IRAS’ Current Area of Focus for Audits: Missing Trader Fraud
IRAS is currently focusing its audit and investigation efforts on businesses involved in Missing Trader Fraud arrangements. Such cases are detected using advanced data analytics. Other sources of leads include tip-offs from whistle-blowers.
Businesses should be alert and avoid participating in any arrangement that is organised with the intention to defraud GST.
What Is Missing Trader Fraud?
Under a Missing Trader Fraud arrangement, a group of businesses would form a supply chain and the same goods would be supplied through the chain. To ensure that the final sale of the goods is not subjected to GST, the goods would ultimately be exported to an overseas customer. A seller upstream in the supply chain would charge GST on the sale of goods to businesses downstream and, instead of paying the GST over to IRAS, the upstream seller would deliberately fail to account in its GST return the GST it has collected. This is termed “missing trader” as the seller disappears with the GST.
To form the fraudulent supply chain, the fraudster would borrow an identity and use it to register a business to facilitate other entities in the chain to claim fictitious GST refunds.
Your business could also become a party in the fraudulent supply chain when you accept offers from a fraudster to buy and sell goods in return for a guaranteed profit with no risks. Click for more specific scenarios.
Consequences of Being Guilty of The Fraud
When the arrangement is detected by IRAS, the fraudster who introduced you to the arrangement would leave you to face the authorities on your own as the business is registered in your name and the transactions are carried out by you.
If you are involved in such an arrangement:
- You will be subject to detailed audit and investigation;
- Although you did not manage the company, you are ultimately liable for the transactions as they were carried out in your business’ name;
- You will be denied of GST claims of his purchases.
- As the company was registered in your name, you will be liable for payment of any GST due to IRAS, as well as penalties, as ordered by the court.
IRAS will also not hesitate to take actions against traders and any intermediaries found to be involved in a GST fraud. Anyone with wilful intent to evade or assist any other person to evade GST faces a penalty of up to three times the amount of tax undercharged and a fine not exceeding $10,000, and/or imprisonment of up to seven years.
Pro tips On Protecting Your Business from Missing Trader Fraudsters
Many legit and tax-paying businesses have been victims of missing trader impersonation. This is when these fraudsters get unrestricted access and directive to their trading platforms. They tend to use the company identities in carrying out illegal exportations leading to missing trader fraud. Let’s look through some Protips on how to prevent your business from these illegal impersonators.
#Tip I: Get Skeptical About ‘Too good to be true’ Business Deals
When a deal appears to be too enticing, offers and guarantees unrealistic profit expectations, no commercial and credit risks and minimal effort in running business. These are signs of false claims. Of course, false claims come with hidden agendas. One of which might just be using your business’s credibility for missing trader fraud. Avoid making your business information accessible to a third-party.
#Tip II: Protect Your Identity
Do not allow others to use your name/business’ name. Do not divulge your personal information. Only deal with verified, trusted, and credible vendors. Sometimes, some business deals may warrant the need to share access with suppliers and vendors. To avoid being a victim of missing trader fraud, ensure you only deal with trusted corporations.
#Tip III: Carry Out Background Routine Checks on New Partners
To be on a safe side, make it a habit or company policy to carry out a thorough check on the credibility of new partners. Transact with credible suppliers and customers. Ensure their businesses are registered, and they have enough positive feedback from their goods and services. Trade in genuine goods at reasonable prices and avoid using cash or cash cheque. Also, try to avoid putting your business on the line for partners who you have little or no information about their companies.
Have you come across an attractive business deal? Be alert! Do not fall prey to a missing trader fraud arrangement. Contact us to help put your affairs in order. This way, you can comfortably focus on other important aspects of your company and know you are in the best hands.