“It is an age-old and universally recognized principle that one sovereign does not assist another in the collection of their taxes . . . but the political sentiment in many countries has changed radically over the years in the light of increasing tax evasion, ” so declared the Singapore High Court in the seminal decision of AXY & Ors v. Comptroller of Income Tax  SGHC 291 (AXY ).
In AXY , the Singapore High Court was faced with the question of whether the subject(s) of tax investigations could obtain discovery from the Singapore tax authority—the Comptroller of Income Tax (the Comptroller)—in order to view the evidence amassed against it. In particular, the applicants sought documents that had been shared with the Comptroller by the National Tax Service of the Republic of Korea (NTS), including the original request for information from NTS, various correspondence between the Comptroller and NTS, and internal documents of the Comptroller, as well as various tax returns filed by the companies in question.
The High Court took the opportunity to succinctly trace the changing nature of Singapore’s compliance with various Exchange of Information provisions (EOIs) in Double Taxation Agreements (DTAs) and recognized how international exchange of information to prevent tax evasion was increasingly becoming the norm. In particular, the High Court noted that prior to the current version of the Income Tax Act (Cap 134. 2014 Rev Ed) (the 2014 Act) the previous tax regime did not give the Comptroller untrammeled and wide powers to obtain information. Then, the Comptroller was required to cross two hurdles: (i) showing there was a “domestic interest”; and (ii) that such foreign request did not fall afoul of the requisite banking confidentiality provisions. Further, under the previous regime, the Comptroller was required to apply to the High Court for an order of production and access to information, further draining executive time and resources.
The 2014 Act does away with these requirements and the Comptroller can now proceed by simply issuing notices to the relevant financial institutions. The onus is now on applicants to challenge the Comptroller’s actions or decisions through judicial and administrative review.
An issue which therefore arises is whether applicants or affected companies can see the initial request sent by the foreign tax authority. Although AXY held that the answer to that question is ‘yes’, Singapore legislators have since passed a new section 105HA of the 2014 Act, which now states that a court will not grant leave for discovery of the request issued by the foreign tax authority and related documents if the court is satisfied that the foreign tax authority has requested that the Comptroller not disclose said documents.
The implications of these moves by the Singapore government should not be underestimated. The amendments and the present regime showcase Singapore’s willingness to cooperate fully with foreign tax authorities in a speedy and expedient manner. The open question – which has yet to be answered – is how individuals or companies resisting such EOI requests may challenge the Comptroller’s decision. No doubt, a document like the request from the foreign tax authority would be key to such a challenge. Without the document, the ability to mount a credible judicial/administrative review action may be severely compromised. There are no easy answers to that question and one may need to await future decisions from the Singapore courts to determine whether it is right, constitutional or otherwise, for the Singapore government to suppress key documents in support of a challenge to the Comptroller’s increasingly wide powers.