Tax Investigation: Two company directors get jail and S$1m in penalties for tax evasion

Tax laws are created by the Singapore government to make sure that the citizens pay the right amount of taxes. While most citizens are compliant, some may attempt to get around the system via tax evasion. This is what happened to two company directors of Candid Electrical, who according to the Inland Revenue Authority of Singapore (IRAS), had “misrepresented” Candid’s Electric’s income tax returns by falsely claiming the couple’s private expenses of S$929,460 from the years 2006 and 2010.

The fall of husband, Foo Ming Chee and wife, Lim Kim Wah was one that cost them a whopping S$1 million in total penalties on top of two jail terms. For the offences, Foo Ming Chee was given a month's jail and a S$440,309 penalty - three times the amount of income tax evaded. His wife Lim Kim Wah received six months' jail and a S$587,079 penalty, which is four times the amount of income tax evaded. Both pleaded guilty, but only to two charges each from the total of five charges presented to them.

If they could turn back time, for sure they wouldn’t have evaded paying taxes or over-claimed expenditures from their private entertainment and luxury goods. Or perhaps they would have secured the legal use of tax laws to reduce their tax burden, which in this case, via tax avoidance. It’s no surprise that these may sound perplexing to many, so to illustrate more, we take you on our full roundup of everything we know so far about what is punishable in tax evasion and how you can keep up with tax planning for years to come.

Tax Evasion - What is Punishable?

In Singapore, the term “tax evasion” is used to refer to unlawful ways to avoid paying taxes by taxpayers. It often entails dishonest tax reporting or taxpayers who deliberately misrepresent the true state of their affairs to IRAS to reduce their tax liability. This includes things like:

Declaring less income, profits, or gains
Misrepresentation of tax reporting
Transferring of profits without commercial reason
Overstating expenses or expenditures

Though tax evasion is most commonly linked to corporate income tax, it can also be related to goods and services tax (GST) and employment/personal income tax. Preventing these altogether can help you steer clear of severe penalties and in some cases, jail terms from the court of law. There is, however, a safer alternative to reduce your tax liability, and that is through tax avoidance.

While the terms “tax evasion” and “tax avoidance” are often used interchangeably, in actual fact, tax avoidance is viewed as means that are within the law to reduce one’s tax liability. It isn’t anything new, but it highlights the needs of taxpayers who would like to secure a tax advantage via legal means. To achieve this, the taxpayer must know about the tax regulation and tax system to get an allowable tax benefit. And if you think about it, what better way to pay taxes than using tax avoidance?

Keeping up with Tax Planning

In view of the above, it is a good practice for corporations to engage tax professionals to conduct internal tax audit to uncover tax irregularities and combat tax evasion. We don’t know when IRAS will come knocking on your door, but it is essential to know that your tax planning stays within the language and spirit of IRAS. By doing so, you can avoid messy endings or being charged with harsh tax evasion penalties - which already we can see it happening to Foo and Lim.

And through identifying appropriate opportunities for tax savings and understanding of the regulations and reliefs available, your tax planning journey can be less stressful and smooth, if not a complete breeze.

Next steps

NLA DFK, a member of DFK International, is a group of accounting and corporate advisory firms with a history in Singapore since 1948. DFK International is a top 10 international association of independent accounting firms and business advisers with 229 member firms and 441 member offices in 93 countries. With a total staff strength of more than 70 in Singapore, NLA DFK is proud to fuel your growth by embracing our G.A.S. suite of services:

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