If you have been charged by IRAS for tax evasion, would you accept the accept the charges and submit yourself to whatever punishments befitting OR would you seek your justice in court? What did Mr Looi, our famour curry puff entrepreneur do under similar circumstances?
For income tax offences
Section 96 and Section 96A provide for statutory presumption which relieves the prosecution from having to prove an intention to evade tax, the very hallmark of tax evasion.
Where a false statement is found to have been made in the taxpayer’s return, accounts or records, this is considered proof of an intention to evade tax.
You can try to challenge the presumption by having the burden of to disproving the presumption in trial.
For GST violations,
The advantage is also with IRAS, the plaintiff / prosecution. The defence ie. the alleged violators, would have to prove its case beyond reasonable doubt.
To date, very few persons charged with tax evasion have been brave enough or not foolish enough to seek justice in court.
As for our Mr Looi, he pleaded guilty with any legal representation.
Mr Sharma, a partner of KhattarWong rallied the authority to level out the playing field ie. BOTH prosecution and defence are required to prove their case in court.
For most of us, we should not bother to know the crime and punishment one could get for evading tax. We only need to know the law will come down hard on you.
But given the recent hoo and haah of going tax violators in the now glamourous occupation of being a hawker, it would be appropriate for our students and members of accounting profession to remind our clients of the consequences of tax evasion.
What is tax evasion?
Income tax evasion requires both a wilful intent to evade tax as well as one of five forms of physical conduct, namely:-
- omitting from a tax return, income that should be included
- making a false statement or entry in a tax return
- giving a false answer, whether verbally or in writing, to any question or request for information from the IRAS
- preparing or maintaining false books of account or other records, or authorising the same, or falsifying any books of account or other records
- making use of any art, fraud or contrivance or authorising the use of any art, fraud or contrivance.
Since December 2003, apart from the offence of tax evasion in Section 96 of the Income Tax Act, an offence of serious fraudulent tax evasion has been enacted under Section 96A.
The newer offence carries a heavier penalty, a higher fine and an extended jail time, for essentially some of the same acts that used to constitute ordinary tax evasion.
A person convicted of tax evasion under Section 96 faces a penalty of three times the tax evaded, a fine of up to $10,000 and a term of imprisonment of up to three years or both fine and jail.
The last two types of physical conduct listed above have been taken out from Section 96 and reinstated as new offences.
Under Section 96, there is a minimum jail sentence of six months upon a conviction for three or more offences, including assisting another to evade tax.
Under Section 96A, a person found guilty and convicted of two or more offences, also faces at least six months in jail.
Final Remark – I have done a simple format above for you to do email broadcasts to your hawker clients if necessary.
S. Sharma, in today’s BT, who is now a partner at the law firm KhattarWong (but was senior legal officer at IRAS), highlighted the difference in how prospective tax evaders are being investigated, examined and prosecuted, depending on whether it is income tax OR goods and services tax (GST) violation.
What is the difference?
- For income tax violations,
The IRAS conducts its own investigation, obtains approval from internally to institute the prosecution and conducts the proceedings in court without any talking to the Attorney-General or any Deputy Public Prosecutor.
Under Section 69 of the GST Act, a prosecution for GST evasion requires the sanction of the Public Prosecutor alone, and not the Comptroller of GST, unlike income tax evasion.
Why the difference in treatment?
Is it because GST monies are deemed to be state assets “stolen” by the tax violators? Whereas income taxes are “contributions” from tax payers for nation building.
As to Mr Sharma, the “why” is not important. He has requested the relevant authorities to harmonise the difference.
Yesterday, Mr Donald Tsang, Chief Executive of Hong Kong announced how he has decided to spend the HK$58.6 billion (US$7.55 billion) budget surplus accumulated in the last financial year and which is likely to be sustained after 6.3 per cent economic growth in the first half of 2007.
- HK$5billion giveaway in the form of corporate tax and salary tax cut by 1 percentage point to 16.5 per cent and 15 per cent respectively in the fiscal year starting next April 2008
- Rates for property owners totalling some HK$2.6 billion would be waived for the final quarter of the fiscal year
- Plans to spend US$19 billion on infrastructure, including new links to China/Macau, potentially creating a quarter of a million jobs
Budget surplus may come and go. So the method of distribution should not be made permanent or difficult to reverse ie. in the form of tax cuts. Waiver of collection on a temporary basis in the waiver of property rates would have been more acceptable.
Are they trying to keep up with Singapore with direct tax cuts? The similarity ends there. Singapore raised its indirect tax rate from 5% to 7%. So where is Hong Kong’s indirect tax?
Furthermore, from the economic standpoint, the economy does not need further stimulation with the tax cuts given the low unemployment situation in Hong Kong.
I am in favour of well-thought through infrastructural expenditures as they would be investments for the future of Hong Kong.
Mr Tsang, don’t forget to tackle the issue of broadening the tax base which you gave up towards the end of your last term.
Albeit an honest one.
Mr Looi San Cheng, 63 years old, made $1.06mio selling his famous Tip Top curry puffs from his stall in Ang Mo Kio Ave 8 over the 6 years.
Mr Looi has severely under reported his profits. He said he made $2,800 between 2001 and last year when he actually made $1.06mio.
So he now have the honour of being the first hawker to go to jail for tax evasion. He also have to pay out $487,000 for back taxes and penalty.
Saturday’s article cited the citation by PM Lee on Tip Top’s expansion into Harbin and Shenyang in China. I wonder this may have led to taxman’s focus on Tip Top.
So all you other hawkers out there who are making millions, who have been under reporting your income and who have been recently highlighted in TV programmes, please come clean on your tax returns by emailing IRAS at email@example.com.
a Japanese chef who has left this
The current law on audit exemption applies to individual company but not to a group of companies. So say Mr Joseph Alfred, Technical Advisor for ACCA Singapore.
- Companies Act’s Section 205(2) says companies are required to appoint auditors.
- Companies Act’s Section 205A says private exempt companies with less than $5mio turnover and dormant companies are exempted from audit.
Where is the problem?
Let me illustrate with a simple example. Holding company has a turnover of less than $5mio and may be exempted from audit.
Subsidiary company has a turnover of more than $5mio and thus its financial statements would be audited. So far so good.
But when it comes to Group’s consolidated financial statements, the regulator has confirmed that there is no legal compulsion for them to be audited.
Joseph opined that a Group with a turnover of of more than $5mio should NOT be exempted.
As for me, I am still not convinced with the need to audit the consolidated statements. As some practitioners have said, the need to audit should rest primarily on who are the ultimate key users of the statements. We should not just rely on mere criteria.
“The best defence is offence.”
Well that is the basic position of the four banks against APB in trying to claim back $109mio of their lost funds. Disregarding the bank’s internal control failure to detect the fraud, the banks have chosen to place the faults on APB.
- One of the banks argued that Chia Teck Leng’s acts were carried out in his capacity as APB’s finance manager – and the company must shoulder the blame.
- Senior counsel Steven Chong, who represents two of the foreign banks, told the court that the fundamental issue was how Chia was able to perpetrate the fraud for almost five years and remain undetected. The obvious answer, he said, is that APB has vested wide powers and authority on Chia without any proper checks and balances in place.
- Chia was also able to ensure that correspondence from the banks was never opened by anyone other than him. His secretary was specifically never to open letters from banks addressed to him.
From 1999 to 2003, Chia, now 47, had submitted to the banks fictitious documents with forged signatures of top APB executives, which convinced the banks to give him credit facilities in APB’s name.
What did Chia do with the monies? He blew $62 million in casinos around the world, before being convicted and sentenced to 42 years’ jail in 2004. Some millions still cannot find.
While Mr Chia sits in prison for the remaining 39 years, many bank officers’ career have been scarred.