A recent NZ court case involved a tax agent (Chatfield & Co), the Commissioner of Inland Revenue (CIR), the Korean National Tax Service and the NZ Competent Authority (Mr Nash).
The High Court case of Chatfield and Co vs The CIR challenged the roots of procedural fairness.
In what turned out to be a bun fight between the courts and the IRD over the legality of notices issued by the CIR, the tax agent, Chatfield and Co won the case it initiated in 2015 in a High Court judgement on 22 December 2017.
One of the key principles in the case was whether the CIR was subject to judicial review of her decision not to release information held in relation to a number of companies for which the Korean National Tax Service was seeking information under the DTA.
The CIR argued that she was not subject to judicial review because it was “simply not in the public interest for judicial review to be available in the circumstances of this case”.
The High Court didn’t agree, stating “the matters at issue, in this case, are not matters of high policy. Nor are they politically fraught. All that is required is an assessment as to whether or not statutory requirements contained in domestic legislation have been met on the facts of this particular case”.
The High Court ruled in favour of Chatfield and Co, after the CIR refused to provide evidence on the background to the request from the Korean National Tax Service.
Mr Nash, the Competent Authority, was unable to satisfy the High Court that the exchange of information to the Korean National Tax Service met the ‘necessary’ requirement as set out in the double tax agreement between the two countries.
Justice Wylie’s key issues were:
Justiciability – whether the Commissioner’s decision to issue the 2014 notices was subject to judicial review.
Whether the competent authority for New Zealand (Mr Nash) acted lawfully; whether he took steps to satisfy himself that:
a) the request was made in respect of taxes covered by article 2 of the DTA,
b) the information was necessary under article 25(1) of the DTA; and,
c) whether the exception set out in article 25(2)(b) applied or not.
This led to the unhingeing of the CIR, and Mr Nash, in their attempt to sideswipe judicial review, and the tax agent won the case.
The case has certainly hit the headlines in the Australian legal community, with one practitioner taking note that the High Court outcome ‘has seismic implications for the defence of information notices issued under this and like procedures’ – David W Marks, QC, Barrister-at-Law, Inns of Court, Brisbane (source: Thomson Reuters Weekly Tax Bulletin 15 Jan 2018).
In addition to issues of justiciability, other issues were raised in the case including the statute of limitations under Korean tax law.