Court of Appeal Affirms the Authority of the Comptroller of Income Tax in Sharing Tax Information under a Tax Treaty
4 May 2018
The Court of Appeal has
provided its written grounds of decision pertaining to an in camera hearing held on 5 September 2017. At the hearing, the
Court affirmed the High Court’s decision
to refuse an application made by four foreign individuals (“the Appellants”) that
requested to commence a judicial review against the decision of the Comptroller
of Income Tax (“the Comptroller”) to issue statutory Production Notices to three
banks in Singapore to obtain bank information, following an Exchange of
Information (“EOI”) request from South Korea.
This is the first case
of an application for permission to commence a judicial review in Singapore to
challenge the Comptroller’s issuing of a Production Order for access to information
protected under the Banking Act. The decisions of both the High Court and the
Court of Appeal have put beyond doubt the Comptroller’s
powers and duties at law in responding to an EOI request from a foreign treaty
partner.
Facts of the Case
In
September 2013, the Comptroller received an EOI request from the South Korean
tax authority concerning 5 individuals and 51 companies. Following
clarifications sought and obtained from the South Korean tax authority, the
Comptroller issued Production Notices to three banks in Singapore requiring
these banks to furnish bank account information in relation to the specified
individuals and companies. Consequently, the Appellants filed an application
with the High Court for approval to commence a judicial review of the
Comptroller’s decision to issue the said Production Notices.
After
dealing with numerous interlocutory applications from the Appellants over the
course of two years, the High Court dismissed the Appellants’ application in
September 2016. The Applicants subsequently appealed against the High Court’s
decision.
After
hearing lawyers representing the Appellants as well as lawyers from the Inland
Revenue Authority of Singapore (“IRAS”) and the Attorney-General’s Chambers
(“AGC”), the Appellants’ appeal against the High Court’s decision was dismissed
by the Court of Appeal in September 2017. The Court of Appeal issued its detailed
grounds of decision today.
The
Court of Appeal highlighted that the Comptroller had made reasonable
clarification with the South Korean tax authority where necessary, to ensure
compliance of the requirements in the Eighth Schedule of the Income Tax Act (“Eighth
Schedule”) that must be fulfilled by a foreign treaty partner for all EOI
requests. Based on the facts of the case, the Court of Appeal found that the
Comptroller’s decision was based on information provided by the South Korean
tax authority over the course of several months which included discussions and
materials before the Comptroller was satisfied on the totality of the evidence.
The Court of Appeal held that it could not be said that the Appellants had
established an arguable or prima facie case of reasonable suspicion that the
Comptroller’s decision was tainted by any illegality or irrationality so as to
afford grounds for judicial review. The Appellants were ordered to pay costs to
the Comptroller and the AGC.
Please
refer to Annex A for the principles
laid out by the Court of Appeal that are relevant to EOI administration in
Singapore.
Link
Singapore is committed to
the internationally agreed Standard for EOI for tax purposes (“the EOI
Standard”)
Since endorsing the EOI Standard in 2009,
Singapore has taken progressive steps to strengthen its framework for
international cooperation to combat cross-border tax offences. In April 2013,
the Global Forum on Transparency and Exchange of Information for Tax Purposes
affirmed through a peer review process that Singapore’s EOI regime is in line
with the EOI Standard, both in terms of legal framework and implementation. In
May 2013, Singapore’s EOI administration under the EOI Standard was further streamlined with the removal of the requirement of a Court
Order for the Comptroller to obtain bank and trust information from financial
institutions.
The
decisions of both the High Court and the Court of Appeal make clear the legal
position on EOI administration and also endorses the Comptroller’s decision to
assist in the request from the South Korean tax authority based on its assessment
that the request was consistent with the EOI Standard.
Inland Revenue Authority of Singapore
Annex A
Relevant principles
articulated by the Court of Appeal
In its Grounds of
Decision, the Court of Appeal highlighted the relevant principles in relation
to the Comptroller’s role in dealing with EOI requests:
(a) The standard for
assessing EOI requests remains the EOI Standard of foreseeable relevance. The
requirements in the Eighth Schedule of the Income Tax Act help to ensure that
the touchstone of foreseeable relevance is satisfied, while ensuring at the
same time that relevant information is exchanged to the widest possible extent.
The Comptroller must be satisfied that the information specified in the Eighth
Schedule has been provided by the foreign tax authority unless he waives any of
these requirements.
(b) The
Comptroller's assessment of the foreseeable relevance of the requested
information is important in determining whether an EOI request amounts to a
fishing expedition, that is to say, a speculative request that has no apparent
nexus to an ongoing tax inquiry or investigation by a foreign tax authority. If
the Comptroller should so conclude, he should not provide the requested
information.
(c) The Comptroller
is afforded a wide discretion in dealing with EOI requests. In general, he is
not expected to go behind the assertions made by a foreign tax authority in an
EOI request. The Comptroller is not obliged to embark on an independent
investigation or a mini-trial to establish the veracity of the foreign tax
authority's statements, nor is he required to delve into questions concerning a
foreign jurisdiction's domestic law.
(d) In assessing an EOI request, any doubts
which the Comptroller may have as to whether the Eighth Schedule requirements
have been satisfied and/or whether the EOI Standard of foreseeable relevance
has been met should be clarified with the foreign tax authority. Such doubts may
arise on the face of the EOI request itself or from the representations made by
the person(s) of interest in response to the request. The Comptroller should
make reasonable inquiries to satisfy himself that the
requirements in the
Eighth Schedule have been complied with and the "foreseeable
relevance" requirement met. Where the foreign tax authority provides an
explanation to clarify any doubts that may arise, the Comptroller is not
obliged to embark on a substantive inquiry into the correctness of that
explanation.
(e) Each EOI request
is generally assessed at the time it is made. At the material time, there need
only be a reasonable possibility that the requested information will be
relevant. Subsequent matters going towards the actual relevance of the
requested information once it has been provided will generally be immaterial in
a review of the Comptroller's initial decision on the EOI request.
(f) However, where a
person of interest has not been served with notice of the EOI request and
becomes aware of the request only after the Comptroller has made his decision
on it, the person of interest should have the opportunity to raise concerns as
to the validity of the request within a reasonable time, and the Comptroller
should reconsider his initial decision in the light of these concerns if they
appear to be legitimate. If necessary, the Comptroller should consult and seek
the views of the foreign tax authority on any doubts which may arise from the
representations made by the person of interest.