Revenue and Tax Law

• Published date: 01 December 2015
• Date: 01 December 2015
• Author: TAN Kay Kheng LLB (Hons) (National University of Singapore), CDipAF (Association of Chartered Certified Accountants), MAcc (Charles Sturt University), MTax (University of New South Wales), CTA, FCPA (Australia), ATA (Income Tax), FSIArb; Advocate and Solicitor (Singapore). Leonard GOH MA (Cambridge); Advocate and Solicitor (Singapore); Deputy Senior State Counsel, Legislation Division, Attorney-General's Chambers.
• Citation: (2015) 16 SAL Ann Rev 604

Introduction

24.1 The Supreme Court delivered only two revenue law decisions in 2015, a ‘relatively quiet’ year for tax litigation in contrast to previous years. The two decisions covered income tax, and more specifically, the exchange of information (often abbreviated to ‘EOI’) arrangement between the tax authority in Singapore and its counterpart in another country (ie, Japan and Korea respectively).

24.2 There is, however, a non-tax case which mentioned an income tax aspect in passing.

24.3 There are therefore, in our view, three cases for the year 2015 which had relevance to revenue law:

Tax Type	High Court	Court of Appeal
Income tax	1	1
Miscellaneous	0	1

Income tax

Exchange of information – Singapore and Japan

24.4 In ABU v Comptroller of Income Tax[2015] 2 SLR 420 (‘ABU’), the Court of Appeal upheld the decision of the High Court and dismissed the appeal of the taxpayer. The facts are set out at [1]–[7] of the judgment and briefly described below.

24.5 The case involved an EOI request made by the National Tax Agency of Japan (‘JNTA’) pursuant to Art 26(1) of the avoidance of double taxation agreement (‘DTA’) between Singapore and Japan (‘Singapore-Japan DTA’). JNTA requested the production of bank statements for certain accounts held by the appellant (ABU), his son and their related entities with BLM Bank (‘Bank’). Under the then applicable statutory provisions (viz, s 105J(2) of the Income Tax Act (Cap 134, 2008 Rev Ed) (‘ITA’), the Comptroller of Income Tax (‘Comptroller’) applied to the High Court against the Bank for an order directing the production of the bank statements. The appellant, a Japanese national residing in Japan, applied for and was granted leave to intervene in the Comptroller's application.

24.6 The High Court granted an order in terms of the Comptroller's application. The High Court also dismissed the appellant's applications for the said order to be discharged and to be stayed pending certain legal proceedings against JNTA in Japan. The High Court's decision is reported as Comptroller of Income Tax v BLM[2014] 1 SLR 123; see (2013) 14 SAL Ann Rev 490 at 502, paras 23.61–23.63.

24.7 At the hearing of the appeal by only the appellant in late 2014, the Court of Appeal dismissed the appeal, except to the extent of a variation that the scope of the order be limited to reflect the terms of JNTA's request and no more. The detailed grounds of decision were released on 22 January 2015.

24.8 The Court of Appeal noted that the ostensible purpose of JNTA's request was to determine whether the appellant had failed to report distributions he had received from certain foreign investment funds which he and his family had invested in. JNTA had found certain documents during the appellant's tax examination in Japan suggesting that he had not done so, and arising from its suspicion, the request was made to the Comptroller.

24.9 The following issues arose for consideration by the court (see ABU at [22]):

(a) whether the role of the High Court as contemplated under s 105J of the ITA extends to a substantive review of JNTA's request;

(b) whether the statutory regime permitted the exchange of information for periods before the Singapore-Japan DTA was given effect in Singapore;

(c) whether the making of an order was justified in the circumstances of the case; and

(d) a consideration of the position of the other account holders in the appeal.

24.10 Before addressing the issues, the court sketched the key developments leading to the establishment of the statutory regime for the exchange of information with foreign tax authorities, and the pertinent features of this regime (see ABU at [23]–[31]). In particular, the regime was necessary to enable Singapore to comply with Art 26 (‘EOI Standard’) of the Organisation of Economic Cooperation and Development 2008 Model Tax Convention on Income and Capital (‘OECD Model Convention’). (See para 23.22 below for more background information on the EOI Standard.) As regards a request by a foreign tax authority, the Eighth Sched of the ITA required 11 items of information to be included in the request, including (by way of illustration) the purpose of the request, the identity of the competent authority, and the identity of the person in relation to whom the information is required.

24.11 Where information is protected from unauthorised disclosure by s 47 of the Banking Act (Cap 19, 2008 Rev Ed) or s 49 of the Trust Companies Act (Cap 336, 2006 Rev Ed), the Comptroller must make an application to the High Court for the requisite order for the production of the protected information (under s 105J(3) of the ITA).

24.12 On the first issue regarding the role of the High Court, the Court of Appeal preferred the approach adopted by Andrew Ang J in Comptroller of Income Tax v BJY[2013] 4 SLR 801 (‘BJY’) to that adopted by Choo Han Teck J in Comptroller of Income Tax v AZP[2012] 3 SLR 690 (‘AZP’): see ABU at [33]–[36]. (As an aside, the cases of BJY and AZP were reviewed previously in (2013) 14 SAL Ann Rev 490 at 500–501, paras 23.51–23.54, and (2012) 13 SAL Ann Rev 420 at 425–426, paras 23.14–23.16 respectively.) Ang J's approach was that the element of foreseeable relevance ‘as well as other limitations on the exchange of information under the EOI Standard were subsumed under the single broad inquiry of whether the making of an order for production was justified in the circumstances of the case’: ABU at [36].

24.13 However, the Court...