The 'missing trader': Man jailed for sophisticated scheme that cheated $2m in GST refunds

SINGAPORE — A man who joined a criminal scheme that cheated the Inland Revenue Authority of Singapore (Iras) of over $2 million has been sentenced to five years' jail.

On Feb 29, Kelvin Yeo Soon Teck, 42, pleaded guilty to two offences under the Companies Act and one charge of forgery. Two other charges of forgery were taken into consideration for sentencing.

The court heard that the fraud took place from September 2015 to April 2016.

In 2015, Yeo got to know a Vietnamese man, Trinh Tien Dung, known as Don, and a 47-year-old Singaporean man, Francis Tan Nuan Seng.

Don, one of the masterminds, got Yeo on board the scheme to defraud Iras.

Known as "missing trader fraud", this scheme exploits the goods and services tax system for illicit gain.

The police and Iras said in a previous news release that a typical arrangement for this fraud involves a group of businesses that forms a supply chain through which goods are sold.

At each stop along the supply chain, the seller charges GST on the goods sold. But the original seller then disappears without paying the collected GST to Iras, and becomes the "missing trader".

Meanwhile, the goods sold down the chain are purportedly exported by the last seller in the chain.

Since exports are zero-rated, this last seller does not collect GST on the exports. Instead, it claims a refund from Iras on the GST paid on its purchases of the goods.

The state will suffer a loss if Iras refunds this last seller, as the "missing trader" had not paid the GST it had collected for its sale of the goods at the start of the chain.

Yeo operated two companies involved in the fraud, M Solution Trading (MSTPL) and Crescendo Hardware Trading (CHTPL). He ran the operations of MSTPL with Tan, according to court documents.

MSTPL, a shell company incorporated after the men hatched their plan, was the "missing trader" in their scheme. It pretended to sell goods to a chain of other businesses, including CHTPL, and collected seven per cent GST on its "sales".

CHTPL was a legitimate company that provided wholesale plumbing and piping equipment, but it was used as a buffer company in the fraud and did not have any real dealings with MSTPL.

Don provided details such as stock specifications, quantities and prices to Yeo, who used the information to forge various sales invoices from MSTPL and CHTPL.

In total, the invoices claimed fictitious sales of more than $115 million.

The scheme resulted in about $7.5 million in fraudulent tax claims filed with Iras. Of these claims, Iras paid out about $2 million.

Yeo received between $110,000 and $140,000 as commission for his role in the scheme.

Deputy Public Prosecutors Matthew Choo, Joshua Phang and Lee Da Zhuan asked for between 62 and 70 months' jail, noting that this was a serious and sophisticated case of tax fraud.

The prosecutors said GST is an important source of revenue for government expenditure on economic and social programmes.

Said the prosecutors in their submissions: "GST fraud thus has a wide-ranging impact, depriving the Government of the revenue to fund these programmes, and also depriving the public of these programmes' benefits."

In mitigation, Yeo's lawyer, Lim Bee Li, said Yeo faced stress and guilt about his involvement in the scheme and had told Don he wanted out.

"When he made an attempt to tell Don, he faced threats that his family and himself would face danger if he did not continue acting under the instructions of Don," added Lim.

But District Judge Wong Li Tein did not accept this as a mitigating factor.

"The fact that (Yeo) felt that he could not leave was a consequence of allowing himself to be manipulated by Don," said the judge, adding that there was no evidence Yeo was forced to continue with the scheme.

Tan's case is still before the courts. A Singaporean man, Sia Hock Chuan, 57, who was the director of MSTPL, was fined $5,000 for his role in the scheme.

Another local man, Luke Giam Zi Hin, 41, and one Louis Tan, were identified in court documents as one of the masterminds and runners of the scheme respectively. It was not stated if Don and these two men have been arrested.

This is the second prosecution in Singapore involving missing trader fraud, said the police and Iras.

In the other case, involving shell company Nagore Trading, nearly $8 million in fraudulent tax claims were filed with Iras, which was cheated of more than $772,000.

Four men linked to the case were sentenced to between five months' and four years' jail. The alleged accomplices' cases are before the courts.

ALSO READ: Government to refund $7.5m in GST wrongly collected by 6 agencies over 5 years

This article was first published in The Straits Times. Permission required for reproduction.