IRAS will tighten audits to deter tax evasion: Josephine Teo
IRAS will “closely monitor” corporatisation behaviour to prevent instances of tax evasion, especially among high income earners, said the Senior Minister of State for Finance.
SINGAPORE: The Inland Revenue Authority of Singapore (IRAS) will be monitoring corporatisation behaviour more closely and stepping up its audit programmes, in light of impending personal income tax rate changes, said Senior Minister of State for Finance Josephine Teo on Monday (Mar 9).
Speaking in Parliament, Ms Teo said that one of the main risks of changing income tax rates was an increase in tax avoidance where high income earners may set up companies to avoid higher personal income taxes. In so doing, they can pay corporate income tax instead.
“We take the evasion of tax seriously. And IRAS will closely monitor corporatisation behaviour where you form a company and you park most of the income through that company or flow it through the company.”
“In cases where companies are being set up mainly to avoid personal income taxes, IRAS’ approach is to disregard corporate structure, and assess income on the individuals. ”
Personal income taxes for top income earners are due to increase as well. Marginal tax rates for individuals who earn at least S$160,000 are set to go up in Year of Assessment 2017.
The impending rise in personal income tax rates is among a slew of recent measures to enhance Singapore’s system of tax and benefits to address wealth inequality. Ms Teo added that property tax has also been enhanced since Budget 2010.
“The combination of our system of property taxes and housing grants forms a highly progressive system of wealth taxes and transfers,” she said.
These changes have resulted in a vast majority of HDB flat homeowners paying less property tax than before, thus ensuring that lower-income families are able to own a home.
“Singapore is quite unique in the way we help our citizens achieve home ownership. Besides the substantial subsidies built into the purchase price of new HDB flats, those who are less well-off have, since 2006, been provided with more housing grants,” Mrs Teo said.
“There is no parallel for this situation internationally – where the vast majority, even amongst lower-income families, are able to own a home and a valuable asset. What this amounts to is a system where both income inequality and wealth inequality are mitigated,” she added.
Mrs Teo also highlighted a 2014 Credit Suisse global report on wealth, which showed that the top one per cent of Singapore’s wealthiest hold almost a third of the country’s wealth.
Still, she pointed out that the study also showed that Singapore has lower wealth inequality than economies like Hong Kong and the US. She also noted that such studies were subject to date limitations.
