SINGAPORE: In an eye-opening revelation, the Inland Revenue Authority of Singapore (IRAS) has recovered more than S$3 million (around US$2.2 million) in unpaid taxes and penalties from 49 companies in the funeral sector over the past five years. This action stemmed from extensive investigations initiated in 2019 focusing on tax compliance among funeral service providers and related industries, including religious rites, embalming services, and food catering.

As part of these investigations, IRAS has scrutinized 65 businesses for discrepancies in tax reporting and has successfully prosecuted three undertakers. A particularly notable case involved renowned undertaker Roland Tay of Direct Singapore Funeral Services & Embalming, who was recently fined S$12,000 and required to pay an eye-watering penalty exceeding S$529,000 for his tax violations.

The funeral industry, often family-operated, has been characterized by a pattern of significant cash transactions, inadequate record-keeping, and poorly maintained internal controls. "These business practices can lead to incorrect income tax returns and delayed registration for Goods and Services Tax (GST) once their taxable turnover crosses S$1 million within a year," explained Ameera Koh, deputy director at IRAS's investigation and forensics division.

Many of these discrepancies arise when family members serve dual roles—such as acting as bookkeepers—causing complications in recording sales and expenses. Cash payments from clients, often gathered from contributions from family and friends, may also go unreported.

IRAS has highlighted the importance of compliance, noting that some service providers fail to declare income from goodwill contributions, commonly known as 'hongbao', which should be reported as employment income. Alarmingly, since 2019, the tax authority has also prosecuted a religious practitioner for similar offenses.

Digital Transformation is Key

To combat these issues, IRAS is advocating for digital solutions within the sector. A shining example is Ang Yew Seng Funeral Parlour, which has adopted online banking and QR code payments, streamlining its operations through digital software for invoicing. The funeral director, Ang Jia Jia, praised the efficiency boost and underlined the importance of engaging a third-party accounting firm to assist with financial statements and tax reporting.

"The accountants keep us informed about new regulations, ensuring we meet the latest standards and maintain compliance," Ang noted. She revealed a noticeable shift in industry practices, partly driven by the COVID-19 pandemic, which necessitated a reduction in physical interactions.

A Shift Towards Professionalism

Hoo Hung Chye, the executive director of the Association of Funeral Directors, echoed this sentiment, stating that businesses are moving away from cash transactions as families increasingly opt for digital contributions. While acknowledging that a few poorly performing firms tarnish the reputation of his industry, Hoo emphasized the association's commitment to uplifting standards.

"We're actively engaging with funeral service providers to help them professionalize their operations," he affirmed. The association also strives to provide guidance on regulatory requirements, which they hope will lead to a transformative shift within the industry, focused on better serving bereaved families.

The funeral sector’s embrace of technology and compliance not only aims to recover lost revenue but also strives to enhance service quality, ensuring a respectful and sincere experience for families during their most challenging times. As the industry adapts and evolves, it will undoubtedly play a crucial role in shaping the future landscape of funeral services in Singapore.