IRAS recovers over S$3m from funeral sector in unpaid taxes and penalties since 2019

SINGAPORE: The Inland Revenue Authority of Singapore (IRAS) has clawed back more than S$3 million (US$2.2 million) in unpaid taxes and penalties from 49 firms in the funeral industry over the past five years. 

This was following investigations into the funeral sector and its related services - such as rites by religious practitioners, embalming and food catering - that began in 2019, IRAS said.

To date, IRAS has audited and investigated 65 businesses for anomalies in tax reporting and prosecuted three undertakers in court.

In the latest case in September, well-known undertaker Roland Tay from Direct Singapore Funeral Services & Embalming was fined S$12,000 and ordered to pay a penalty of more than S$529,000 for tax offences.

Funeral parlours are typically family-run businesses, noted deputy director at IRAS’ investigation and forensics division Ameera Koh. 

“Their (funeral industry) business practices are often marked by substantial cash transactions, poor record-keeping, and weak internal controls or processes,” she said. 

This may result in these businesses filing incorrect income tax returns and failing to register for Goods and Services Tax (GST) on time when their taxable turnover over a 12-month period exceeds S$1 million, IRAS said.

Detailing how this may happen, the agency said family members double-hatting as bookkeepers may result in sales and expenses not being properly recorded. Payment from clients - typically cash from contributions collected from family and friends - similarly may not be documented.

IRAS has also prosecuted one religious practitioner since 2019. 

Among the potential offences such service providers may commit is sometimes omitting the declaration of income from hongbao - or goodwill - money when it should be declared as employment income, IRAS said.

GOING DIGITAL

IRAS is encouraging companies in the funeral sector to go digital to prevent themselves from falling afoul of the law.

One business that has already made the switch is Ang Yew Seng Funeral Parlour, which now opts for online bank transfers and QR code payments.

The firm has also started using digital software which can be used to create invoices on the go, which has improved efficiency, said the firm’s funeral director Ang Jia Jia.

The company also engaged a third-party accounting firm.

“They help us with preparing the financial statements at year-end and as well as tax-reporting,” she said, 

Ms Ang added that the accountants she engages also update her company on new rules, allowing the firm to keep up with the latest standards and ensure compliance.

“We also wanted to maintain a positive business reputation as well (so) we will have a good relationship with customers (and) suppliers,” she said. 

Ms Ang, who has been in the family-run business for more than a decade, said the industry is slowly moving away from cash payments, partly prompted by the COVID-19 pandemic two years ago, when in-person contact had to be reduced.

IMPROVING THE INDUSTRY

Executive director of the Association of Funeral Directors Hoo Hung Chye similarly said that businesses are starting to rely less on cash payments, as some families have started to collect contributions from relatives and friends digitally. 

Mr Hoo added that while there are a few bad eggs among the roughly 400 registered funeral service providers, they do not reflect the sector’s quality of service.

Still, his association is trying to encourage firms to evolve and improve in some areas.

“With the help of the agencies … we're trying to reach out to more and more of these funeral service providers to better professionalise themselves,” he said. 

The association is also advising them on their statutory compliance and regulatory obligations. 

“This, hopefully, will help the whole industry transform itself to better serve the families that we serve,” he said.