reducing administrative and compliance costs through e-tax solutions & special services: what...
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Reducing administrative and compliance costs through e-tax
solutions & special services: what works for micro & small
businesses?
Sabina CheongInland Revenue Authority of Singapore
4 March 2010International Tax Dialogue Asia Conference
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Overview
• Characteristics of SMEs (Small-Medium Enterprises)•IRAS’ Strategic Compliance Framework•Compliance & Service Initiatives•Conclusion
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• No legal definition in Singapore but there are several working definitions adopted by different agencies
• Ministry of Trade and Industries:– Manufacturing – net fixed assets investments of
S$15 million or less– Non-manufacturing – less than 200 employees
Definition of Small Medium Enterprises (SMEs)
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• Large in numbers• Wide diversity in terms of size and type of
business• Sole-proprietors, partnerships or private
limited companies• Family-run businesses• Usually no professional staff to deal with
tax matters
Characteristics of SMEs
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• Incomplete records keeping due to nature of business or resource constraint
• Ignorant of Accounting and Tax rules• Accuracy of tax reporting
Key Challenges of Tax Administration for SMEs
Strategic Compliance Framework
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OUR VISIONThe leading tax administration in the world
A partner of taxpayers in nation-building and economic developmentAn excellent team of competent and committed people
OUR CORPORATE GOAL (COMPLIANCE)
To ensure compliance by all taxpayers
OUR BELIEF
Taxpayers are Generally Compliant
STRATEGIC PILLARS
STRATEGIC OUTCOME
Enhanced Voluntary Compliance
Simple Tax SystemInformed Taxpayers
Credible IRAS
Engaged
Community
Our Belief about Taxpayers’ Behaviour
Downward Pressure of
Societal Norms to Comply
TAXPAYER BASE
Voluntarily Compliant
Ignorant
Negligent
Errant
Assist & Serve
Educate & Prevent
Detect & Reform
Penalise & Deter
Willing to comply
but require
assistance
Figure 1. Belief about Taxpayer Compliance
OUR BELIEF
Taxpayers are Generally Compliant
IRAS website, e-Services, Starter package for new taxpayers
Talks with trade associations, Public communications
Audit programs, Voluntary disclosure policy
Impose penalties, enforcement, investigation, prosecutionAvailable at: http://www.iras.gov.sg > About IRAS > Taxpayer Compliance
Strategic Pillars of Compliance & Initiatives
Initiatives: Registration and de-registration Simple tax filing Efficient tax processing Regular rules review Provide more convenient ways to
make payment
STRATEGIC PILLARS
Simple Tax SystemInformed Taxpayers
Credible IRAS
Engaged
Community
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Income Tax• Registration of taxpayers for income tax – use
technology to obtain information directly from other government agencies – Accounting and Corporate Regulatory Authority
(ACRA) – info on all new companies and businesses
• Ensures compliance and removes need for businesses to come forward and register
Registration
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Goods and Services Tax• High exemption threshold of S$1 million for
GST registration:– Small and micro businesses have option not to
register for GST and need not comply with various compliance requirements
Registration
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Income Tax• Waiver of submission of income tax return for
dormant companies• Procedures to mark companies inactive• Procedures for strike off with ACRA
De-registration
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Simple tax filing Income Tax:• Companies – Reviewing tax returns regularly; no. of
pages was reduced from 8 to 5 (for main return) and from 11 to 4 (for appendices)
• Sole-proprietors and partnerships with turnover < $$500,000 – Submit 4 line statement– Need not submit accounts unless requested
• Sole-proprietors with turnover < $100,000 – 2 line statement
• E-Filing- prefilled reliefs for individuals
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Simple Tax Filing
Goods and Services Tax:• Compulsory e-filing• Six monthly GST accounting is available for
voluntary registrants• Option for cash accounting instead of accrual
basis for the small and micro businesses.
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Efficient Tax Processing
• Use of highly integrated information systems- Refunds to taxpayers are made automatically - Bulk generation of returns
• Leverage on straight through processing- Returns are processed expeditiously with minimum human intervention
• Streamline and improve business systems and processes continuously- Committed to continuous improvements
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Regular Rules Review
• 5-year rules review cycle:– Simplify our rules and requirements with aim to
making it easy to comply and reducing compliance costs for taxpayers
– Examples:• Assessment of non-trade income and donations on
accounting year instead of calendar year basis• 100% capital allowances for small assets costing $1,000
or less
Convenient Ways to Pay
• Income Tax– 12 monthly instalments– Deduction through bank accounts– Decentralised payment at post offices
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Strategic Pillars of Compliance & Initiatives
STRATEGIC PILLARS
Initiatives: Provide timely and proactive taxpayer
education Provide real-time & easy-to-
understand information Assistance in filing returns
Simple Tax SystemInformed Taxpayers
Credible IRAS
Engaged
Community
Help taxpayers get it right the first time
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Taxpayer Education Programme• Regular seminars and workshops:
– For new businesses, especially SMEs and those without tax agents
» Completion of tax returns, tax obligation and basic corporate tax / GST information
» Common mistakes made in tax returns
• Ad-hoc seminars and workshops– Reach out to specific groups of taxpayers:
» Hawkers and Traditional Chinese Medicine Practitioners
» e-Services , GST rate change seminars
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Assistance in Record-Keeping
• Issue of e-Tax Guide- Basic Record Keeping Guide for Small Businesses for GST
and Income Tax
- letters to new businesses:- To educate them early about proper record keeping as
well as their other tax obligations
• Subsidies on purchase of accounting software - 50% of cost up to $1500 to encourage GST registered SMEs to use accounting software to improve on record keeping
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Provide real-time & easy-to-understand information
• User-friendly IRAS website with updated tax information
• Clarifications of tax treatments via e-Tax Guides
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Assistance in filing returns
• Online self-help:– Basic tax calculator for companies– Worksheet for preparation of accounts and tax
computation for sole-proprietors
• Online information:– Starter package for self-employed covering tax
obligations, record-keeping and accounting requirements
– Starter package for new businesses
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Assistance in filing returns
• e-Filing assistance:– Station officers at community clubs to help
individuals including sole-proprietors and partners to e-file
– Dedicated helplines and email to handle enquiries on GST e-filing
– Providing e-filing facilities and coaching at IRAS SurfCenter for those without internet access
Strategic Pillars of Compliance & Initiatives
Initiatives: Proactive actions to facilitate compliance Prompt and effective actions against non-
compliance Maintain high levels of presence amongst
taxpayers through education, audits and open communication
STRATEGIC PILLARS
Simple Tax SystemInformed Taxpayers
Credible IRAS
Engaged
Community
Strategic Pillars of Compliance & Initiatives
Initiatives: Leverage on 3rd parties Engage partners such as tax
agents, trade associations, professional bodies
Media
STRATEGIC PILLARS
Simple Tax SystemInformed Taxpayers
Credible IRAS
Engaged
Community
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To deliver targeted education and assistance for specific groups of SMEs:– Taxi drivers – Distributing leaflets via taxi rental
companies– Real estate agents – Educational sessions for
bigger real estate agencies, and handing out record-keeping guide
Leveraging on 3rd parties
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• Tax agents- Help tax agents upgrade their knowledge - Provide 50% subsidy on tax courses conducted by Tax
Academy for smaller tax agent firms
• Trade associations- Reach out to businesses through dialogue sessions
with various trade associations
• Professional bodies- Platform to explain rationale of tax policies &
procedures
Engaging partners
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• Educate public and verious taxpayer segments on their tax obligations
• Raise public awareness of our compliance programmes
Media
Conclusion
• Use appropriate technology to simplify filing and procedures for taxpayers
• Provide timely & accurate information • Easy & Convenient Services to assist
taxpayers
• Listen to taxpayers’ feedback - refine our system
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