Consultants or con men? Iras on alert

A man who fell victim to a scam by a "consultant" lodging a police report. The scam was built around the Productivity and Innovation Credit scheme.
A man who fell victim to a scam by a "consultant" lodging a police report. The scam was built around the Productivity and Innovation Credit scheme.ST FILE PHOTO

Some agents are getting the self-employed to file false claims for payouts under PIC scheme

The taxman is on the alert for "consultants" who target small businesses and the self-employed to get them to cheat on a government grant meant to boost productivity and innovation.

The Inland Revenue Authority of Singapore (Iras) said these so- called consultants have misled or influenced hawkers, property agents, hair salon owners and taxi drivers, among other self-employed individuals, to make false claims to get cash payouts under the Productivity and Innovation Credit (PIC) scheme.

Since the scheme started in 2010, Iras has rejected or clawed back the sums paid out for about one in three - or about 30,000 - cash payout claims filed by the self-employed as the claims were inaccurate or false. The sums not given out or recovered from these dubious claims amounted to about $358 million in the last five years.

Iras digs deep into the most suspicious claims and had investigated 488 cases by the end of last year. Eight people have been prosecuted for PIC fraud and, so far, four have been sent to jail.

Iras assistant commissioner of investigation and forensics Loh Lee Kim said the agency has a "pipeline" of cases to take to court, including against "consultants" and those who conspired with them. She did not give any other details, such as the numbers under probe currently.

  • HOW 'CONSULTANTS' ABUSE THE SCHEME

  • Fake claims: A training vendor approached a hair salon owner, saying she could earn a tidy sum by sending a few stylists for training. She did not hire the stylists, or send anyone for training.

    But she used their names to claim training expenses. The vendor gave her an invoice for $25,000 in training fees.

    She submitted the invoice, aiming to get a cash payout of 60 per cent of the "fees", or $15,000. She would give the vendor $10,000 and keep $5,000 herself.

    Claims for products that did not meet any real commercial need: A consultant told a hawker he could create a mobile phone application to boost his business.

    The hawker was also told that he could get some money from the PIC scheme. All he had to do was sign a blank PIC application form, and pay CPF contributions for three people in order to qualify for the cash payout.

    The consultant presented a $20,000 invoice for the app. The $12,000 cash payout was split: Yhe consultant took $9,000 and the hawker $3,000. After giving the consultant his cut, the hawker realised the app was faulty.

    What the Iras says: The Iras has not appointed or endorsed any consultants on PIC matters. It advises businesses to fill the applications themselves as the process is simple and takes about 10 minutes to complete online.

    For those wanting to hire a consultant, the Iras recommends checking the consultant's credentials and background.

    They should be careful of consultants who exaggerate the PIC scheme's benefits and offer deals that sound too good to be true. They should also get the consultant's advice in writing and verify the claims are accurate before signing application forms.

    • For clarification on PIC matters, e-mail Iras at picredit@iras.gov.sg or call the Iras helpline on 1800-3568622 (for companies) or 63513534 (for sole proprietorships/partnerships).

    • To report a scam or tax evasion, e-mail ifd@iras.gov.sg or write to Iras, Investigation & Forensics Division, 55 Newton Road, Revenue House, Singapore 307987.

    Theresa Tan

Under the PIC scheme, firms can get cash payouts of 60 per cent of up to $100,000 a year on expenditure in areas like staff training and the purchase of information technology (IT) or automation equipment.

Since the scheme started in 2010, Iras has rejected or clawed back the sums paid out for about one in three - or about 30,000 - cash payout claims filed by the self-employed as the claims were inaccurate or false.

Consultants typically seek to abuse the scheme by approaching the self-employed and offering them a product, from computer software to automation equipment.

They are told that they do not have to pay for the purchase upfront as the Government will pay for the bulk or all of the cost through the PIC scheme.

The consultants say they will handle all the paperwork. All the applicant has to do is to sign a blank or pre-filled application form.

When the business receives the cash payout, the consultant usually takes the bulk of the amount, leaving a small cut for the business. What this means is that the business usually ends up with a free product plus a cut of the payout.

Consultants may also give wrong or misleading advice on the PIC scheme, and the unwitting applicants do as they are advised as they do not know any better.

An example is when the applicant is told to list any three Singaporeans as their staff in order to meet the scheme's qualifying criteria - even though they do not have three employees. This is wrong as employees must be genuinely hired.

While some applicants are misled by consultants into making false claims, others willingly go along with the ruse - for example by using fake invoices to claim for non-existent purchases.

"Some of the self-employed do not realise the seriousness of it... We could send them to jail," Ms Loh warned. Those convicted of PIC fraud have to pay a penalty of up to four times the cash payout received. They can also be jailed for up to five years, or fined up to $50,000 or both.

Mr Andy Seah, assistant commissioner for the individual income tax division, reminded the self-employed that they are liable for the authenticity and accuracy of their claims, even if a consultant has filed an application for them.

He added that some of the businessmen realise they have been conned only when they receive a faulty product or when the consultant goes missing.

Mr Hong Poh Hin, vice-chairman of the Foochow Coffee Restaurant and Bar Merchants Association, said hawkers may not have the time or knowledge to check on the consultants' claims.

He disclosed that the association was itself duped by a consultant who sold it a photocopying machine for over $30,000 and said it could claim most of the outlay from the PIC scheme. But the association does not qualify for the scheme as it is a non-profit organisation and the scheme is only for businesses.

The association also discovered later that the machine was grossly over-priced. But by then, the consultant's firm had shut down.

Mr Chan Chong Beng, chief executive of interior furnishings firm Goodrich Global, suspects consultants are behind most of the fraudulent claims, as most hawkers and small-time businessmen may not be aware of the PIC scheme or how to qualify for it. "They may not realise that what the consultants tell them is wrong and they could be caught. If they know, I don't think they will do it," he said.

A version of this article appeared in the print edition of The Sunday Times on February 21, 2016, with the headline 'Consultants or con men? Iras on alert'. Print Edition | Subscribe