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

1

2

Overview

• Characteristics of SMEs (Small-Medium Enterprises)•IRAS’ Strategic Compliance Framework•Compliance & Service Initiatives•Conclusion

3

• 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)

4

• 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

5

• 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

6

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

9

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

10

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

11

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

12

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

13

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.

14

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

15

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

16

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

18

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

19

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

20

Provide real-time & easy-to-understand information

• User-friendly IRAS website with updated tax information

• Clarifications of tax treatments via e-Tax Guides

21

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

22

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

25

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

26

• 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

27

• 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

THANK YOU

29