SINGAPORE — Over the past two months, tax investigators from the Inland Revenue Authority of Singapore (IRAS) arrested 10 members of a criminal syndicate suspected of perpetuating Goods and Services Tax (GST) carousel frauds.
IRAS said in a media release on Wednesday (13 November) that this is the first time it has exercised its newly-acquired powers of arrest, during raids conducted from 23 to 24 October, and 12 to 13 November.
The island-wide operations involved simultaneous raids on 36 business entities and 73 locations including Kallang Pudding, Tampines and Choa Chu Kang. About 200 electronic devices and business records were seized during the operations, while 41 individuals are assisting IRAS in investigations.
“The profile of tax evaders is changing. In the past, we investigated mainly businessmen who failed to report their income fully, or who claimed certain expenses not allowable for tax purposes. Today, we deal with more syndicated groups whose members may have been involved in past criminal activities,” said Lawrence Eng, assistant commissioner of IRAS’ Investigation and Forensics Division.
“Some suspects can be very uncooperative; they try to destroy paper documents or refuse to hand over evidence. With our new powers of arrest, our investigators can be more effective in bringing the perpetrators to justice.”
How carousel frauds cheat authorities
In carousel frauds, the same goods are traded through contrived supply chains which eventually result in the export of the goods. While these supply chains involve seemingly unrelated multiple companies, they are typically controlled by one mastermind.
For instance, Company A acquires the goods and then sells them to Company B charging GST on the supply of the goods. Instead of accounting and paying over the GST to IRAS, the director of Company A would go missing.
The goods are further sold to bogus businesses acting as “buffer” companies before they are finally exported. The exporter company would then claim input GST paid on the exported goods, which is effectively seeking a refund of the GST amount on a fraudulent supply chain – GST that the tax authority never received in the first place.
No goods may actually be exported
In some instances, no goods are actually exported and the business transactions are merely a paper exercise, with the sole aim of claiming fraudulent GST refunds.
There are also some cases where some of these supposedly exported goods are subsequently sold in the domestic market without GST, which gives the fraudsters an unfair advantage over other legitimate businesses which charge GST on the sale of their goods.
Anyone who commits the offence of wilful intent to evade or assist any other person to evade GST faces a penalty of up to three times the amount of tax undercharged, as well as a fine of up to $10,000 and/or a jail term of up to 7 years.
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