MEASURES AGAINST INSIDER GIFTING OF SGX-LISTED SHARES AND UNIT TRUSTS TO APPROVED CHARITIES FOR TAX DEDUCTION

From time to time, we read of cases of persons prosecuted and convicted of the offence of insider trading. This basically involves a person, who has confidential and price-sensitive inside information of securities listed in the stock exchange entering into trades, either by himself or through proxies to make money. Recently in the US, the spotlight fell on the phenomenon of insider gifting that involved an insider making gifts of shares to a charitable institution to gain tax credits. I therefore filed a PQ with the Minister for Finance to check if we have processes in place to detect and deal with such cases. I am glad to note that, indeed, we do. My PQ and DPM Lawrence Wong’s answer may be accessed through the link below.

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Mr Murali Pillai asked the Deputy Prime Minister and Minister for Finance whether the Inland Revenue Authority of Singapore has in place procedures and policies to detect and deal with cases of insider gifting that involve gifts of public shares listed on the Singapore Exchange, or of units in unit trusts traded in Singapore, to approved Institutions of Public Character by individuals who possess price sensitive information at the material times to obtain tax deductions.

Mr Lawrence Wong: The Inland Revenue Authority of Singapore (IRAS) has processes to review high-value donations, including donations of shares and unit trusts, before the tax deductions are applied. Where there is reason to believe that the arrangement leading to the donation was made for the purpose of tax avoidance, including cases involving insider gifting, IRAS will not hesitate to investigate and will work with the relevant agencies such as the Monetary Authority of Singapore.

Where appropriate, IRAS will take action under Section 33 of the Income Tax Act, which empowers the Comptroller to disregard or adjust the tax deduction claims, and impose relevant tax surcharges against the donor.

In order to attain Institution of a Public Character (IPC) status, charities must have in place robust internal processes of transparency and accountability. This includes carrying out proper due diligence checks on their donors.