Tax evasion is an act of completely dodging and omitting the effort to pay any taxes willfully.
Tax evasion includes:
- Failure to report income. E.g. Under-reporting income and over-stating deductions deliberately. Hiding profits or including inaccurate deductions and reliefs.
- Falsification of accounts e.g. keeping two sets of books inclusive of false entries.
- False claim for deduction of expenses e.g. Classifying personal expense as business expense to reduce personal income tax.
- Entering into sham transactions e.g. Concealing the transfer of assets and income.
Tax evasion has been classified as a money-laundering predicate offence by the Financial Action Task Force(FATF).
Anyone who attempts to disguise the illegal source of such funds may be charged with a money laundering offence. As of July 2013, Singapore has adopted the recommendations set out by FATF.
Evasion of tax is illegal and a criminal offence. S96 provides penalties for any person who wilfully evades tax or assists another to evade tax. Singapore draws a distinction between fraudulent tax evasion (S96) and serious fraudulent tax evasion (S96A) and serves different penalties.
Under S96 the penalties are:
- Penalty of 300% of the amount of the tax undercharged.
- A fine not exceeding $10,000, and/or;
- Imprisonment of up to three years.
Under S96A penalties are:
- A penalty of 400% of the amount of tax undercharged.
- A fine not exceeding $50,000, and/or;
- Imprisonment of up to five years.
Whilst generally governments have been clamping down on tax evasion, many countries are combating tax avoidance as well. Recent examples of tax avoidance highlighted in the tax policies of worldwide businesses like Amazon, Google, Starbucks, and Apple with profits exceeding billions that are taxed not more than 10%.
Another example will be Dolce and Gabbana. A Milan tax court had ruled in favour of Italy’s tax authority, Agenzia delle Entrate, finding Dolce and Gabbana had engaged in a ‘conduct of abuse with the only goal of obtaining a fiscal advantage’. They both were sentenced to jail for tax evasion.
As Singapore is considered to be one of the most desired financial centres in the world, the government has made it a point to increase transparency and cross-border plans to curb money laundering and illicit cash flows.
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