High Court orders taxman to disclose audit papers sought

A company which is being sued by the Singapore taxman for the return of some $9.6 million in tax refunds will be allowed access to relevant documents to aid its defence, the High Court ruled.

In the first such reported case here, the court said the documents were not protected and were not immune to disclosure.

At issue was "whether documents, communications and other papers generated in the course of an investigatory audit by a public authority are protected by legal professional privilege", wrote Judicial Commissioner Aedit Abdullah in judgment grounds issued on Tuesday.

Legal professional privilege protects all communications between a lawyer and client from being revealed without the client's consent.

The defendant company had applied for access to documents relating to tax refunds granted by the Comptroller of IncomeTax.

Documents pertaining to a field audit of the company, when issues arose over the tax refunds, were also sought.

The case is rooted in tax returns that the company submitted between 2004 and 2006, seeking tax refunds for interest expenses on a $225 million loan from a bank.

Based on these returns, the comptroller granted some $9.6 million in tax refunds.

But following a review and audit completed in 2008, the comptroller concluded the company had used a tax avoidance arrangement and wrongly claimed the refunds.

The anti-tax avoidance laws empower the comptroller to disregard or vary an arrangement which is aimed at reducing tax liability.

The defendant's group of companies had undergone restructuring and obtained the $225 million bank loan, but this amount was returned through a complex series of transactions which were allegedly done to get the tax refunds.

The comptroller followed up with additional assessments, in a bid to recover the sums.

The bid was challenged by the company before the Income Tax Board of Review and the case went all the way to the Court of Appeal in what became Singapore's first anti-tax avoidance case in 2014.

The apex court had ruled that the company claimed the tax refunds under a tax avoidance arrangement but said the comptroller could not recover the money through additional assessments.

The ruling said the comptroller could instead sue the company for mistaken payment, which the comptroller indeed went on to do.

The company in turn sought access to the tax documents to prepare for its defence. Its Drew & Napier lawyers, led by Mr Jaikanth Shankar, argued that the documents would help make out if the comptroller's claims were valid.

The three groups of documents were meant to show, among other things, that the internal discussions of the officials who assessed the company for tax could show whether the comptroller was mistaken about the tax refunds.

Wong Partnership lawyers, led by Senior Counsel Alvin Yeo, countered for the comptroller that the company's bid was "a fishing expedition".

They argued that legal advice and litigation privilege applied to two of the three sets of documents.

The judicial commissioner held that all three groups of documents were "relevant and necessary" to help the company in its case and show the basis for the taxman's decision.

The judge also ruled that no legal professional privilege was attached to the documents claimed, as they were not created for the "dominant purpose" of litigation.

For instance, the audit documents sought were created to help the comptroller review the decision to grant the tax refund, and not for the lawyers to advise on the audit and the decisions taken, although it was possible the lawyers were "eventually involved".

"There was no link drawn between the documents and the (legal) advice. Without this, there can be no claim of privilege," said the judge.

He ruled that detailed directions on the orders sought and costs would be given separately.

vijayan@sph.com.sg

This article was first published on Feb 3, 2017.
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