S. Koreans fail to stop taxman's sharing of data

Court rejects bid to prevent Comptroller from giving bank data to the Seoul tax authorities

The High Court has rejected moves by four South Koreans to stop the taxman from providing information on their bank accounts here to the South Korean tax authorities probing tax evasion.

The court found that the Comptroller of Income Tax had observed requirements under the relevant laws providing for information exchange with the South Korean tax authorities.

"It is clear that the Comptroller had not acted, as the applicants had claimed, in breach of the terms of the statutory powers conferred upon it, without proper consideration of the facts, or in improper delegation of its statutory discretion," said Judicial Commissioner Aedit Abdulah in judgment grounds issued last week.

The South Korean tax authorities had sought data on the accounts and activities of five individuals and 51 companies in local branches of two foreign banks and a local bank. The scope of the two categories of data sought included periodic bank statements, copies of certificates of deposit and other items dating back to Jan 1, 2003.

The South Korean tax authorities had explained to the Comptroller the alleged tax-evasion scheme by their five citizens and evidence to show the firms listed had been suspected of receiving unreported income.

NO BREACH OF POWERS

It is clear that the Comptroller had not acted, as the applicants had claimed, in breach of the terms of the statutory powers conferred upon it , without proper consideration of the facts, or in improper delegation of its statutory discretion.

JUDICIAL COMMISSIONER AEDIT ABDULAH, in judgment grounds issued last week.

The Comptroller's staff met South Korean officials in Seoul in 2014 to discuss various issues under the bilateral exchange-of-information regime, including their request. Following this, the Comptroller issued notices to the three banks for the disclosure of the banking activities. The four men applied to quash the notices and stay the proceedings.

Their team of lawyers from Wong Partnership, led by Senior Counsel Tan Chee Meng and lawyer Melanie Ho, argued that the Comptroller acted irrationally in issuing the notices and did not appropriately balance their clients' right to privacy against the Comptroller's aim to enhance international tax cooperation.

The Comptroller countered that the applicants failed to show that there was a reasonable suspicion that his actions were illegal or irrational, among other things.

The Inland Revenue Authority of Singapore counsel, led by Mr Alvin Koh, added that there was no legal basis to stay the proceedings pending tax litigation in South Korea.

The Attorney-General's Chambers, represented by Ms Ruth Yeo and Ms Jocelyn Teo, also applied to intervene in the proceedings, citing the public interest and focusing on issues of law and construction under the Income Tax Act and relevant conventions.

The judge noted that the information-exchange regime was a key aspect of global cooperation to curb tax evasion and protect the integrity of tax systems.

He found that there "was no arguable basis in fact or in law on which they can succeed".

The applicants, who cannot be named, are appealing the decision.

A version of this article appeared in the print edition of The Straits Times on March 09, 2017, with the headline 'S. Koreans fail to stop taxman's sharing of data'. Print Edition | Subscribe