To fight tax crimes in Singapore, this IRAS tax investigator has raided nightclubs and embalming rooms

Around two in the afternoon sometime in 2017, some 50 Inland Revenue Authority of Singapore (IRAS) tax officers conducted a raid on several outlets of a nightclub suspected of tax fraud, as well as its administrative office and the residences of the performers.

They seized important evidence and interviewed the CEO, general managers and performers.

Though similar to a police raid, this was not one. It was conducted by tax investigators on suspicion of Goods and Services Tax (GST) fraud.

Kwek Shi Yi led the raid. Her job: Plan and execute such operations to help Singapore fight tax crime.

“The reason we do surprise raids and not a planned visit is because we do not want to take the risk that evidence could be destroyed,” she explained.

Over her seven years at IRAS, the 33-year-old has done 50 such raids.

One syndicate GST fraud case she investigated involved approximately S$114 million in fictitious sales of goods created by a chain of sellers who each charged GST on these goods. The original seller then disappeared without paying the collected GST to IRAS, while the last seller in the chain exported the goods and claimed a GST refund from IRAS amounting to close to S$8 million.

INVESTIGATING TAX CRIMES

A wide range of tax crimes takes place in Singapore. These include income tax fraud, such as where a person under declares his or her earnings, and GST fraud, where companies or individuals avoid paying GST, stamp duty fraud, such as the 99-to-one property scheme, and frauds related to payout schemes administered by IRAS.

For instance, some business owners may fail to register for GST even though their sales revenue has crossed the S$1 million mark, while others find ways to suppress sales to keep revenue below the S$1 million mark so they do not have to register for GST.

Another common instance of fraud is when companies or syndicates use counterfeit goods or create fictitious invoices to inflate the value of company transactions to claim GST refunds.

Over the last five years, Kwek and her colleagues have helped to restore an average of S$42 million dollars of revenue to Singapore annually.

Some of these cases come to the attention of IRAS when advanced statistical tools, artificial intelligence and social network analysis detect anomalies in tax reporting, leading to further probing.

Some cases are also brought to IRAS by whistle blowers. “They usually come in with heavy stacks of evidence to tell us they suspect there is a tax evasion case in a particular company,” said Kwek.

“IRAS assures that the identities of informants are safeguarded and offers informants a reward of 15 per cent of tax recovered, capped at S$100,000.”  

Such information is first assessed by IRAS’s intelligence department. If deemed to be credible, the case will be handed over to tax investigators like Kwek.

If a raid is necessary, Kwek develops a strategy for it: When and where to conduct the raid and the manpower required.

The team conducts these raids in plain clothes. Upon arriving at the locations of the raid, the tax investigators flash their warrant card, explain the purpose of their visit, and search the place for any documents or devices such as computers and mobile phones related to the investigation. These will be handed over to IRAS’ forensics department.

Tax investigators usually conduct interviews and record statements of suspects and their collaborators on site.

However, if necessary, they may handcuff and arrest suspects who are believed to be heavily involved in certain serious cases for more detailed questioning, or who are believed to be flight risks.

Working on this information, Kwek further develops the case before making a recommendation to in-house prosecutors on whether there is sufficient evidence to prosecute the errant taxpayers and their collaborators.

Detailed planning is crucial, especially in syndicate cases. “The masterminds typically try to distance themselves from the fraud by using layers of companies, and recruiting individuals as ‘puppet’ directors, and recruiting runners to do the legwork for them,” Kwek explained.

“For such cases, because there are a lot of taxpayers and collaborators involved, we need to find out all the locations the syndicate is operating from ahead of time, and sometimes involve the whole division to concurrently raid multiple locations.

“This is to ensure that when we hit them, they don't have time to contact one another or destroy documents,” she added. 

INSIDE THE WORLD OF A TAX INVESTIGATOR

Kwek’s search for missing tax dollars has taken her to some unusual places. Besides the nightclub in 2017, she has also stepped into the embalming room of a funeral parlour to search for documents.

“I was a bit nervous because there were trolleys and trolleys of coffins being rolled outside the office and into the hearse. We also witnessed bodies being carried into the funeral parlour to be embalmed before being transferred into the coffin,” she recalled.

“I have crossed many individual thresholds because of this job. It has been an eye-opening experience for me and has given me great insights about people,” she said.

In another instance, when she raided a suspect’s flat, she found herself surrounded by close to 50 caged geckos in his bedroom. Some were the size of house lizards and others, the size of chameleons.

“Some of the geckos were staring at me and it gave me goosebumps,” she said.

In addition to raids, Kwek also leads a team of five to work on strategies that streamline investigation procedures. She and her team also review current tax legislation and they propose amendments where necessary.

A SENSITIVE TOPIC

Noting that tax is a sensitive topic for some, she said: “When I meet with some friends, they say: ‘The tax man is here again’ and ask me, ‘When are you going to break down more doors?’

“It is a misconception that tax investigators need to look fierce, be fit, strong and confrontational whenever we approach taxpayers so that we can interrogate them or arrest them,” she said.

Sometimes, a softer approach may be more effective, she said.

When she encounters uncooperative taxpayers, explaining the purpose of the visit and treating taxpayers with respect and empathy is often what it takes to secure their cooperation.

Kwek believes that it is important to educate the public on tax crimes so that they do not inadvertently end up being made used of in tax fraud schemes.

Moreover, tax revenue recovered from crimes is important, Kwek said.

“It is what funds public goods such as healthcare and the building of public amenities, which benefit all of us. I believe it is about doing the right thing,” she said.