Clawback Amounts from Productivity and Innovation Credit Payouts

Mdm Speaker, since inception until January this year, 102,000 companies have benefited in one way or another from the Productivity and Innovation Credit. To put this into perspective, this is 70% of all active companies in IRAS' records for the Year of Assessment 2014.

For a scheme with such a wide reach, it is expected that some taxpayers will try to game the system through artificial and contrived arrangements even as the majority of claims are genuine. For example, a group of taxpayers had hired each other as employees and paid each other just enough to satisfy the three-local employee condition in order to qualify for the cash payout.

To address these abuses, IRAS conducts rigorous compliance programmes to review and audit PIC claims. Relying on the experiences of IRAS investigators and advanced analytics, IRAS has investigated or audited about 71,000 claims, or around 30% of the PIC Cash Payout claims made from Years of Assessment 2011 to 2015. One thousand five hundred of these claims investigated or audited required clawback. As for the amount of cash payout clawed back, for Years of Assessment 2011 to 2014, IRAS has clawed back $11 million, of which, $8 million has been recovered to date.

Taking the Year of Assessment 2014 for illustration, out of the 10,000 claims investigated or audited, IRAS has clawed back $7 million worth of improper claims from 500 cases, of which $5 million have been recovered to date.

The Government takes a serious stance on PIC abuse. IRAS will not hesitate to take stern enforcement actions against these businesses and any intermediaries helping them.

Madam, three supplementary questions for the Senior Minister of State. I am sorry, the figures were too much for me to remember, but I wonder if the Senior Minister of State could clarify, out of the applications made for cash payouts, how many percent of the claims were rejected before payout and how many needed to be clawed back after payout? If the Senior Minister of State could give us a sense of that distinction.

Secondly, I wonder if the Ministry, in hindsight, thinks that it perhaps had been too lax in its approval procedures since now we are faced with having to claw back after payout, and whether IRAS would review the approval process to tighten this up.

Thirdly, I understand that IRAS has prosecuted some people in Court for PIC fraud and there are also some cases pending prosecution as well. From the IRAS website, the cases that were reported as prosecuted appeared to involve the grant recipients. We understand that, of course, many of the grant recipients relied on consultants who provided them, as it seems, dubious advice. So, I would like the Ministry to clarify are there cases actually involving consultants that have been prosecuted or are being prosecuted, and, if so, how many of them.

If I may address the Member's questions in turn, I think what the Member is really seeking is to have an idea, the sense of the claims which are actually rejected before payout and after payout.

As I had mentioned earlier, around 71,000 have been investigated or audited. After they have been investigated or audited and rejected upfront, it is about 43,000. There are a number of investigated and audited cases that led to actual clawback. That is about 1,470 or if we round it up, 1,500. That is the first part of the question.

The other question the Member had asked was whether we should review the approval process. That is something that we constantly look at to see how we can improve it. But there is also the other aspect, which is where people deliberately attempt to abuse the system. And that is, in fact, the reason why we do these audits. We want to make sure that even though on the face of it, it looks like they have done the application properly, you have got to look behind it. That is why IRAS investigates and does audits. As I have said earlier, we will have no hesitation in prosecuting those that are found to be abusing the system.

The Member also asked about whether prosecutions included consultants. I am afraid I do not have that information with me at the moment, but that can be checked.

Mdm Speaker, one final clarification for the Senior Minister of State. Based on the figures she cited earlier, the 71,000 being investigated, after we deduct the 43,000 where the claims were rejected prior to payout, and the 1,470 where they were clawed back after payout, does this mean that there were more than 26,000 cases where payout has been made, but clawback has not been achieved, as yet?

I think the Member took the 71,000, minus off the 43,000, minus off 1,500, and that gives a figure of approximately 25,000. These are still under investigation or audit. So, they are in the process of being looked at. I am not able at this stage to say whether they are rejected upfront or whether they are clawed back because they are still being looked at.