SINGAPORE – More than $270 million in income tax and penalties has been recovered from businesses over the past three years or so, the Inland Revenue Authority of Singapore (Iras) said on Sunday.
The money was clawed back after audits and investigations involving about 7,000 businesses, including 398 investigated for income tax evasion, which resulted in 75 cases being taken to court.
One of the more well-known cases this year involved Roland Tay Hai Choon, the founder of Direct Funeral Services.
He was charged in September with evading income tax of around $427,000 and failing to register his business for goods and services tax.
Another court case concerned Grace Casket owner Grace Tay, who has been charged with evading tax of about $56,570.
Ms Loh Lee Kim, the Iras’ assistant commissioner of the small business division, said: “Both shared something in common – their businesses were sole proprietorships with poor record-keeping practices.
“Both tax evasion cases were brought to light when Iras auditors detected anomalies in the tax reporting and other accounting issues.”
Small businesses, especially those with substantial cash transactions and poor record-keeping, are at higher risk of tax non-compliance.
“Such businesses are usually managed by family members, and the majority of ownership lies within the family,” added Ms Loh.
“For such businesses, sales and expenses may not be adequately recorded and tracked due to the lack of proper internal controls.”
Businesses that run online have also been on the rise in recent years, with the pandemic accelerating the growth of the digital and gig economies.
This is another group that may have no or poor record-keeping, with weak internal controls and processes, said Ms Loh.
Some online business operators may also not be aware that they are required to report their income from online sales for tax purposes.
Tax applies on such areas as the sale of goods on online platforms like a website or through social media.
Fees or commission, even if they are non-monetary like gifts, earned from promoting a company’s products or services, are also subject to tax.
Advertising revenue from video channels or social media, or sales of digital services such as through graphic design or online tutoring, are taxed as well.
Anyone who finds that they have made errors in tax reporting can voluntarily disclose them under Iras’ Voluntary Disclosure Programme, which offers reduced or no penalties to taxpayers who meet the qualifying conditions.
Ms Loh said: “While Iras believes taxpayers are generally compliant, there remains a minority that intentionally cheat or evade tax.”
Tips for businesses to avoid running afoul of tax laws:
1. Declare income and expenses accurately
All businesses and self-employed people should ensure that they report their business income and expenses accurately in tax returns. People who are separately earning additional income from running a business on the side must also declare the additional income.
Business expense claims should not include expenses that were not incurred or were not legally deductible, for example, private expenses on travel or entertainment not related to running the business.
2. Register for GST on time
Businesses should closely monitor their annual income to assess if they need to register for GST. Businesses are liable to register for GST at the end of a calendar year if their taxable turnover for that year exceeds $1 million, or at any time if they can reasonably expect their taxable turnover in the next 12 months to exceed $1 million.
3. Keep proper records and documentary evidence
All businesses and self-employed persons need to keep proper records, and supporting documents such as invoices need to be kept for at least five years. These can be used to support their declarations if needed.
They should also maintain a full and complete physical or digital record of income and expenses such as invoices, receipts, proof of receipts and payments and other documentary evidence unless the business qualifies for simplified record-keeping.
