By way of context, in the case, information was received by Revenue from the Austrian tax authority under Directive 2011/16 (DAC). Pursuant to specific provisions of Irish legislation, Revenue has the power to obtain relevant information from Irish taxpayers through third parties, and can also make an application to the High Court for an order requiring the information to be supplied.
In the case, the party (company) refused to comply with the Revenue notice to supply names, addresses and dates of birth requested by the Austrian tax authority, citing concerns in relation to data protection and that the request was a 'fishing expedition'.
That refusal led to Revenue making an application to the High Court ordering the company to produce that information. In response, the company argued that:
The order breached data protection laws;
There were deficiencies in the request made by the Austrian tax authorities, sufficient to ground a reasonable suspicion of non-compliance by the Austrian authorities with Article 17 of the DAC; and
The request was in the nature of a fishing expedition and that the reasonable grounds test was not met.
High Court decision
The High Court decided that the only question for it to consider was whether the test outlined in Irish legislation for an order to be made to produce third party information was satisfied. The legislative threshold to be satisfied in order for the High Court to make the order requires:
That there is evidence that Revenue is satisfied that there are reasonable grounds for suspecting that the taxpayer may have failed to comply with the tax laws of a foreign territory;
That this failure is likely to have led to or lead to serious prejudice; and
The information requested is relevant to the proper assessment or collection of foreign tax.
The High Court was satisfied that the threshold was met and granted the order.
In coming to this decision, the High Court considered the meaning of "reasonable grounds to suspect" and considered that both a subjective and objective test must be satisfied. As such, it must be clear that Revenue harbours a genuine suspicion in their own mind that a failure to comply with foreign tax laws may have occurred (the subjective test), and also that suspicion must be based on reasonable grounds (the objective test):
In the sense that a reasonable individual acting without passion or prejudice, and proceeding on the basis of the information known to them, would fairly have suspected the person concerned may have failed … to comply with any provision of Austrian income tax laws.
Berlioz
In the course of the decision, the High Court also considered a number of interesting issues that did not form part of the decision. In particular, it analysed the Court of Justice of the European Union (CJEU) decision in Berlioz Investment Fund SA v. Directeur de l'administration de contributions directes (Case C-682/15), and noted that the threshold set in that decision for information requests made under the DAC was quite low.
The court also considered whether a third party who receives an information request is entitled to raise the requesting tax authority's (in this case, Austria's tax authority) compliance with the requirement, to exhaust all the usual sources to obtain the requested information under Article 17 of the DAC.
Revenue argued that it was only the requested authority (in this case Irish Revenue) that could object to a request under this provision. This point was considered by the Advocate General in Berlioz. However, it was not considered in detail by the CJEU in that case.
However, the Irish High Court indicated that it disagreed with Revenue's position on this (obiter) on the basis that Article 17(2) and 17(4) of the DAC certainly appear to provide a basis upon which a third party might challenge the legality of an order.
