Investigations to Productivity and Innovation Credit Scheme Claims01 Mar 2016
To ask the Minister for Finance (a) in each year since the inception of the Productivity and Innovation Credit (PIC) scheme, how many cases and constituting what percentage of total PIC claims has IRAS investigated, or is investigating or pursuing, clawbacks of PIC payouts; (b) what is the dollar value of the clawback investigations initiated by IRAS in each year; (c) what are the reasons for the clawbacks; and (d) what is the success rate so far in obtaining the clawbacks.
Reply by Senior Minister of State for Finance Indranee Rajah:
Since inception until January this year, 102,000 companies have benefited in one way or another from the Productivity and Innovation Credit. To put this into perspective, this is 70% of all active companies in IRAS’ records for the Year of Assessment 2014. For a scheme with such a wide reach, it is expected that some taxpayers will try to game the system through artificial and contrived arrangements even as the majority of claims are genuine. For example, a group of taxpayers had hired each other as employees and paid each other just enough to satisfy the three-local employee condition in order to qualify for the cash payout.
To address these abuses, IRAS conducts rigorous compliance programmes to review and audit PIC claims. Relying on the experiences of IRAS investigators and advanced analytics, IRAS has investigated or audited about 71,000 claims or around 30% of the PIC Cash Payout claims made from Years of Assessment 2011 to 2015. 1,500 of these claims investigated or audited required clawback. As for the amount of cash payout clawed back, for Years of Assessment 2011 to 2014, IRAS has clawed back $11 million. $8 million has been recovered to date.
Taking the Year of Assessment 2014 for illustration, out of the 10,000 claims investigated or audited, IRAS has clawed back $7 million worth of improper claims from 500 cases, of which $5 million have been recovered to date.
The government takes a serious stance on PIC abuse. IRAS will not hesitate to take stern enforcement actions against these businesses and any intermediaries helping them.