IRD Claims Secrecy over Tax Raid for Aussie Taxman

LAWFUEL – Legal Newswire – By Brent Gilchrist – It seems that the Inland Revenue Department is quick to act on requests for help from big brother taxman across the Tasman. The Australian Tax Office was investigating a $50M tax scheme that involved monies flowing into NZ so the ATO asked IRD to honour its Tax Treaty obligations to swap information by raiding the properties of a NZ company which was (presumably) suspected of being involved in the tax scheme.

The NZ company is challenging through Judicial Review the legality of IRD’s raid but IRD will not release the ATO requests, thus frustrating the company’s onus to prove wrongdoing. IRD argued that the Tax Treaty allowed for the information exchanges to be kept secret and that a failure to do so would severely curtail future trans-Taxman tax cooperation.

In an interim decision in the High Court in Auckland, Baragwanith J dismissed the application for discovery, ruling that the case CIR v ER Squibb must be followed unless the public interest of open justice outweighed the public interest of confidentiality of information provided to a tax authority.

So IRD can perform a property raid because his big brother ATO asked him to and then not be accountable in justifying the legality of the raid in terms of NZ law by claiming secrecy. Does that not open the way for the following theoretical information sharing approach:

“Mr ATO, little brother IRD here. We want to raid a NZ company’s premises to see what we can find but would you believe that our tax laws require us to justify such a raid! Now these crims, I mean taxpayers, have been to Aussie recently so perhaps you can claim an interest in their activities and send us a request to raid them on your behalf and then we don’t have to disclose our file. We just cite the public interest defence and Bob’s your uncle – we get what we want and we can then return the favour when you want to raid an Aussie business without due cause.”

Avowal Administrative Attorneys Ltd v District Court at North Shore, CIV-2006-404-7264, Auckland Registry, 21 August 2007, Baragwanath J (Interim decision)

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