AXY and others v Comptroller of Income Tax (Attorney-General, intervener)

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 02 March 2017
• Neutral Citation: [2017] SGHC 42
• Court: High Court (Singapore)
• Hearing Date: 15 September 2016,14 September 2016
• Docket Number: Originating Summons No 106 of 2014
• Plaintiff Counsel: Tan Chee Meng SC, Ho Pei Shien Melanie, Ngiam Heng Hui Jocelyn, Samuel Lim Si Wei and Lim Ying Min (WongPartnership LLP)
• Defendant Counsel: Koh Meng Sing Alvin, Li Yourui Charles, Nai Thiam Siew Patrick and Pang Mei Yu (Inland Revenue Authority of Singapore),Ruth Yeo and Jocelyn Teo (Attorney-General's Chambers)
• Subject Matter: Revenue Law,International Taxation,Exchange of Information,Administrative Law,Judicial Review,Discretionary Powers
• Published date: 09 May 2018

Aedit Abdullah JC:

This case concerned the nature and extent of the obligations of the Comptroller of Income Tax (“the Comptroller”) in dealing with requests by foreign tax authorities for information under Singapore’s exchange of information (“EOI”) regime. The applicants (“the Applicants”) sought leave to commence judicial review of the Comptroller’s decision to issue notices for information to various banks in Singapore in fulfilment of requests made by the National Tax Service of the Republic of Korea (”NTS”) under a bilateral convention. I concluded, having considered the submissions of the parties, including that of the Attorney-General (“AG”) who had intervened, that the Applicants failed to establish an arguable or prima facie case of reasonable suspicion that the Comptroller’s decision to issue the notices was either illegal or irrational. The Applicants, being dissatisfied with my decision, have appealed.

Background

These proceedings arose out of tax investigations conducted by NTS, the national tax administration agency of the Republic of Korea, in respect of the Applicants and related companies. On 23 September 2013, as part of its investigation process, NTS submitted a letter of request for information (“the Request”) to the Comptroller pursuant to Article 25(1) 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, which was concluded on 6 November 1969, as amended by the Protocol Amending the Convention which was signed on 24 May 2010 and took effect on 28 June 2013 (“the Convention”). Article 25 of the Convention, which is central to this dispute, reads in full: 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation: (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 25 of the Convention is incorporated into domestic legislation through s 105D of the Income Tax Act (Cap 134, 2014 Rev Ed) (“ITA”), which states:

Request for information

105D.—(1) The competent authority under a prescribed arrangement may make a request to the Comptroller for information concerning the tax position of any person in accordance with — (a) if it is an avoidance of double taxation arrangement, the EOI provision of that arrangement; or (b) if it is an EOI arrangement, the provisions of that arrangement.

(2) Unless the Comptroller otherwise permits, the request must set out the information prescribed in the Eighth Schedule.

(3) Every request shall be subject to and dealt with in accordance with the terms of the prescribed arrangement.

(4) For the purposes of subsection (3), the terms of the prescribed arrangement shall not be construed in such a way as to prevent the Comptroller from complying with, or to permit him to decline to comply with, a request for information merely because — (a) Singapore does not need the information for its own tax purposes; or (b) the information is held by a bank or other financial institution, a nominee or a person acting in an agency or a fiduciary capacity, or it relates to the ownership interests in an entity.

It was common ground between the parties that the Convention is a “prescribed arrangement” and that NTS is a “competent authority” as defined in s 105A(1) of the ITA.

The information sought by NTS in the Request can broadly be categorised into two groups. First, NTS sought information regarding stipulated bank accounts of 5 individuals, including the 1st, 2nd and 4th Applicants, and 11 companies. For these accounts, NTS provided the specific bank name, account number, and account holder details. Second, NTS also sought information relating to unidentified bank accounts of the 5 individuals and 51 companies in the Singapore branches of Woori Bank (“Woori”) and the Union Bank of Switzerland Aktiengesellschaft (“UBS AG”). The scope of information sought for both categories included the following documents for the period between 1 January 2003 and the present: Periodic bank statements; Copies of the opening account contracts, signature cards, and personal information of agents or consignees; Copies of cancelled cheques, deposit slips, wire transfers of other deposits or withdrawal documents for all transactions; and Copies of certificates of deposits, safe deposit box contracts, loan documents or any other documents evidencing transactions which are reflected in the accounts’ records.

On 7 November 2013, the Comptroller wrote to NTS seeking clarifications regarding the Request. Amongst other things, the Comptroller sought information concerning the legality and tax implications of Korean taxpayers owning offshore companies, explanations of the alleged tax evasion scheme by the Korean taxpayers listed in the Request, and evidence to show that the companies stated in the Request had been used to receive unreported income. NTS replied on 16 December 2013. Based on the information provided by NTS, the Comptroller grouped the 51 companies (of which bank account details were sought in the Request) into three groups and, on 17 January 2014, sent a second letter to NTS requesting further evidence chiefly in respect of the connections between the 1st Applicant and the companies in one of the groups (“the Second Letter”).

Thereafter, a meeting between staff members of the Comptroller and NTS was held in Korea on 21 and 22 January 2014. The agenda of the meeting was to discuss various issues concerning the EOI regime, including the Request. On the first day of the meeting (ie 21 January 2014), two material exchanges between the authorities occurred. First, NTS made a specific request for information relating to a bank account of one of the companies identified in the Request with Oversea-Chinese Banking Corporation Limited (“OCBC”). Second, NTS provided documents seeking to address the Comptroller’s further queries raised in its Second Letter.

Subsequent to the exchanges, the Comptroller issued notices for the disclosure of banking activity relating to the Applicants in the exercise of its powers under ss 65B and 105F of the ITA. These notices were issued on 21 January 2014 to Woori (“21 January Notice”), and on 27 January 2014 to UBS AG and OCBC (“27 January Notice”) (collectively, “the Notices”).

On 11 February 2014, the Applicants filed the present application in Originating Summons No 106 of 2014 (“OS”) seeking, amongst others, a prohibitory order and a quashing order against the Comptroller and the Notices. The Applicants also sought stay of proceedings pending determination of the Applicants’ tax residency and/or tax liability in Korea by the National Tax Tribunal of the Republic of Korea (“NTT”).

The Applicant’s Case

The Applicants submitted that the Comptroller acted illegally and/or irrationally in issuing the Notices as it failed to make sufficient prior inquiry into the compliance of the Request with the Eighth Schedule of the ITA, and/or the requirement under Article 25 of the Convention that the requested information be “foreseeably relevant” to the administration of the Convention or the requesting state’s domestic tax laws. Specifically, the Comptroller took into account irrelevant factors and failed to consider relevant ones such as the developments in Korea subsequent to the Request which rendered the basis of the...