Singapore

Iras recovers $10m from tax-avoiding high earners

Doctors, dentists, lawyers, tutors, insurance and property agents among those under Iras probe for tax avoidance

The taxman is clawing back millions of dollars in back taxes from high earners such as doctors, property agents and lawyers who had avoided paying their proper dues.

It is still early days, but about $10 million has already been recovered from them.

This includes taxes that they should have paid in the four previous years.

More than 20 doctors and dentists have paid back $3.6 million in total. Some had formed companies just to get tax breaks.

Since 2015, the Inland Revenue Authority of Singapore (Iras) has launched investigations into the tax returns of about 145 doctors and dentists in private practice, as well as 32 medical groups.

In 2015, the Government announced that, from the year of assessment (YA) 2017, the highest personal income tax rate would go up from 20 per cent to 22 per cent.

Corporate tax went down from 18 per cent to 17 per cent in YA2010.

With the change, chargeable income above $165,000 would be lower for a company than for an individual. For chargeable income of $500,000, the difference in tax is about $27,000.

Companies also enjoy tax breaks under the start-up tax exemption scheme, where eligible companies in the first three years can save up to $34,000 a year in taxes.

From the fourth year, they can claim partial tax exemption with tax savings of up to $25,925.

"There may be greater impetus for high-income individuals seeking to avoid taxes through corporatisation and arrangements lacking in commercial substance," said Mr Andy Seah, assistant commissioner of the individual income tax division.

That is why, he added, Iras started scrutinising the tax returns of high earners more closely in recent years.

This has led to the taxman recovering around $6 million from about 60 lawyers, tutors, renovation contractors and commission agents, such as those in insurance and property.

REVIEW

Meanwhile, more than 100 doctors, including 30 to 40 anaesthetists in private practice, have received letters from Iras telling them their returns are being reviewed.

This has caused quite a stir among those in the medical profession here.

Iras also urged doctors to own up voluntarily with the promise of lower penalties in an article in the Singapore Medical Association (SMA) newsletter in April.

It also met members of the SMA last month.

Mr Seah said that while Iras will not dictate the form of business that doctors want to use, it will look at whether it has commercial substance or was created for tax purposes.

If the company has no assets, staff or premises; or if the income is derived from the personal efforts of the owners, with the company not contributing to it, Iras is empowered to remove the tax advantage and adjust the tax payable.

It can also claim any tax differential due for the previous four years. The international norm is for back taxes to be collectable for between four and six previous years.

Mr Seah said tax avoidance is not a criminal offence, but tax evasion is.

This is because in avoidance, the actual income was reported, with no concealment. However, the tax-payer had, for example, improperly claimed for corporate exemptions.

He added that Iras is committed to maintaining a tax system "where every taxpayer contributes his fair share towards nation-building".

The Singapore Medical Council (SMC) told The Straits Times that it "notes that Iras' audit on medical practitioners is ongoing", but it has not received any complaints against doctors from Iras on this.

It added: "SMC will take disciplinary action against doctors if they are convicted in court of offences committed under the Income Tax Act."

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