High-Earning Tax Avoiders Under Scrutiny As IRAS Recovers $10m
High income earners in Singapore, including property agents, doctors and lawyers, who previously avoided paying their dues in taxes will now have to. So far, $10 million in unpaid taxes has been recovered, and it is still early days yet. More than 20 dentists and doctors have had to pay back $3.6 million in total.
In its meeting with the members of the Singapore Medical Association (SMA) last month, the Inland Revenue Authority of Singapore (IRAS) is urging all doctors who may have been guilty of tax evasion to own up and face lower penalty charges. IRAS published this urge under an article entitled Useful Tax Pointers for Medical Practitioners, which was published by the SMA.
In its article published by the SMA, IRAS highlighted the common mistakes medical practitioners could make when filing their tax returns, and that most cases of non-compliance were because of insufficient understanding or negligence of tax matters. Since 2015, IRAS has launched investigations into the tax returns of 145 doctors and dentists in private practices, along with 32 other medical groups.
Some high earners were found to have established companies just to get tax breaks. Companies in Singapore enjoyed tax breaks under the start-up exemption scheme, enabling the founder to save up to $25,925 a year in taxes. IRAS has since been scrutinising tax returns of high earners and keeping a close watch in recent years.
When an individual establishes a company in Singapore, the start-up exemption scheme is applicable for the first three years of operation. Individuals could get $34,000 in savings on the first $300,000 of chargeable income a year. After the first three years, the partial tax exemption scheme kicks in from the fourth year onwards. This results in $29,925 in savings on the first $300,000 of chargeable income a year.
So far since IRAS began that operation, $6 million has been recovered from 60 lawyers, renovation contractors, tutors and commission agents (those involved in property and insurance). More than 100 doctors have so far received letters from IRAS letting them know that their returns are being reviewed. The reviews will include investigations into whether the businesses which were set up were for tax avoidance, or if they in fact had valid commercial substance.
Tax Evasion is Criminal Offence
Tax evasion in Singapore is a criminal offence, and the penalties which could be faced include a jail term of up to three years, a fine and four times the amount of tax evaded. Tax evasion is not the same as tax avoidance. In the case of tax avoidance, an individual fully declares their income but attempts to pay lower taxes by utilising the available loopholes or claim personal expenses under business expenses. Loopholes include setting up a company for tax breaks for example. Tax avoidance is not a criminal offence, unlike tax evasion.
In 2011, there was a case of a doctor being jailed for six months after being found guilty of tax evasion. In addition to the jail term, a penalty of $117,888.30 had to be paid by the doctor, who was also later suspended for four months by the Singapore Medical Council (SMC).
IRAS is committed to maintaining Singapore’s tax system, upholding the value hat every taxpayer contributes their fair share towards building the nation. SMC also states that white it acknowledged that IRAS’s audit was ongoing, it has so far not received any complaints against the doctors from IRAS regarding this matter. SMC also added that it will take disciplinary action against the doctors if they are convicted in court of offences committed under the Income Tax Act.