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4 March 2010 International Tax Dialogue Asia Conference

4 March 2010 International Tax Dialogue Asia Conference. Reducing administrative and compliance costs through e-tax solutions & special services: what works for micro & small businesses? Sabina Cheong Inland Revenue Authority of Singapore. Characteristics of SMEs (Small-Medium Enterprises)

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4 March 2010 International Tax Dialogue Asia Conference

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  1. 4 March 2010 International Tax Dialogue Asia Conference Reducing administrative and compliance costs through e-tax solutions & special services: what works for micro & small businesses?Sabina CheongInland Revenue Authority of Singapore

  2. Characteristicsof SMEs (Small-Medium Enterprises) • IRAS’ Strategic Compliance Framework • Compliance & Service Initiatives • Conclusion Overview

  3. Definition of Small Medium Enterprises (SMEs) • 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

  4. Characteristics of SMEs • 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

  5. Key Challenges of Tax Administration for SMEs • Incomplete records keeping due to nature of business or resource constraint • Ignorant of Accounting and Tax rules • Accuracy of tax reporting

  6. Strategic Compliance Framework OUR VISION The leading tax administration in the world A partner of taxpayers in nation-building and economic development An 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 Simple Tax System Informed Taxpayers Credible IRAS Engaged Community STRATEGIC OUTCOME Enhanced Voluntary Compliance

  7. Our Belief about Taxpayers’ Behaviour 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, prosecution Available at: http://www.iras.gov.sg > About IRAS > Taxpayer Compliance

  8. Strategic Pillars of Compliance & Initiatives STRATEGIC PILLARS Simple Tax System Informed Taxpayers Credible IRAS Engaged Community Initiatives: • Registration and de-registration • Simple tax filing • Efficient tax processing • Regular rules review • Provide more convenient ways to make payment

  9. Registration 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

  10. Registration 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

  11. De-registration Income Tax • Waiver of submission of income tax return for dormant companies • Procedures to mark companies inactive • Procedures for strike off with ACRA

  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. RegularRules 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

  16. Convenient Ways to Pay • Income Tax • 12 monthly instalments • Deduction through bank accounts • Decentralised payment at post offices

  17. Strategic Pillars of Compliance & Initiatives STRATEGIC PILLARS Simple Tax System Informed Taxpayers Credible IRAS Engaged Community Initiatives: • Provide timely and proactive taxpayer education • Provide real-time & easy-to-understand information • Assistance in filing returns 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 newbusinesses: • - 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

  23. Strategic Pillars of Compliance & Initiatives STRATEGIC PILLARS Simple Tax System Informed Taxpayers Credible IRAS Engaged Community 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

  24. Strategic Pillars of Compliance & Initiatives STRATEGIC PILLARS Simple Tax System Informed Taxpayers Credible IRAS Engaged Community • Initiatives: • Leverage on 3rd parties • Engage partners such as tax agents, trade associations, professional bodies • Media

  25. Leveraging on 3rd parties 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

  26. Engaging partners • 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

  27. Media • Educate public and verious taxpayer segments on their tax obligations • Raise public awareness of our compliance programmes

  28. 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

  29. Thank You

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