The Federal Court has dismissed the taxpayers’ arguments and found that documents obtained by the Commissioner from the Cayman Islands Tax Information Authority (“CITIA”), and on which the Commissioner based assessments issued to the taxpayers, totalling some $40m, from the sale of Australian shares, had not been improperly obtained. This was the case even though the Grand Court of the Cayman Islands subsequently ruled that the documents should not have been handed over to the Commissioner by the CITIA and at the same time ordered the CITIA to write to the Commissioner seeking his undertaking not to divulge the documents in Court proceedings in Australia and demanding the immediate destruction or return of the documents to the CITIA.
The documents related to the Commissioner’s claim that the taxpayers’ central management and control was in Australia, which the taxpayers denied, and that therefore they were liable for tax in Australia on the gains made on the shares. Note also that the Commissioner had previously been granted freezing orders in respect of the summary judgment obtained against the taxpayers in relation to the debts and that the taxpayers have now primarily satisfied payment of these sums.
In arriving at its decision, the Federal Court said that the fact that the tender of the evidence might be an offence under the laws of the Cayman Islands was irrelevant as to whether the circumstances in which the Commissioner came into possession of the documents involved any impropriety. This was because the requests made by the ATO to the CITIA to provide it with the relevant documents were made wholly in accordance with the “Agreement between the Government of Australia and the Government of the Cayman Islands on the Exchange of Information with respect to Taxes”.
The Federal Court also ruled that the Commissioner did not act in contempt of the Federal Court in making the requests. As a result, the Federal Court concluded the documents were not improperly obtained and that therefore the Court’s discretionary power to reject their tender as evidence was not enlivened.
(Hua Wang Bank Berhad v FCT (No 7) [2013] FCA 1020, Federal Court, Perram J, 8 October 2013.)
[LTN 196, 10/10/13]