IRAS recovers S$75m in corporate taxes, penalties in first nine months

Singapore

SINGAPORE'S tax authority recovered S$75 million in corporate taxes and penalties for the first nine months of 2019, an excess of nearly S$8 million compared with the same period in the previous year.

The amount came from 2,368 companies from a cross-section of industries and businesses, the Inland Revenue Authority of Singapore (IRAS) told The Business Times.

This is up from the S$67.3 million collected from 2,263 companies between January and September 2018. For the full calendar year however, the authorities collected S$84.5 million.

"The increase is probably due to the heightened vigilance by IRAS in its audit and investigation work - data analytics could be employed to effectively pre-empt and counteract high-risk cases of non-compliance," Lawrence Loh, director for the Centre for Governance, Institutions and Organisations at the NUS Business School, told BT.

The figures were released to BT ahead of the Nov 30 deadline for firms to file their corporate taxes. Companies that e-file have until Dec 15.

"While some of these companies may not have set out to wilfully evade taxes, IRAS continues to take a serious view of non-compliance through negligence of tax obligations," the authority said.

Taxpayers who are found to have under-reported income or wrongfully claimed business expenses negligently may face a penalty of up to two times the amount of tax under-charged, it said.

In particular, the practices of some companies from the food and beverage (F&B) and motor vehicle industries, as well as family-owned companies, could make them more prone to tax violations.

For example, smaller F&B operators may choose not to invest in point-of-sale billing systems to track their sales takings, relying instead on manual accounting methods. This means that family-owned F&B businesses tend to have poorer record-keeping practices, IRAS said.

Dr Loh said companies in the F&B and motor vehicles sector are often "transaction-intensive" with many accounting items that are petty in nature and involve multiple internal and external parties. In addition, they do not usually leverage technology due to constraints in financial resource and human capabilities.

"It is almost like a vicious circle - small companies are trapped in poor record-keeping due to resource and capability limitations. With bad record practices, they cannot professionalise and grow."

IRAS said another issue for family-owned companies is the lack of clear distinction between private and business expenses. "Even if a company is fully owned by a business owner, all transactions between the owner and company should be handled on an arm's length basis, including remuneration."

This year, e-filing of corporate income tax returns is compulsory for companies with revenue more than S$1 million in year of assessment (YA) 2018. All companies will have to e-file from YA 2020.

The authority said it believes maximising the level of voluntary compliance is the only sustainable strategy for ensuring the overall effectiveness and efficiency of Singapore's tax administration in the long run. To that end, it aims to make tax compliance as simple as possible.

It is working with the Accounting and Corporate Regulatory Authority and five software developers to create an enhanced accounting software with seamless tax filing that will be available progressively from November.