Taxpayer K v Fiji Revenue and Customs Authority [2012] FJTT 12; Income Tax Appeal 4.2004 (29 August 2012)

IN THE STATUTORY TRIBUNAL, FIJI ISLANDS
SITTING AS THE TAX TRIBUNAL

Income Tax Appeal No 4 of 2004

BETWEEN:

Taxpayer K
Applicant

AND:

FIJI REVENUE & CUSTOMS AUTHORITY
Respondent

Counsel: The Taxpayer as a self represented litigant.
Ms F Gavidi, FRCA Legal Unit, for the Respondent

Date of Hearing: Thursday 23 August 2012

Date of Judgment: 29 August 2012

JUDGMENT

DEFINITION OF RESIDENT – Section 2- INCOME TAX ACT (CAP 201) – Permanent place of abode; overseas tax free salary arrangements.

Background

1. In August 1998, the Applicant Taxpayer was offered and accepted employment in Samoa for two years, as part of the South Pacific Regional Environmental Program(SPREP). To do so, the Applicant took leave from his Fijian based employer for that period.
   
2. The contract of employment entered in to between the program entity and the Taxpayer, specifically stated that the remuneration under the contract of employment, would be tax free in Samoa for non-citizens or non- residents of that country.[1]
   
3. Encouraged by the role and the prospect of earning a tax free income, the Applicant Taxpayer accepted the offer of employment.
   
4. Upon his return to Fiji, the Taxpayer subsequently learnt that the income earnt under this employment arrangement was not tax free income, when the Respondent issued him with Amended Tax Assessment Notices to that effect.
   
5. The Applicant makes his appeal on the basis that he claims:-
   
   • he was not a Fijian resident for the combined purposes of Sections 7 and 11 of the Income Tax Act (Cap 201),
     
   • or that his income was "tax free income" by virtue of a Memorandum of Agreement entered into between various Pacific Island signatories that formed the regional environmental body.
     

Issues for Consideration

6. This has been a long running dispute between the Applicant and the Respondent, the terms of which at the outset when the Notice of Appeal was lodged in 2004, were broader and encapsulated the taxation years between 1996 and 2002.
   
7. Through negotiations held between the parties, some of which were undertaken on the Applicant's behalf by Counsel, the current matters in dispute relate only to matters impacting on the 1998, 1999 and 2000 taxation years.
   
8. Due to the departure of the Applicant's Counsel overseas, the Applicant took the decision to make submissions to the tribunal as a self represented litigant.
   
9. The Applicant's submissions before the tribunal were based on two main themes, being that:-
   
   • (i) The Memorandum of Agreement developed between the South Pacific Nations in the formation of the SPREP, had specifically indicated that employees engaged by the program would receive tax free remuneration and that this proposed benefit, was set out as a term of his employment contract with the program; and
     
   • (ii) The Taxpayer was not a resident of Fiji in the relevant period and therefore the remuneration that he received, was not income for the purposes of the Income Tax Act (Cap 201).
     

Tax Free Status for Employees of the SPREP

10. The Taxpayer provided the tribunal with a copy of an unsigned Memorandum of Agreement, entitled Agreement Establishing the South Pacific Regional Environment Program (SPREP) dated 16 June 1993, which as Article 10 reveals, open for signature by the 18 listed countries for a 12 month period and thereafter remaining open by accession.
    
11. At Paragraph 1.6 of the Applicant's Submissions dated 17 August 2012, as evidence in support of that arrangement, the Taxpayer cites the SPREP Staff Regulations dated 1 January 1996, that provide at page 1,
    

This region model shall be adjusted for equitable implementation in SPOCC organisations based in other countries and the tax free entitlements for expatriate staff shall be considered in determining appropriate allowances and benefits.

12. Unfortunately for the Taxpayer that is where it would appear the implementation of that proposal ends.
    
13. The Taxpayer was unable to provide any supporting evidence to conclude, that the Government of Fiji was either a signatory to, or had acceded to the Establishing Agreement.
    
14. But more importantly, there is nowhere within the Income Tax Act, that provides any exemption for such purpose.[2]
    
15. For the sake of considering other legislative options, my attention was also drawn to the Diplomatic Privileges and Immunities Act (Cap 8) as an alternative location in which such an exemption may be provided. This too, was of no assistance to the Applicant's case.[3]
    
16. While it may have been the case that the Applicant had been promised the benefits of a tax free salary for two years, it would seem that the promisor did so in circumstances where no legislative arrangement was in place.
    
17. There is no evidence before this tribunal in relation to why this did not occur and it serves no purpose to speculate in such matters.
    
18. The fact is that any representations made by SPREP to the Applicant are matters between those two parties.
    
19. If the Applicant did rely on representations made by SPREP, which he claims to have done and he did so in circumstances that were detrimental to his own self, then that too is a matter for the Applicant to explore. Having said that, this tribunal has no jurisdiction in such matters.[4] Should the Applicant still wish to pursue such matters, he will also need to consider whether or not he is time barred from doing so.
    

Was the Applicant Taxpayer a Resident for the Purposes of the Income Tax Act?

20. Section 7(1)(a) of the Income Tax Act (Cap 201) provides the trigger for the taxation of Fijian residents, where their total income exceeds $15,000.
    
21. The definition of "resident" is contained at Section 2 of the Act and provides relevantly as follows:
    
    • (a) a person, other than a company, who resides in Fiji, and includes a person –
      
      • (i) whose domicile is in Fiji, unless the Commissioner is satisfied that his permanent place of abode is outside Fiji;
        
      • (ii) who has actually been in Fiji, [continuously] or intermittently, during more than one-half of the income year, unless the Commissioner is satisfied that his usual place of abode is outside Fiji and that he does not intend to take up residence in Fiji;
        
      • (iii) in the case of a company.....
        
22. It appears to be accepted by the Respondent, that the Applicant was in Fiji for 76 days out of 365 in 1999 and 94 days out of the same number, in 2000. On that basis, it would seem that the sub-definition at paragraph (ii), is not relevant.
    
23. The focus on this analysis, must therefore be, where was the permanent place of abode of the Applicant.
    
24. The Applicant contends that his permanent place of abode was Samoa, even though he admits to the fact that his wife and two children were at the time living in Fiji. In his oral submissions, the Applicant cites the fact that he purchased a motor vehicle while in Samoa and also leased a flat there, as constituting sufficient evidence that he had abandoned his Fiji residence.
    
25. On the other hand, the Respondent's witness, Mr Willie Wong, a Principal Auditor with the Authority, identified bank deposit records, the fact that the Applicant's children remained at school in Fiji, that his family were housing in Fiji, as well as the fact that he had rented out the family home, as providing evidence of the principal place of abode as being Fiji.
    
26. The Taxpayer relies on the Full Court decision in Federal Commissioner of Taxation v Applegate[5] to illustrate both the notions of abandonment of residence in the country of origin, as well as the intentions of the taxpayer as to the duration of the absence.
    
27. That case in my mind is easily distinguished. In the first place in Applegate, the taxpayer terminated his residence in Australia and together with his wife took all their assets to the New Hebrides. As mentioned earlier, Taxpayer K left his family in Fiji, while he worked abroad.
    
28. Secondly, in Applegate's case, the taxpayer left to work overseas for an indefinite period. In the case now before the tribunal, the absence was only for a fixed two year contract.
    
29. In contrast, the Respondent firstly drew the attention of the tribunal to Section 31 of the Act, that together with Section 2, relies on a concept that deals with "world wide income". While the concept in itself, supports the view that income derived offshore is capable of being taxed, the provision really adds no direct value to the task of interpreting Sections 7 (1)(a) and 11.
    
30. What is of more value however, is the submission of the Respondent that draws a parallel between the definition of "resident"at Section 2 of the Act, with the definition of "resident or resident of Australia", as contained at Section 6 of the Australian Income Tax Assessment Act (Cth) 1936.
    
31. In this regard, the Respondent relies on the decision of the Australian Administrative Appeals Tribunal, referred to as AAT Case 8892. In that case, a Full Tribunal of the Administrative Appeals Tribunal found that the taxpayer's permanent place of abode was not rendered outside Australia, merely by virtue of the fact that he resided in the Solomon Islands for some three and a half years. The reasons given included:
    
    • (i) The taxpayer was to remain in the Solomon Islands for a fixed and definite period;
      
    • (ii) The taxpayer maintained his residential home in Australia;
      
    • (iii) The taxpayer sought leave without pay from the Australian Public Service so that in the event that of his employment with the Solomon Islands being unsuccessful he could return to the Australian Public Service.
      
32. The case of Taxpayer K in these three respects is almost identical. Taxpayer K took a two year fixed term contract, rented out his residential home in Australia and took unpaid leave from his employer.
    
33. The Respondent further relies on the Australian case of Iyengar v Commissioner of Taxation[6], to support the position that Taxpayer K was a resident for the purposes of Section 2. In the case of Iyengar, Senior Member CR Walsh identified seven key factors relevant to the consideration. Relevant to his conclusion though, was the fact that Mr Iyengar a Professional Engineer had maintained the mortgage payments for his family home; maintained a bank account in Australia which his wife had access to; transferred monies to Australia and had his family remain in that country, save for a three short visits by his wife.
    
34. Again the parallel facts to that of Taxpayer K are easily drawn, as evidenced by banking records, the Taxpayer's own evidence of maintaining mortgage payments and the fact that Taxpayer K's family remained in Fiji, during the duration of the contract.
    

Conclusions

35. Having regard to the evidence and submissions of the parties, I am of the view that Taxpayer K is a "resident" for the purposes of Section 2 of the Income Tax Act (Cap 201). His permanent place of abode during the relevant period, was Fiji and not Samoa.
    
36. On that basis, Taxpayer K must submit to the income tax laws of this country, having regard to the requirements imposed particularly by Sections 7 and 11 of the Income Tax Act.
    
37. I find that the Amended Assessments were correctly issued by the Respondent in the relevant periods.
    

DECISION OF THE TRIBUNAL

The Tribunal orders that the Application be dismissed.

Mr Andrew J See
Resident Magistrate

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^[1] Clause 19 of the Contract Document. (See Attachment A of the Appellant’s Submissions in Support of Appeal, filed 9 May 2005).

^[2] See for example, Section 17 of the Act, where an extensive set of exemptions are provided.

^[3] Note also the letter from the Ministry of Foreign Affairs and External Trade, dated 24 November 2003 as contained within the Affidavit of Willie Kwong, in which the Permanent Secretary clarifies that fact.

^[4] These are possibly matters that could be pursued at contract or tort.

^[5] [1979]FCA37

^[6] [2011]AAT856