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The extent of Comptroller of Income Tax’s (Comptroller) powers in dealing with requests from foreign tax authorities under Singapore’s exchange of information (EOI) regime was recently challenged in the High Court case of AXY and others v Comptroller of Income Tax (Attorney-General, intervener) [2017] SGHC 42. The applicant taxpayers sought leave to commence judicial review of the Comptroller’s decision to issue notices to various banks in Singapore to seek information to fulfil the requests made by the National Tax Service of the Republic of Korea (NTS) under the EOI regime.

In seeking leave for judicial review, the applicant must show an arguable or prima facie case of reasonable suspicion that the Comptroller’s issuance of the notices pursuant to the requests made by the NTS satisfied a ground of judicial review, such as illegality or irrationality.

As a preliminary point, the court considered the interface between the court and the Comptroller’s respective roles in the EOI regime following the 2013 amendments to the Income Tax Act (ITA). The court held that while the 2013 amendments changed the identity of the authority assessing the EOI requests, this being the Comptroller rather than the court, the substantive standards that EOI requests are subject to have not been altered. The court only retains the role of judicial review (i.e. it would examine the decision-making process of the Comptroller) and will not examine the Comptroller’s substantive decision or attempt to substitute the Comptroller’s decision with its own view of how it would have made the decision.

The first ground of judicial review, illegality, is concerned with whether the Comptroller “has been guilty of an error of law” in issuing the notices. The applicant made several contentions as follows:

  • The applicant contended that the Comptroller had failed to properly evaluate whether the NTS’s request complied with the Eighth Schedule of the ITA, which sets out the information to be included in a request for information (such as, amongst others, the purpose of the request). The applicant argued that the Comptroller was obliged to examine the veracity and bases of the NTS’s statements in the request by “going behind” the request for information to resolve any doubts. The court however held that the Comptroller was entitled to take the NTS’s statements at face value, although this does not preclude the Comptroller from making any inquiries if he so wishes.
  • Article 25 of the Convention permits only the exchange of information that is “foreseeably relevant” to the administration or enforcement of the Double Tax Convention or the requesting state’s tax laws. The applicant argued that the Comptroller failed to consider that (a) the scope of the Request was too broad and (b) the NTS did not provide “clear and specific” evidence to establish foreseeable relevance. The court held that “foreseeable relevance”” is a low threshold and, in practice, once a requesting state can point to an ongoing investigation of a particular taxpayer, this would render the request for information foreseeably relevant. Additionally, the determination of foreseeable relevance should be assessed at the time of request and subsequent occurrences affecting the assessment of foreseeable relevance are generally immaterial. In this instance, the Comptroller had properly directed his mind to the issue of foreseeable relevance and clarified matters with the NTS as was appropriate.
  • The applicant also argued that, in addition to the requirements under the ITA, there is a distinct and specific requirement for a request for information to be “clear, specific and legitimate”. This phrase was cited from the Parliamentary debates during the Second Reading of the Income Tax (Amendment) Bill 2013. However, the court held that this phrase merely illustrates the standards that would be achieved when the requirements of the Eight Schedule of the ITA are satisfied and is not an additional requirement over and above the Schedule. There is no authority that Parliamentary debates could, in themselves, create legally binding requirements.
  • A further contention of the applicant was that the Comptroller, in assessing requests for information, must balance the affected parties’ interests in confidentiality against the need for an efficient exchange of information regime. The Court found that this proposition has no basis in law.
  • Lastly, the applicant claimed that the Comptroller had failed to independently exercise its discretion to issue the notices of information and had improperly delegated this decision-making power to the NTS, as the Comptroller acceded to the request without sufficient independent inquiry and reproduced the scope of the request in its entirety in the notices. The court held that it was clear that the Comptroller had independently analysed the request for information and had also made genuine inquiries of the NTS in relation to the request.

The applicant’s second ground of judicial review, irrationality, would be satisfied if the Comptroller came “to a conclusion so unreasonable that no reasonable authority could ever have come to it” or if the decision was “so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it”. The court found the applicant’s arguments on irrationality (which were largely similar to the arguments for illegality) to be “wholly untenable” and that there was no reason to hold the Comptroller’s decision to issue the notices irrational.

Therefore, the applicant did not meet the standard of an arguable and prima facie case of reasonable suspicion, and the court dismissed the application. The applicants have appealed.

Editorial Note

With the potential increase in requests from foreign tax authorities under the EOI regime, this case and the result of its appeal will be of great interest for taxpayers and practitioners alike in determining the circumstances where the Comptroller’s decision to gather and provide information to foreign tax authorities may be challenged.



Image credit: Chon Day (3/6/1943), The Complete Cartoons of the New Yorker