Flawed employment levy system encourages corruption and tax evasion in Singapore.

Discussion in 'Labor & Employment' started by Bic_Cherry, Dec 18, 2018.

  1. Bic_Cherry

    Bic_Cherry Active Member

    Jun 24, 2012
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    Flawed employment levy system encourages rampant corruption and tax evasion in Singapore.

    It encourages workers to be dishonest and corrupt in their salary and qualifications declaration: e.g. they are complicit in fake contracts with deliberately inflated salaries to fool MOM into allowing their employer to employ them as Soon as pass holders. They also accept inflated monthly salary cheques ($2200) to fool IRAS that the money was paid to them as salary when in fact $800 of it was returned to the boss. This $800 will evade company tax and dividend payout to company shareholders because it has effectively become erased from the company profits records.

    Dishonest employers not only are evading company tax, they are also evading MOM levy charges since despite being flawed, low skilled foreign workers attract stricter quotas and a higher workpass levy rate.

    On more than two counts has the company/ employer benefited from each salary slip faked.

    The worst thing of all is that Singapore's corruption free business environment has been irreversibly tarnished by the manifold benefits of gaming the (flawed) workpass levy system.

    Many foreign workers will experience first hand the rampant corruption going on behind close doors and this will be reflected in their shoddy work and even embolden them towards other dishonest acts in a land as they are already initiated to become complicit in systematic corruption upon their first day at work.

    Not only does this flawed workpass levy system encourage rampant corruption, it also short changes the nation's tax coffers since by accounting standards, $800 per fake salary slip issued has vanished from the company balance sheet and will thus evade corporate tax each month. At a corporate tax rate of 17%, the result of tax evasion of $9600 p.a. per s-pass employee of profits under declared amounts to an evaded corporate tax of $1632/ pax.

    Incidental to this case is that the punishment is no more than a small slap on the wrist because adding the probable worker levy evaded if a work permit rather than an s-pass should have been issued, perhaps meaning a monthly evasion of (lower range estimate) say $200 in levy or $2400 p.a. per pax of evasion, means a total (levy plus Corp tax) evasion of $4032 annually per pax; 10 pax is much more than $40,320 evaded annually of which the fine is only $21,000, less than the amount evaded in 8 months of $26,880 as the scam had been on for 8 months (report says Oct 2014 to May 2015).

    The worst part of this is that because an issue as fundamental as salary is at issue, large spectrum of participants ranging from directors, CEO, foreign employee to the wage clerk and accountant secretaries are probably all in cahoots in the corrupt under declaration right from day one and thus nobody will blow any whistles unless the reward for doing so is extremely significant and there is also immunity from prosecution, thus the number of cases charged and convicted is most likely just the tiny tip of the iceberg with the majority of cases remaining largely undetected.

    The biggest losers will be the citizens and consumers as corruption and misrepresentation becomes the standard commercial/ industrial normal within Singapore.

    Company Director Fined $21,000 for Falsely Declaring Salaries in Work Pass Applications
    8 July 2016
    Tags: Work passes and permits Foreign manpower
    A 51-year-old Singaporean, Tan Boon Sing (“Tan”), was sentenced in the State Courts on 7 July 2016 for falsely declaring salaries to obtain work passes for 10 foreign employees. Tan was charged with 10 counts of the offence. He pleaded guilty and was fined $21,000 in default nine weeks’ imprisonment for three charges, with the remaining seven charges taken into consideration. Both Tan and his company, KT Engineering & Construction Pte Ltd have been barred from hiring foreign workers.

    Falsely declaring salaries and collecting kickbacks from foreign workers
    Between October 2014 and May 2015, Tan made false declarations in the work pass applications for 10 foreign workers. Tan declared their salaries to be $2,200 so as to meet the salary requirement for an S Pass, even though he knew that they would be paid a lower amount. The workers were granted S Passes based on the false information provided.
    Investigations revealed that the workers were each paid a monthly salary of $1,400. The company would issue a monthly $2,200 cheque to each worker. Tan would then instruct his former employee, a 44-year-old Indian national Peyarijohn Shekatham (“Peya”), to collect back $800 in cash from each of the workers every month on his behalf. The workers were told by Peya that their work passes would be cancelled and they would be sent back to their home country if they did not comply.
    Following MOM’s investigations, Tan has since returned the monies collected to all the workers.
    For Peya’s involvement in aiding Tan to collect kickbacks, Peya will be dealt with in due course.

    Applicants must make truthful declarations
    Commenting on the case, Mr Kandhavel Periyasamy, Director of Employment Inspectorate, MOM’s Foreign Manpower Management Division, said, “Tan had falsely declared the salary of the workers so that they could qualify for S Passes. This is a serious offence and we will take strong enforcement action against such employers, including barring them from employing foreign workers.”
    Since 2014, 55 employers were prosecuted for falsely declaring their foreign workers’ salaries.
    Under the Employment of Foreign Manpower Act (EFMA), offenders found guilty of false declaration offences can be imprisoned for up to two years, or fined a maximum of $20,000, or both. For kickback offences, offenders can be imprisoned for up to two years, or fined a maximum of $30,000, or both.
    Members of the public who know of persons or employers who contravene the EFMA should report the matter to MOM at 6438 5122 or e-mail mom_fmmd@mom.gov.sg. All information will be kept strictly confidential.

    Last edited: Dec 18, 2018

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