SINGAPORE: In a startling conclusion to a significant Goods and Services Tax (GST) missing trader fraud case, Francis Tan Nuan Seng was sentenced to four years and two months in prison on September 23 for his role in a scheme involving a staggering S$55 million (approximately US$42.6 million) in fictitious sales.

Tan was the final individual of three men implicated in this fraudulent operation to face sentencing, according to a joint announcement from the Singapore Police Force (SPF) and the Inland Revenue Authority of Singapore (IRAS). He was convicted on several serious charges, including fraudulent trading, forgery, and criminal breach of trust, stemming from a separate case that further highlights the depth of his illegal activities.

Two additional charges—one for forgery and another for transferring benefits from criminal conduct—were acknowledged during the sentencing process, underscoring the breadth of his offenses.

Tan’s accomplice, Kelvin Yeo Soon Teck, had already been sentenced to five years in prison back in February 2023 for his similar crimes. Another participant, Sia Hock Chuan, endured a lesser penalty when he was fined S$5,000 in October 2023 for negligence in his role as a director related to the fraud, alongside a three-year disqualification from managing any company.

What is Missing Trader Fraud?

The scheme, known as GST missing trader fraud, involves dishonest traders exploiting the GST system to create illicit profits through fake transactions. These transactions are the foundation for fraudulent GST refund claims submitted to IRAS. The fundamental principle of this fraud sees the seller, or "missing trader," collecting GST from sales but failing to remit taxes to the revenue authority. Businesses further down the supply chain then attempt to reclaim the GST they supposedly paid.

In this notorious case, Tan and Yeo utilized a shell company, M_Solution Trading, devoid of any legitimate business activities, to carry out their deceitful operations. Yeo also controlled a second entity, Crescendo Hardware Trading, which was intertwined with their operations. Sia served as a nominee director for M_Solution Trading, indicating the lengths these individuals went to conceal their fraudulent activities.

Between September and December 2015, they fabricated 90 sales invoices purporting to document non-existent sales of goods worth about US$55 million. These invoices misled subsequent companies and ultimately led to exporters claiming GST refunds from IRAS, resulting in the submission of fraudulent claims totaling around S$7.53 million. To date, IRAS has already disbursed approximately S$2.04 million in fraudulent GST refunds due to their deceptive tactics.

Authority's Warning

Officials from both the SPF and IRAS have issued stern warnings regarding GST missing trader fraud, reiterating their commitment to cracking down on such criminal operations. They caution businesses that since January 1, 2021, any GST-registered entity aware or could have been aware of its involvement in a missing trader fraud scheme would be denied input tax claims and subjected to a hefty 10% surcharge on denied input taxes.

The authorities emphasize the importance of due diligence, urging businesses to implement appropriate checks within their operations to avert any engagement in potentially fraudulent transactions. As outlined, the legal repercussions for participating in such scams can be severe, making vigilance vital for all businesses.

Stay informed, as this ongoing battle against fraud in Singapore remains a crucial aspect of maintaining the integrity of the nation's tax system!