Australian Tax Court Uses Documents Improperly Obtained In Breach Of Exchange Of Tax Information Agreement

iStock_000024834312XSmallIn the Australian Federal Court on Tuesday (8 October) Justice Perram allowed the Australian Tax Office (“ATO”) to use documents obtained in apparent breach of the exchange of the Tax Information Agreement (“TIA”) between Australia and the Cayman Islands.

It appears that the Cayman Islands Tax Information Authority (“CITIA”) erroneously provided the ATO with information for tax years prior to the date set as operational for the agreement.

The Australian court’s decision has effectively validated an effective retrospective application of the Cayman’s TIA, at least in this case.

The judgement (in Hua Wang Bank Berhad v Commissioner of Taxation (No 7) [2013] FCA 1024) found that although the Caymans Grand Court had decided on 13 September 2013 that the CITIA decision on 23 February 2011 to provide the information to the ATO should be set aside and the documents should be returned;

“…for the purposes of deciding whether the documents were obtained improperly is besides the point:the ATO validly requested the material under Art 5 and it validly received them under Art 6. That the Grand Court has quashed that decision is a matter of domestic law and can have no effect upon the lawfulness of the ATO’s receipt of that material.”

This case follows the Full Federal Court judgement in Denlay v Commissioner of Taxation [2011] FCAFC 63 which held that even if the obtaining of information involved unlawful conduct on the part of ATO officers it would not necessarily impinge upon the validity of an assessment made using the information.

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Director Principal of Rollo & Company Pty Ltd, a CPA practice that specialises in Australian & international tax, estate and succession planning, professional education, negotiation and mediation, mentoring – executive coaching, and higher education consulting. We also provide the Student Ombudsman Service at Macquarie University in Sydney.

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  1. DWM says:

    The documents were properly obtained, in terms of form and process, under the international agreement, but the Cayman Court afterward held that the documents should not have been handed over for legal reasons.

  2. Leo Neve says:

    The proper citation is FCA1020 and not 1024.
    Often in TIEA there is a provision in the Protocol to art 5 : “Any bans on data supply prescribed under the law of the supplying Contracting Party shall be observed. If it emerges that inaccurate data or data which should not have been supplied have been supplied, the receiving agency shall be
    informed of this without delay. That agency shall be obliged to correct or erase
    such data without delay;”.

    The receiving agency shall be obliged to erase such data without delay.
    Even if not explicitly mentioned in the TIEA with Cayman, it is an essential element of comity in international tax exchange. Australian Court should have decided differently.

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