22 January, 2016
In AXY and others v Comptroller of Income Tax [2015] SGHC 291 (“AXY”), the High Court issued its decision on the ambit of documents that can be subject to discovery in relation to judicial review proceedings involving the Comptroller of Income Tax in Singapore (the “Comptroller”) in the context of the exchange of information (“EOI”) between tax administrations of different jurisdictions.
Facts
AXY involved a request by the National Tax Service of the Republic of Korea (“NTS”) to the Comptroller for the provision of information on the applicants’ banking activity in Singapore (“Request”) pursuant to s 105D of the Income Tax Act (“2008 Act”) and Article 25 of the Convention between the Republic of Singapore and the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income as amended by the Protocol (the “Treaty”). This Request was issued after tax investigations had commenced in Korea against the applicants, who are Korean nationals.
Pursuant to the Request, the Inland Revenue Authority of Singapore (“IRAS”) proceeded to issue notices to various banks in Singapore (“Notices”) for information on all banking activity within the accounts of the applicants and their companies.
The applicants then applied for leave by way of an Originating Summons to commence a judicial review of the Comptroller’s decision to issue the Notices (“JR Application”). The applicants also filed an application to obtain production of different categories of documents (“Documents”) for inspection. This application was dismissed by the assistant registrar and was subsequently appealed by the applicants (“Registrar’s Appeal”). Concurrently, the Comptroller made an application to expunge the Documents from the court record and to destroy all copies of the same (“Comptroller’s Application”).
In AXY, the High Court dealt with both the Registrar’s Appeal and the Comptroller’s Application jointly.
Decision
The specific question before the court was whether the production of the Documents was necessary for either the fair disposal of the JR Application and/or for saving costs. In arriving at its decision, the court considered the various categories of documents in turn. The Documents were broadly classified as follows:
- the Request;
- correspondence between NTS and the Comptroller (“Correspondence”);
- Notices issued to the banks;
- documents relating to investigations in Korea;
- income tax returns; and
- EOI Review Committee documents.
The court allowed both the Registrar’s Appeal and the Comptroller’s Application in parts by ordering the disclosure of (i), (ii) and (iii) above and ordering the expunging and destruction of (iv), (v) and (vi).
Rationale
The court determined that as the applicants were seeking to establish a prima facie case of reasonable suspicion that the Comptroller had failed to independently exercise its discretion prior to issuing the Notices, the disclosure of (i), (ii) and (iii) was necessary to enable the court to make a proper assessment of the Comptroller’s exercise of discretion under the JR Application. The disclosure of the Request was significant as it was not only the starting point from which the court could make an assessment of the Comptroller’s exercise of discretion, but it also contained the reasons for the request of information by NTS, which would have further informed the subsequent exercise of the Comptroller’s discretion. Furthermore, the applicants’ ability to pinpoint the exact dates of the Correspondence between the tax authorities indicated that this was not merely a fishing expedition.
As to the destruction of the remaining documents, the court was of the opinion that the documents concerning investigations in Korea relate to the factual accuracy of the Request issued by NTS and that a Singapore court was unsuited to be deciding on matters that were essentially a matter of Korean law. In regards to the EOI Review Committee documents, the court noted that they related to the internal procedures of IRAS, which may be very sensitive in nature. Finally, the fact that the applicants were unable to pinpoint the specific documents of the EOI Review Committee that they were seeking reinforced the court’s view that the application for these documents was akin to a fishing expedition.
Takeaway
From the decision in AXY, for purposes of obtaining leave to commence judicial review proceedings, it appears that applicants would be able to request documents that directly affect the court’s ability to make an assessment of the Comptroller’s exercise of its discretion. Furthermore, the ability to specifically identify the document being sought would assuage any fears the court might have that the application for discovery is a mere fishing expedition.
However, with the introduction of s 105HA into the Income Tax Act, which states that in the context of judicial review proceedings, the court shall not grant leave for discovery of the request issued by the foreign tax authority and related documents if the court is satisfied that the foreign tax authority has requested the Comptroller not to disclose said documents to any person, the right of taxpayers to apply for discovery of documents relating to the EOI in judicial review proceedings appears to have been significantly curtailed.
Therefore, in future applications, requests made by a foreign tax authority and related documents will no longer be subject to discovery or inspection if the court is satisfied that the foreign tax authority has requested that the Comptroller keep said documents confidential.
For further information, please contact:
Wei Chern Tham, Director, Duane Morris & Selvam
wctham@selvam.com.sg
