Root Causes of Increase in Tax Recoveries of $857 Million and Measures to Promote Better Tax Compliance

Mr Derrick Goh asked the Prime Minister and Minister for Finance given the reported increase in tax recoveries of $857 million as compared to about $500 million in the financial year ending March 2024 (a) what had driven the increase in tax recoveries; (b) what is the Government’s assessment of the root causes of the increase in tax recoveries and whether there are areas of concern; and (c) whether there are plans to further strengthen measures so as to promote better tax compliance.

The Inland Revenue Authority of Singapore (IRAS) adopts a risk-based approach to select higher-risk cases for targeted audit and investigation. It leverages data analytics and artificial intelligence models, as well as information from members of the public.

The amount of tax recovered fluctuates from year to year depending on the value of tax adjustments made for the cases completed in that year. In financial year (FY) 2023, IRAS recovered about $857 million in taxes and penalties, a 72% increase compared to FY2022, through its audit and investigation efforts. This was largely due to an increase in the amount of taxes and penalties collected from a handful of high-value outlier cases involving corporate income tax and Goods and Services Tax (GST).

The Government takes a serious view of non-compliance. There are stringent penalties to deter non-compliance. IRAS’ powers of enforcement have also been enhanced in recent years. For example, the recently operationalised section 62C of the GST Act allows IRAS to more comprehensively target the various parties involved in complex fraud cases. IRAS also collaborates with law enforcement agencies, such as the Singapore Police Force, to counter tax crime. Prosecution cases are also publicised regularly.

In addition, IRAS continually enhances its capabilities by upskilling its tax officers to strengthen their audit skills, tax expertise and use of technology. It also develops staff competencies to handle complex investigations into sophisticated fraud schemes.

Besides educating taxpayers on their tax obligations, IRAS will continue to monitor tax compliance performance, identify emerging compliance risk areas and refine existing audit and investigation methods.