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IRAS prosecutes 2 fraudulent traders to the tune of $1.2m and $184k

22-Jul-2014

 

CASE 1

The first GST fraud case involving 10 different entities has been concluded in Court. Eric Chia Puay Yeoh (“Chia”), the mastermind behind a complex GST scam using multiple shell entities, was sentenced to 15 months in prison. Chia colluded with his accomplices to defraud the Comptroller of Goods and Services Tax (“GST”) of GST refunds totalling $953,192.07 from Jan 2005 to Mar 2007.

 

For his criminal actions, Chia landed in court today with 122 charges of defrauding GST refunds and wilfully with intent assisting his accomplices to make fictitious GST claims in their GST returns.

 

Chia pleaded guilty to 45 charges while the remaining 77 charges were taken into consideration for the purposes of sentencing. In addition to imprisonment, the court further ordered him to pay a penalty of more than $1.2 million being three times the amount of the fictitious claims for GST refunds amounting to $400,394.27.    

 

GST Laws
GST-registered businesses are allowed to offset the GST they pay for their purchases (input tax) against the GST they collect from sales (output tax). They pay the net difference to IRAS. Those that incur more GST on purchases than they collect from their sales can claim the difference from IRAS in the form of GST refunds.

Under the GST Act, exports of goods and international services are zero-rated (i.e. GST at 0%). In other words, GST-registered businesses need not collect GST on these exports. However, a GST-registered business that exports its goods overseas may still claim the full amount of GST incurred on its purchases (i.e. input tax).

Elaborate Fraudulent Scheme
Chia's elaborate scheme to commit GST tax fraud first began in Jan 2005 under Kapin Enterprise – a sole-proprietorship business registered under his wife’s name. For two years, he inflated the GST refund claims in Kapin’s GST returns by $217,157.62 without his wife’s knowledge.

 

His dishonest acts continued with companies which he owned – Keat Siang Hang Pte Ltd (KSH), World Resources Organisation Pte Ltd (WRO) and Shi Lin Enterprise Pte Ltd. Figures were cooked to make up fictitious GST refund claims of $95,752.95 and $33,055.66 for KSH and WRO respectively, while GST refund claims for Shi Lin were inflated by $82,402.30.

 

Partners in Crime
Sharing his modus operandi, Chia assisted three of his accomplices to obtain inflated and fictitious GST refunds.

 

Chia suggested to Foo Tee Suan (“Foo”) to register FTH Enterprise (FTH) - an export business - for GST. He wilfully with intent assisted Foo to make fictitious claims in his GST returns from Jul 2005 to Mar 2007. Thereafter, Chia helped Foo to set up three other businesses, namely F&T Top System Enterprise (F&T), Hwa Rong Enterprise Pte Ltd (HREPL), and Hwa Rong Import & Export (HRIE). These were all shell companies without any business transactions.

To illegally obtain GST refunds, Chia declared fictitious figures in the GST returns of FTH, F&T, HREPL and HRIE and fraudulently claimed a total of $458,019.69 in GST refunds from Jul 2005 to Mar 2007.
 
Separately, Chia with wilful intent assisted another accomplice, Ivan Tan Suan Chew, a director of ENV Recycle Trading Pte Ltd (ENV), to make fictitious GST declarations and illegally obtained $35,673.47 in GST refunds from Jul 2005 to Nov 2005.

Chia also with wilful intent assisted Sng Kay Heng (“Sng”), the sole proprietor of Strikey Trading (a dormant business), to falsify his documents to make fraudulent claims in his GST returns for the business. Purchases and sales invoices originally issued to Kapin Enterprise were altered by Chia to reflect the name of Strikey Trading. Fictitious GST refund claims of $31,130.38 were then made by Strikey Trading from Nov 2005 to Jan 2006.

 

CASE 2

Samuel Sim Choon Hock ("Sim"), a manager of Netlink Alliance Pte Ltd ("Netlink") at the time of offence, was sentenced by the court to 18 weeks' jail after pleading guilty to 8 charges. He was also ordered to pay a penalty of $183,925.62, which is three times the amount of fictitious claims for GST refunds of $61,308.54 that he had made in the company's GST returns. 

 

Netlink, a GST-registered company, is in the business of import and export of IT equipment. IRAS' investigations revealed that Sim inflated the input tax claims and understated output tax on sales in the company's GST returns from Feb 2006 to Jul 2008. Sim faced 24 charges of making fraudulent GST claims amounting to a total of $116,558.04. He had used the money to pay for his personal and family expenses. Sim pleaded guilty to 8 charges. The remaining 16 charges were taken into consideration in the sentencing as Sim was cooperative during the investigation process. 

 

 

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Severe Penalties for Fraudulent GST Claims
IRAS takes a serious view of tax criminals and will not hesitate to take stern action against those guilty of defrauding the State. It is a serious offence to claim input tax on fictitious purchases or to understate output tax on sales. Offenders face a penalty of three times the amount of tax undercharged, a fine not exceeding $10,000, and/or imprisonment of up to 7 years. 

 

Reporting of Malpractices
Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering action to be taken. Those who wish to disclose past mistakes, reveal evaded taxes, or report malpractices that might indicate tax evasion, can write to:

Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Singapore 307987

Email: ifd@iras.gov.sg

 

Cash Rewards for Informant  
A reward based on 15% of the tax recovered, capped at $100,000, would be given to informants if the information and/or documents provided lead to a recovery of tax that would have otherwise been lost. All payments are at the discretion of the Comptroller. IRAS would ensure that the identities of informants are kept strictly secret and confidential.

 

Source: IRAS, 10 & 21 July 2014

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