The crackdown announced yesterday has come after repeated attempts by the Inland Revenue Authority of Singapore (Iras) to persuade companies with 100 or more employees to e-file fell short.

E-filing was launched in 1998, and 1,100 employers with 100 or more staff now send in income information electronically, but about 700 firms have resisted the move.

Now, the holdouts face fines of $1,000 if they do not e-file in the next reporting period early next year.

Mrs Patricia Mak, the Iras' assistant commissioner for accounting and processing, said the agency has done all it could to make e-filing as painless as possible for employers.

One helpful strategy was to work with most of the commonly used human resource software providers in Singapore to ensure their software could automatically generate a file with all the necessary information and send it to the Iras.

Yet, about 700 employers are still not filing their staff earnings electronically - not because they lack the technical know-how, but simply because of inertia.

In talks with companies and associations such as the Singapore Human Resources Institute and the Singapore Business Federation, the Iras discovered that bosses kept putting off e-filing year after year because they did not see it as urgent or necessary.

So the Iras decided to make employer e-filing compulsory as a 'last resort', said Mrs Mak.

Employers who have difficulty e-filing because of technical problems such as getting payroll software to work with Iras systems, will not be penalised.

The Iras has said it would help such firms to fix the problem by the next tax-filing season.

The head of a local information technology start-up with just under 100 staff, who did not want to be named, said making the switch to e-filing should not be a big problem, although he was concerned about the cost of compliance.

'In this economic climate, the Government should be careful not to raise the cost of doing business for local companies,' he said.

But the Iras said most employers that switch to e-filing enjoy significant benefits, including cost savings and improved efficiency.

Physical tax forms cost about 50 cents, and then there are postage and administrative costs involved with finding and sending forms to former employees.

The Iras also benefits from faster and more accurate information from the outset.

If employers provide income information, the taxman does not have to wait for individual taxpayers to enter the figures and then verify them with their companies.

The Iras wants all employers - regardless of the number of staff - to file employee income statements electronically within the next three years.

Now, only 6,300 of Singapore's 110,000 employers file electronically.

Many of these companies are small - 60 per cent of firms in Singapore have five or fewer employees - and they, unlike their larger counterparts, may not have the technical expertise or payroll systems in place, so the Iras 'will take a more cautious approach', said Mrs Mak.

This may include extending the three-year deadline.

chuahh@sph.com.sg