23 May 2018
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Korean family fails in bid to block sharing of tax data

Straits Times
14 May 2018
K.C. Vijayan

Information requested by Korean authorities relevant to $334m tax evasion probe: S'pore's top court

Singapore's top court has rejected a bid by a Korean family challenging the taxman's move to give the National Tax Service of the Republic of Korea (NTS) information involving at least US$250 million (S$334 million) in bank accounts here.

The accounts were in the names of 51 nominee companies created by the father using the names of his wife and their two sons as well as various staff from a group of companies he owned, known as "K" Group.

The South Korean authorities are investigating suspected tax evasion on the investment income of these 51 companies. NTS wanted the local branches of three banks to supply details such as periodic bank statements and copies of certificates of deposit, dating back to Jan 1, 2003. The banks named were the Singapore branch of Woori Bank, UBS AG and OCBC Bank.

The Korean officials had informed Singapore's Comptroller of Income Tax of the alleged tax evasion scheme, which claimed to show the firms had been used to receive unreported income.

The Comptroller's staff met NTS officials in Seoul in 2014 to discuss various issues under the bilateral Exchange-of-Information regime, including NTS' request.

The Comptroller then issued notices to the three banks to disclose the information.

The Korean family asked the High Court for permission to apply to quash the notices and place a stay on proceedings, but failed in 2016.

Its lawyer, Senior Counsel Tan Chee Meng, went to the Court of Appeal last year, arguing that the Comptroller should "go behind" the relevant statements and certifications by the Korean officials and not accept the submissions at face value.

The Comptroller's lawyer, Mr Alvin Koh, countered that the High Court had applied the correct legal tests in relation to the Comptroller's role in assessing Exchange-of-Information requests.

The Attorney-General, represented by Ms Aurill Kam, contended that the reliability of the Korean tax officials' certifications should not be further probed.

The Court of Appeal, which dismissed the in-camera appeal last September, in detailed judgment grounds earlier this month made clear that "the Comptroller is under no duty to hold an independent investigation or mini-trial to test the correctness of statements made by a foreign tax authority".

But this did not mean the Comptroller "can act uncritically or unthinkingly" in processing a request, said the Court comprising Chief Justice Sundaresh Menon and Judges of Appeal Tay Yong Kwang and Steven Chong.

The Comptroller has to ensure the prescribed legal requirements are followed to strike a balance between "the competing interests" of facilitating tax exchange information and safeguarding confidential taxpayers' information, wrote Chief Justice Menon on the court's behalf.

In dismissing the family's appeal, the court found the Comptroller had made the decision to accede to the request "based on the totality of all the evidence presented to him".

"It was apparent that the request was not a fishing expedition and that the requested information was foreseeably relevant to the ongoing tax investigations," said the Court.

The Inland Revenue Authority of Singapore said last week: "The (Court's) decisions have put beyond doubt the Comptroller's powers and duties at law in responding to an Exchange-of-Information request from a foreign treaty partner."

The applicants, who cannot be named, were ordered to pay $35,000 in costs to the Comptroller and $20,000 to the Attorney-General.


NOT COMPTROLLER'S DUTY

The Comptroller is under no duty to hold an independent investigation or mini-trial to test the correctness of statements made by a foreign tax authority. 

THE COURT OF APPEAL, in detailed judgment grounds earlier this month.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

AXY and others v Comptroller of Income Tax [2018] SGCA 23