Why proactive tax risk management is a strategic necessity

Over $450 million in taxes and penalties were recovered over the past three years from GST and Corporate Income Tax audits, with more than 70% of GST errors arising from common compliance mistakes like incorrect zero-rating, deemed supplies, and incorrect input tax claims. 

These results are not just retrospective commentary — they are a clear warning. As IRAS moves toward greater data transparency through InvoiceNow, the spotlight on GST non-compliance is only going to intensify. 

Common errors from IRAS audits 

Despite regular guidance and tax education, the IRAS continues to identify non-compliance during its routine audits including: 

• Incorrectly zero-rating services that do not qualify as international services 
• Insufficient documentary evidence for support the exportation of goods
• Omission of deemed supplies
• Claiming input tax on blocked expenses (e.g. medical insurance and treatment costs, club subscriptions, S-plate care expenses, and family benefits)
• Improper use of GST schemes (e.g. Major Exporter Scheme (MES), Import GST Deferment Scheme (IGDS))
• Inadequate documentation to support tax positions 

Crucially, these issues are being uncovered through an increasingly data-driven audit process. The IRAS leverages data analytics, industry benchmarking, and third-party data sources to flag anomalies — and this capability is set to accelerate further with the introduction of mandatory InvoiceNow adoption. 

InvoiceNow is set to change tax transparency 

InvoiceNow, Singapore’s nationwide e-invoicing initiative based on the Peppol framework, is expected to become mandatory for all businesses soon. While its goal is to improve invoicing efficiency and reduce paper-based processes, its implications for tax transparency are profound. 

Once InvoiceNow is mandatory for GST-registered businesses, the IRAS will have access to transactional-level data. This means: 

• Greater granularity of data on sales and purchases
• Faster detection of discrepancies between reported figures and actual invoices
• Increased ability to cross-match buyer and supplier data for audit checks
• Enhanced profiling of taxpayer behaviour using live datasets

In short, the IRAS audit of the future should be faster, smarter, and more targeted — and businesses with weak controls may find themselves exposed without warning. Watch this space; more insights coming to a screen near you soon.  

Why proactive risk management matters more than ever 

Most GST errors flagged by the IRAS are avoidable. Yet businesses often fall into the trap of reactive compliance — responding only when queried, rather than reviewing their GST positions on an ongoing basis. 

This approach is no longer viable in the face of enhanced analytics, more complex supply chains with cross-border transactions, and frequent changes in GST regulations and scheme requirements. This is even before InvoiceNow gets in on the act.

A proactive approach, on the other hand, enables businesses to: 

• Prevent issues before they surface
• Maintain accurate and reconciled tax reporting
• Build confidence with senior management, business stakeholders, and the IRAS through demonstrable controls
• Future-proof systems in anticipation of e-invoicing enforcement 

Tax risk is not just a tax department issue 

Effective GST risk management requires shared accountability across the whole business framework. We encourage finance leaders, operations heads, procurement, and legal teams to all play a role in identifying, escalating, and managing tax risks. Now more than ever, the spotlight is on enterprise-wide tax governance. InvoiceNow will reduce the window for corrections — and amplify the visibility of errors. 

Three immediate actions possible 

1. Conduct an internal GST health check: Focus on the past 12 months of returns (i.e. four quarters), and pay special attention to zero-rating, input tax claims, and non-reporting of deemed supplies.
2. Evaluate your systems’ readiness for InvoiceNow: Are your invoicing and ERP systems aligned to with the InvoiceNow standards and do they capture all the mandatory data elements
3. Upskill your team: Ensure relevant departments understand the compliance and audit landscape — and are ready to respond quickly.