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GAZETTE
sep
T
em
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
60
:
. . 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
61
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.
In
Warnock,
the Revenue Commissioners served a
section 59 notice on the Plaintiffs, a well-known firm of
accountants
62
to
provide
certain
information
concerning, as Costello J. put it
61
"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".
64
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"
65
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:
66
"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
67
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
is
specified
by
many
leading
companies,
both
large
and
small,
Doctors,
Solicitors,
Accoun-
tants,
Architects.
Banks and
Security
Firms.
sounDmnsKinG
For further particulars
contact:
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228