Revenue and Tax Law

Published date01 December 2017
AuthorTAN 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(2017) 18 SAL Ann Rev 664
Publication year2017
Date01 December 2017
Introduction

24.1 The Supreme Court delivered eight decisions in 2017. Of the five cases concerning income tax, only one dealt with substantive issues of revenue law. The remaining cases involved different issues ranging from discovery of documents in tax cases and other procedural matters, to the exchange of information between tax authorities and to a taxpayer-company facing a winding-up application lodged by the tax authority. Of the two stamp duty cases, one considered the application of additional buyer's stamp duty where the buyer was a charitable purpose trust, while the other dealt with issues relating to admissibility of unstamped documents. Finally, in the last case the authors note the Court of Appeal made reference to previous revenue cases concerning statutory interpretation.

24.2 There are therefore, in the authors' view, eight cases for the year 2017 which had some relevance to revenue law:

Tax Type

High Court

Court of Appeal

Income tax

5

0

Stamp duty

1

1

Miscellaneous

0

1

Income tax
Discovery of documents

24.3 The High Court decided two cases (not strictly on issues of revenue law) arising in connection with Comptroller of Income Tax v AQQ1 (“AQQ”).2 In Comptroller of Income Tax v ARW3 (“ARW (No 1)”), the High Court granted ARW discovery of three groups of documents of the Comptroller of Income Tax (“Comptroller”). Subsequently, in Comptroller of Income Tax v ARW4 (“ARW (No 2)”), the High Court gave the Comptroller leave to file its request for further arguments in ARW (No 1) out of time. The High Court further granted the Attorney-General leave to intervene in ARW (No 1).

24.4 Here are brief facts of AQQ. A Malaysian company, ARX, wholly owns AQQ (a Singapore company). Between 2005 and 2007, the Comptroller paid around $9.6m in tax refunds to AQQ. This arose from ARX's restructuring of its group of companies through a complex financing scheme (“scheme”). Subsequently, the Comptroller claimed the scheme was a tax avoidance arrangement under s 33 of the Income Tax Act 5 (“ITA 2008”). The Comptroller thus raised additional assessments to claw back the $9.6m he had paid AQQ. The Court of Appeal agreed with the Comptroller that the scheme was a tax avoidance arrangement. But the Court of Appeal ruled the Comptroller's additional assessments were ultra vires. Nevertheless, the Court of Appeal mentioned unjust enrichment as an alternative possibility for the Comptroller to claim back the $9.6m.6

24.5 Here are brief facts of the appeal in ARX v Comptroller of Income Tax7 (“ARX”). The Comptroller subsequently filed a suit against ARX to claim the $9.6m under various heads: unjust enrichment, fraudulent misrepresentation, and conspiracy by unlawful means.8 One issue was whether the Comptroller knew his claim was time-barred. An affidavit sworn on the Comptroller's behalf mentioned an advice from the Law Division of the Inland Revenue Authority of Singapore (“IRAS”) on the matter. In response, ARX applied for discovery of the Law Division's advice. The Court of Appeal dismissed ARX's appeal. It held the advice was privileged and the Comptroller had not waived privilege to the advice.

24.6 ARW (No 1) was an application by ARW (the same entity as ARX) for discovery of various categories of documents in the Comptroller's possession. One of these documents was the Law Division's advice in ARX. Following the Court of Appeal's decision in ARX, ARW dropped its application for discovery of the advice.9

24.7 The High Court (Aedit Abdullah JC, as his Honour then was) granted discovery of the following groups of documents (comprising 14 categories) to ARW:

(a) documents relating to the Comptroller's decision to pay the tax refunds;

(b) documents relating to the Comptroller's discovery of the matters in his unjust enrichment suit; and

(c) documents relating to the Comptroller's determination that ARW had made use of a tax avoidance arrangement, and the Comptroller's decision to invoke s 33 of the ITA 2008.10

24.8 In this regard, the court held that all three groups of documents were relevant and necessary for the fair and efficient disposal of the matter.11 Abdullah JC further found that legal professional privilege did not attach to the last two groups of documents. The documents were not created for the dominant purpose of litigation (although litigation was a reasonable prospect at the time). Hence, litigation privilege was not established. Similarly, the Comptroller did not show the documents were created for purposes of obtaining advice from lawyers. Thus, the Comptroller also failed to establish legal advice privilege for the documents.12 In this regard, the Comptroller did not claim legal professional privilege over the first group of documents.

Application for leave to request further arguments out of time and Attorney-General's application to intervene

24.9 Subsequent to ARW (No 1), the Comptroller applied for leave to request for further arguments out of time in ARW (No 2). The further arguments related to (a) public interest privilege under s 126(2) of the Evidence Act,13 (b) official secrecy under s 6(3) of the ITA 2008, and (c) legal professional privilege. The Comptroller also applied for leave to

adduce two further affidavits to support the application for further arguments.

24.10 At the same time, the Attorney-General applied to intervene in the discovery applications, related applications or appeals. The Attorney-General's primary concern was to be heard on the issue of public interest privilege under s 126(2) of the Evidence Act. Abdullah JC allowed the Attorney-General's application to intervene. The Attorney-General's duty to intervene for purposes of public interest privilege was part of his responsibilities contemplated by Art 35(7) of the Constitution of the Republic of Singapore.14 No other person was in a position to perform this role.15

24.11 The court also partly allowed the Comptroller's application (for leave to request for further arguments out of time). Abdullah JC held that the delay of 15 days did not show such dilatoriness that the application should be refused on delay alone.16 Moreover, the arguments under s 126 of the Evidence Act and s 6(3) of the ITA 2008 were not hopeless.17 Finally, he could not see any material prejudice from such delay.18

24.12 To this end, he also granted leave for the Comptroller to adduce further evidence – but only in relation to s 126 of the Evidence Act and s 6(3) of the ITA 2008. The issue of public interest privilege was relatively novel and untested in Singapore. Moreover, inordinate delay to the proceedings was unlikely and there was no prejudice that could not be compensated by costs.19

24.13 However, the court refused the Comptroller's application to adduce further evidence to support the latter's application for further arguments on legal profession privilege. Unlike the issues on s 126 of the Evidence Act and s 6(3) of the ITA 2008, legal profession privilege had been fully argued in ARW (No 1).20

24.14 The saga therefore continues and there may be further Supreme Court decisions arising from AQQ which would add to the legal jurisprudence, whether in revenue law or other legal areas.

Exchange of information – Singapore and Korea

24.15 AXY v Comptroller of Income Tax21 (“AXY”) was another case involving a request for information from the Comptroller by the National Tax Service of the Republic of Korea (“NTS”). The request was made pursuant to Art 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 (“Convention”). In brief, NTS sought certain information concerning bank accounts about various individuals and companies in Singapore (“applicants”). Such information included periodic bank statements, copies of opening account contracts and transaction documents since 1 January 2003.22

24.16 The Comptroller requested clarifications from NTS and met NTS's staff regarding NTS's request. Subsequently, the Comptroller issued notices to three banks under ss 65B and 105F of the Income Tax Act23 (“ITA 2014”) requiring disclosure of the applicants' banking activities.

24.17 The applicants applied for judicial review of the Comptroller's decision to issue the notices. The applicants further applied for a stay of proceedings pending determination of their tax residency and/or tax liability in Korea by the National Tax Tribunal of the Republic of Korea.

24.18 The Attorney-General also applied to intervene in the applicants' application. His reasons were public interest in the construction of Art 25 of the Convention as well as the new provisions in ss 65B and 105D of the ITA 2014.

24.19 The High Court (Aedit Abdullah JC) briefly discussed the exchange of information (“EOI”) regime. Among other things, the ITA 2014 had been amended in 2013 to remove the requirement for the Comptroller to obtain a court order before accessing confidential information from financial institutions. This was to streamline EOI administration.24 The upshot was that since 2013, the court's role had changed. The court now examined the Comptroller's decisions “through the lens of judicial review, rather than [to] substantially assess the basis for the request of information itself”.25

24.20 To this end, the court found the applicants had not shown an arguable or prima facie case of reasonable suspicion that the Comptroller's issue of the notices satisfied any ground of judicial review. In particular, Abdullah JC held:

(a) The Comptroller was entitled to take NTS's statements at face value to determine if the requirements in the Eighth Schedule of the ITA 2014 were satisfied. The Comptroller was not obliged to go behind the statements and second-guess their veracity.26

(b) Article 25 of the Convention only permitted EOI if the...

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