'He intentionally chose to do nothing about it,' says Singapore court
A Magistrate's Court in Singapore recently dealt with the first prosecution for an offence relating to the unauthorised collection of Goods and Services Tax (GST) under the Goods and Services Tax Act (GSTA).
This case involved a company director who had failed to notify the comptroller of GST of the company's liability to be registered for GST and had collected GST without authorisation.
The court's decision in this case sets a significant precedent for the interpretation and application of the GSTA, particularly the offences relating to the unauthorised collection of GST.
The case involved a 48-year-old Singaporean male who was the group executive director of a company dealing with employment, recruitment, and manpower outsourcing for the information technology industry.
As the main decision-maker involved in the company's daily operations, including the preparation of corporate tax returns and the issuance of invoices to customers, he was deemed to be acting in the capacity of a director under the GSTA.
During an audit to determine the company's liability for GST registration, offences under the GSTA were uncovered. The director discovered in 2016 that the company was collecting GST from its customers despite not being GST-registered.
However, the court noted that he intentionally chose to do nothing about it, as he was concerned that the company's customers might become suspicious if they stopped charging GST. This failure to exercise due diligence to prevent the commission of the offence led to the director being charged with five offences under the Act.
The director pleaded guilty to two charges:
Three remaining charges, involving the issuance of 121 invoices showing a total amount of $50,665 as tax between 3 June 2016 and 31 December 2018, were taken into consideration for the purpose of sentencing.
The prosecution submitted that the court should impose a fine of $2,000 with a mandatory financial penalty for the failure to notify offence and an imprisonment term of between two to four months with a mandatory financial penalty for the unauthorised tax collection offence.
The prosecution argued that the dominant sentencing consideration should be general deterrence, as the legislative intent of the GSTA is to "strengthen prosecution and deterrence of unauthorised collections of GST."
The seriousness of the offence was emphasised, as it erodes the legitimacy of the GST system and is difficult to detect.
The defence submitted that the director suffered from various health issues, including decompensated liver cirrhosis, and was on the national liver transplant waitlist.
They highlighted his early guilty plea, full restitution of the unauthorised tax collected, and cooperation with the authorities as mitigating factors.
The defence conceded that unauthorised GST collection by unregistered persons is difficult to detect but urged the court to exercise leniency given the director's medical conditions.
If a custodial sentence was deemed necessary, the defence submitted that a sentence of between 15 days to three weeks' imprisonment would be appropriate, with reference to the sentencing framework in a similar case involving GST evasion.
In determining the appropriate sentence, the court considered the legislative intent behind Section 64A(2) of the GSTA, which aimed to protect consumers and strengthen deterrence against unauthorised GST collection.
The court found that the harm caused by the offence was low, but the director's culpability was on the higher end of low, given his knowledge of the unauthorised GST collection and his failure to take action to prevent it.
The court also considered the duration of the offending period, lasting over three years, and the significant amounts involved in the charges taken into consideration.
Ultimately, the court imposed the following sentences:
"The global sentence for the accused is therefore seven weeks' imprisonment and a fine of $2,000 in default five days' imprisonment with the mandatory financial penalty of $97,261.33 in default 70 days' imprisonment."
Furthermore, the court acknowledged the precedent-setting nature of the case, stating:
"Should another case in [the] future arise where the offence-specific factors may be similar to the present case, the calibration of the levels of harm and culpability may still have to be revisited based on the specific facts."
This decision serves as a warning to company directors and reinforces the importance of complying with GST registration requirements and refraining from unauthorised GST collection.
