Two partners caught for income tax and GST offences were ordered to pay back taxes and penalties of over $2.3 million. One of them was jailed for two weeks.
Teo Chwee Guan (张水源), the 55-year-old partner of Chwee Guan Joss Paper Sticks & Candles Trading Co. (“CGJ”) (水源神纸香烛贸易公司), pleaded guilty to two charges of under-reporting his share of the partnership's profits in his income tax returns for the Years of Assessment (YA) 2009 and 2010.
Teo was sentenced to two weeks’ jail and was also ordered by the court to pay penalties of $135,727.74. This is three times the amount of income tax he had evaded. In default of the penalties, Teo would have to serve an additional four months of jail term. Other than the above, Teo has to pay a further $215,438.67 as penalties for other income tax offences compounded by the Inland Revenue Authority of Singapore (IRAS). His partner in CGJ, who similarly under-reported his share of the partnership’s profit, had his offences compounded for $347,654.55 - three times the amount of income tax evaded.
The 32-year-old partnership is also guilty of GST fraud. GST-registered businesses can offset the GST they pay on purchases (input tax) against the GST they collect from sales (output tax) and pay the net difference to IRAS. However, over nine years, CGJ understated its output tax amounting to $357,615.73. For this GST offence, IRAS has imposed penalties of $1,072,847.19 on the partnership, three times the amount of output tax understated. For all these offences, the two partners have to pay back income tax and GST of $590,556.05 and penalties of $1,771,668.15, totalling more than $2.3 million.
Partnership Understated its Profits and Output Tax
IRAS’ investigations revealed that CGJ had understated its profits for YA 2009 and 2010 by $70,372.08 and $434,635.95 respectively. CGJ kept accounts of these figures in six record books and classified them as "Special Sales” and “Special Purchases”. Teo deliberately omitted them from the CGJ’s statement of accounts for YA2009 and YA2010. Correspondingly, he and his partner under-reported their share of partnership profit in their income tax returns for these two years.
The GST offence was uncovered by IRAS’ regular audits conducted on businesses.
Using data analytics, IRAS has the capability to detect, identify and prosecute business owners who omit paying their income taxes or who under-declare their GST output tax.
IRAS Takes Serious View of Tax Evaders
IRAS takes a serious view of taxpayers who do not comply with the need to submit proper income tax returns or have a wilful intent to evade tax. The authority will not hesitate to bring the offenders to court. Penalties for tax evasion can be up to four times the amount of tax evaded. In certain situations, jail terms may also be imposed.
Source: IRAS, 14 June 2013