A scheme that gives businesses cash payouts when they act to boost productivity has turned up a growing number of cheats.
Since the Productivity & Innovation Credit (PIC) scheme was introduced in 2010, the tax authority has probed 158 cases and either recovered or blocked payouts in 49 cases involving a total of almost $3 million.
Under the PIC scheme, companies qualify for tax deductions or cash payouts if they invest in areas such as staff training, information technology or automation equipment, as well as research and development.
The Inland Revenue Authority of Singapore (Iras) caught businessmen trying to cheat by:
Using fake documents to claim for non-existent purchases or inflating how much they had spent;
Creating a shell company to claim for purchases of equipment, when there was no business activity and no such purchase;
Listing relatives and friends as staff, when they did not work for the company, to meet the minimum number of local staff required to qualify for the scheme.
As more such cases surfaced, Iras set up a nine-member task force last August to focus on busting PIC fraud.
Miss Loh Lee Kim, Iras assistant commissioner of investigation and forensics, told The Sunday Times: "The task force often visits businesses to check on them. For some businesses, the minute we arrive at their office, they withdraw their claims."
So far, two men have been jailed for PIC fraud.
Last September, the director of an IT firm was jailed for two months for fraudulently claiming a cash payout of about $58,000.
The 34-year-old had used fake invoices and lied that his firm spent almost $200,000 on computer equipment it never bought.
He had to pay a penalty of about $232,000 - four times the sum fraudulently claimed - and the firm had to pay the same amount, plus a $10,000 fine.
In February, a 47-year-old man was jailed for five weeks for faking a $60,000 claim on automation equipment costing almost $170,000 he had never bought. In fact, the company he set up was never in business either. He and the firm had to pay a penalty of $180,000 each and the firm was fined a further $8,000.
Miss Loh said Iras will be prosecuting more suspected cheats, but declined to elaborate. She warned those trying to abuse the scheme that "they should really sit up because we are looking at them".
Businessmen interviewed said some may try to cheat because the scheme is broad-based, applies to all businesses and offers generous cash payouts.
For example, if a company buys $100,000 worth of IT equipment, it can apply to get back $60,000 in cash - or 60 per cent, subject to a maximum expenditure of $100,000 a year.
Mr Chan Chong Beng, chief executive of interior furnishings firm Goodrich Global, said he would not be surprised if there were vendors who inflated their prices on paper to let their clients claim larger PIC payouts.
"Small and medium-sized enterprises are facing a cash crunch now and some people who are desperate for cash would resort to anything to solve their problem," he said.
In its last five financial years, Iras investigated 691 cases involving all types of tax fraud, and recovered about $248 million in taxes and penalties.