The Gazette 1986

GAZETTE

sep

BER 1986

there was no evidence to support the notional

management fee.

Carroll J. held that the Appeal Commissioner was

correct to apply the principles enunciated in the

Petrotim

case. She noted that although that case

concerned goods, services were also a marketable

commodity. The principle was the same and the Appeal

Commissioner was entitled to find that the transaction

was so outside the ordinary course of business of any

trader that it was not done in the course of trade.

Carroll J. also adopted the remarks of Lord Denning in

Petrotim, inter alia,

to the effect that

Sharkey

-v-

Wernher

applied to the case

. . where a trader may, for no reason, choose to

give things away or throw them into the sea. So

when he puts securities through his books at a

derisory price, the figures are to be regarded as

struck out for the purposes; and in their place you

must put in the market realisable value at the

time."

Accordingly, Carroll J. held that notional fees for

services should be taken into account. However, the

Judge held that the estimated fees as calculated by the

Appeal Commissioner were not justified by the evidence

as there was no evidence at all upon which he could base

his findings. Once again, neither the

Ramsay

case nor

Furniss

-v-

Dawson

, were cited to the court.

(E)

Avoidance and Evasion

The recent decision of Costello J. in

Warnock

-v-

Revenue Commissioners

may represent a significant

development in the attitude of the Irish courts to tax

avoidance arrangements. Section 57, Finance Act, 1974,

is an anti-avoidance measure to tax Irish resident persons

on income derived from assets transferred abroad if

they have 'power to enjoy' the income. Section 59

empowers the Revenue Commissioners to require any

person to furnish them with such information as they

think necessary for the purposes of section 57 by notice

in writing.

Warnock,

the Revenue Commissioners served a

section 59 notice on the Plaintiffs, a well-known firm of

accountants

provide

certain

information

concerning, as Costello J. put it

"the use of tax

havens in connection with tax avoidance schemes". The

Plaintiffs challenged the notice on the basis (a) that it

was

ultra vires

section 59, and (b) was invalid because it

would cost £50,000 to comply with it and the cost and

the disruptive effect of compliance would be unduly

burdensome and oppressive. Costello J. noted that

sections 57 to 59 were anti-avoidance measures to

counter attempts to avoid tax liability by the transfer of

assets to tax havens abroad. He remarked that the

power given to the Revenue Commissioners under

section 59 was a "very extensive one" and that "it

would be hard to imagine how it could be drafted in

wider terms".

However, he concluded that the

Revenue officer in question had

bona fide

formed the

opinion that the information was necessary. As regards

ultra vires,

he did not agree with the Plaintiffs'

argument that in seeking information on pre-6 April,

1974, transactions, section 59 was giving section 57

retrospective effect. Costello J. fell that the Oireachtas

specifically authorised them to obtain the information

in the legislation. With respect to the question of

whether the notice was oppressive and burdensome,

Costello J. noted that the notice was "quite narrowly

restricted"

in that it was restricted to transactions

which individuals had entered into relating to specifi-

cally named territories, and was for the purpose of

seeking information about the use of tax havens for tax

avoidance purposes. As a matter of fact he held that

compliance with the notice would not have involved any

excessive amount of time or energy on the part of the

Plaintiffs. He therefore concluded that the Plaintiffs

had not established that compliance would be

oppressive and upheld the validity of the notice:

"It seems to me that the very wide powers which

were given to the Revenue Commissioners by the

Oireachtas were based, at least in part, on the view

that persons who avoid the payment of taxes may

also be inclined when the net is tightened to evade

the payment of taxes. And it seems to me that as

all the transactions referred to in the notice are

ones which could establish that a liability to tax

under section 57 might arise, the information

sought in it was needed to assist the Commis-

sioners carry out their important public function

in tracking down tax evaders."

More recently, in the case of

O'Coindealbhain

(Inspector of Taxes)

-v-

Gannon

Barrington J. refused

to apply the literal wording of the legislation in favour

Solicitors — how public

are your private

conversations?

The problem of private consultation» oeing overheard by

those in waiting areas is quite a c ommon one, particularly

w h en the areas is close to the consulting room. N ow there

is an inexpensive electronic solution to this problem that is

easy to install and requires no structural alteration! W i th

Soundmasking, conversations are kept private and confi-

dential — a benefit for both lawyers and their clients

Soundmasking

specified

many

leading

companies,

both

large

and

small,

Doctors,

Solicitors,

Accoun-

tants,

Architects.

Banks and

Security

Firms.

sounDmnsKinG

For further particulars

contact:

OFFICE ENVIRONMENT DESIGN LTD.

25 Harcourt Street, Dublin 2.

Telephone: 780499/780037.

ask for

FREE TRIAL

228