of these acts of tax evasion arose not only from elaborate schemes but also from simple acts.
To conclude, taxpayers are responsible for the information that they have declared in their tax returns and GST-registered businesses must ensure that they have complied with the GST law and regulations.
For negligent or ignorant taxpayers who have not given due attention to their tax obligations, these businesses or individuals are encouraged to self-review their income tax and GST matters. Any past tax mistakes detected, including the impact and quantum of these mistakes, ought to be immediately disclosed to IRAS. In the spirit of encouraging voluntary compliance, such mistakes are viewed differently from tax evasion, and these voluntary disclosures are considered by IRAS as mitigating factors when assessing the additional tax liabilities arising from these mistakes. Thereafter, taxpayers are expected to be compliant and not repeat their tax mistakes moving forward.
If you wish to understand more on the topics of tax evasion or inquire on the Voluntary Disclosure Programme, please feel free to approach:
Ang Poh Geok Email: [email protected]
Juliet Lim Email: [email protected]
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© December 2014. This article is contributed by Acutus Tax Services Pte Ltd. All rights reserved.