Urgent Skin and Eye Blue Letter

Even as the dust on the SingHealth cyberattack has barely settled, another piece of bad news has surfaced on healthcare IT systems offered by Integrated Health Information Systems (IHIS). IHIS is the IT arm of MOHH that oversees IT development and implementation in the public healthcare sector, and increasingly influences the private sector as well. It involved the mis-labelling of drugs affecting 400 GP patients who saw GPs who are using the GP Connect software that IHIS offers. Two days later it was reported that the affected number of affected patients is more likely to be double that of the original number – 836 patients seen in 104 clinics.

An egregious example given was that a patient who was supposed to take 10ml of cough mixture would be asked to take 10 bottles in instead. For codeine addicts, that’s like hitting the casino jackpot.

When such an incident happens, we need to ask a couple of inconvenient questions. First- if the patient indeed was dispensed 10 bottles and worse, took the amount as stipulated, who will be responsible for the unfortunate consequences?

The short answer to this question is “YOU, the GP”. (are you surprised?) As a GP in the private sector using GP Connect, it is quite unlikely you had hired a pharmacist or staff nurse to perform dispensing. If you did, then the pharmacist or staff nurse, both registered with the state and licensed to perform dispensing duties independently, has to bear the brunt of the responsibility. If not, the dispensing staff are dispensing under your supervision and you will have to take professional responsibility even if the IT system had printed out the labels wrongly. This is because you are supposed to have checked and realised the labels did not reflect what you had prescribed earlier on. You may be punished by MOH, Health Science Authority and/or SMC for dispensing the drug in wrong dosages.

What about the IHIS and the IHIS folks? Presumably, the people in there who developed GP Connect are NOT state-registered doctors, pharmacists and nurses. So, the most you can do is perhaps sue them for civil damages and get some money back. The people won’t be suspended or struck-off by some authority regulating the IT profession (IT professionals are not state-licensed).

This is what the financial and business world calls “skin in the game”. You, the doctor, have a lot more skin:- epidermis, dermis and hypodermis, in the game then the IT folks. This inequality or asymmetry in risk exposure leads to the inevitable cultivation of unhealthy behaviour. That’s not to say IT people are evil people, they are not. It’s just that if that is how the system is badly set-up, then suboptimal behaviour and outcomes are sure to follow. This phenomenon is pretty well described in famous economist Nassim Nicholas Taleb’s new book “Skin In The Game”. (He also wrote The Black Swan which sold 3M copies)

On 6 Sep 18, 2 days after the news first broke, it was revealed that this glitch was due to a “planned system update”. Frankly, this sounds terrible and this hobbit is not sure what is the messaging aim here. If a “planned” system update could mess up life like this, one should ask what if the update was unplanned? Would it have been far worse? Is it being “planned” a mitigating factor or an exacerbating factor? Are we supposed to commiserate with the patient, the GP, or get angrier with IHIS? Would the mess have been less if there wasn’t any update, whether planned or otherwise? I don’t know about you, but this hobbit is really confused.

Next on the radar screen are the anaesthetists in the private sector. Apparently, many of them have been targeted by the taxman. Let this hobbit be clear from the onset: he firmly believes the taxman is to more feared than the hitman. The hitman can’t do anything after you are dead. The taxman will get you, in this life or the after-life: he will hit your estate. They are even more powerful than forensic pathologists.

As we all know, most anaesthetists set up companies. Professional fees are paid to and recognised as revenue in these companies, and anaesthetists then get their income from these companies in the form of salaries, dividends and directors’ fees after expenses have been deducted.

Apparently, the taxman now thinks that because these companies who have no office, hire no staff other than the anaesthetists, they are nothing more than tax shelters providing tax avoidance for the owner-employee anaesthetists. The taxman now wants to claw back the difference in taxes the doctors have paid to the government had the doctor been taxed as an individual only when the doctor had paid taxes as a blend of different tax schemes (personal income tax for salary of up to 22%, 22% for director’s fees, 17% corporate tax rate for dividends).

This problem arose because the maximum tax rate for income tax now (22%) is significantly higher than for corporate tax (17%). Certain amounts of dividends are also given tax breaks and certain cost items can be “expensed off”, such as meals with colleagues or the purchase of your Ipad which you need for your work. Some people have received letters saying their claw-back will be up to 5 years. So now, an anaesthetist may now find himself owing the taxman hundreds of thousands of dollars.

It is therefore no surprise that many private sector anaesthetists are up in arms. I know many of them, and they have sought professional accounting and tax advice in the past to set up these companies to avoid paying more tax. They did so in good faith under professional advice. Why should they be penalised for something in the past, just because the taxman applies new rules of interpretation of (purportedly) Section 33 of the Income Tax Act? Who wants to pay more tax than what one is supposed to legally and in good faith?

In any case, tax avoidance may not also be the main reason why doctors set up companies. A private limited company, as the name suggests, is a way of limiting one’s exposure to damages arising from business activity. If you work for and under a company, your business liability is limited to the assets of the company, even though your professional liability is not. For example, the damages, say, your supplier, can get from you is limited to the company’s paid up capital and assets. Your supplier cannot touch the assets that you own personally which are not part of the company, such as your home or your personal-use car. As this hobbit sees it, this is the main advantage of setting up and working under the umbrella of a private limited company.

This liability limitation objective can be evinced by the fact that some companies set up by older anaesthetists have been in existence for decades. In the 80s and 90s, income tax was actually lower than corporate tax. These senior anaesthetists probably paid more money than they could have had they not sought a company structure to house their activities. Can they now claw-back the excess money from the taxman? In the name of fairness, surely there is is some merit in this argument?

Even if the taxman wants to take a new interpretation and get anaesthetists to pay more taxes, this new interpretation should not be applied retrospectively in claw-backs. It should at best be applied to current and future income. And the fact that because the anaesthetists don’t have an office and hire staff, they are then penalised to pay more taxes doesn’t make much sense. If 30 anaesthetists hired 5 receptionists and a tea lady and housed them in a 500 square-foot office in Yishun at $2 per square feet means paying much less taxes, then they may just do it. But what does that do to Singapore and the government’s drive for more productivity? Nothing. It may just mean more low productivity jobs that the Singapore economy doesn’t need.

Someone needs to see the Big Picture here. Obviously the taxman’s visual field and visual  acuity in the context of the Future Economy needs to be questioned here. If not, the road to lower taxes through lower productivity will surely be taken.



4 thoughts on “Urgent Skin and Eye Blue Letter

  1. Dear Hobit. If I’m not mistaken, according to Singapore law, one does not avoid professional liability simply by hiding behind a limited liability company. This is unique to certain professions eg. Doctors, Lawyers etc… So the sole purpose of a LLC in this case is “Tax Management” :).


    1. There are other non-professional risks. Liability to employees, liability to third party administrators, liability to suppliers, even liability to one another – partners in a practice, which may be also non-professional liability etc


  2. There are many single non medical owner-consultancy company in existence using a revenue model not dissimilar to private anaesthetists. Targeting a single profession is unfair and there will be wider implications. Ultimately, the interpretation of the tax law is by the courts and perhaps the profession can come together and challenge IRAS’ ruling.


  3. Hobbitsma

    I believe some “doth protest too much”
    Professionally speaking, that section has been in existence for a long time, the key issues which you have not highlighted and which was in the ST article(a bit poorly written considering target audience general public as compared to professionals) is as follows:

    a) setting up of multiple companies
    b) continuous number of new entities after the concession for SME period over

    This is to me ,prima facie evidence of companies, being set up deliberately to take advantage of lower taxes, this creates 2 issues which allows IRAS to claw back, evidence of companies being set up to lower taxes to 50% of company tax rate 17% and sole purpose is for tax purposes only.
    Tax avoidance is normally allowed where it is in the course of business and not the only purposes.



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