Tax Write-Up: Penalties for Evasion of Income Tax and GST

By Jia Min, Shaun, Samantha and Winston (Research and Training Department)

In this month’s publication, we look at an article from the Straits Times regarding penalties for the evasion of income tax and GST.

This year, from January to September, IRAS recovered S$175 million in evaded GST and penalties. In FY 2018, IRAS recovered $195.8 million in taxes and penalties from its audit of 3,145 GST-related cases.

Non-compliance was found to be more common among businesses with weak internal controls or processes, substantial cash transactions and weak or no record keeping. Such businesses usually pass down old, manual methods of accounts from founder to successors.

For example, the funeral industry was particularly susceptible to tax offences. The funeral operator would begin work after the client has chosen the casket and engage sub-contractors such as tentage suppliers and caterers. On the final day of the wake, the client usually pays in cash using contributions collected from friends and family. The funeral operator then pays the sub-contractors in cash. These transactions may not be maintained or recorded properly.

Businesses may not keep track of their annual taxable turnover and fail to register for GST on time if they do not properly record sales and expenses. Therefore, IRAS has launched a web-based calculator on Oct 1, to help businesses more conveniently determine if they have to register for GST, by selecting its relevant sources of income and entering their income figures.

Mr Lawrence Eng, Assistant Commissioner of IRAS’ Investigation and Forensic Division, said: “IRAS would like to invite businesses, especially family-owned ones, to do a self-review of their past records and voluntarily disclose any errors made. IRAS will treat such disclosures as mitigating factors when considering the action to be taken.”

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