Whether Revenue was justified in refusing access to four categories of records relating to transfer pricing methodology

10 March 2021

Background

On 10 September 2019, the applicant made a wide-ranging request, set out in four appendices, relating to the transfer pricing audit carried out by Revenue regarding the corporation tax payable by the Company and Revenue’s approach to transfer pricing and related audits generally. In response to a request made by Revenue on 17 September 2019, the applicant agreed to a staggered approach to dealing with the appendices. Revenue therefore treated the appendices as separate requests for the most part. This review concerns Appendix 3, in which the applicant sought access to four categories of records relating to transfer pricing methodology, as set out below in summary form:

1. All records containing details of any meetings held since 1 January 2010 between Revenue and any interest group, such as the American Chamber of Commerce or the Silicon Valley Tax Directors Group, relating to Revenue’s approach to, or view in respect of, the Irish tax treatment of payments of royalties by an Irish incorporated and tax resident company to an Irish incorporated but non-Irish tax resident company which owns the intellectual property giving rise to the royalty payments;
2. All records of any Advance Pricing Agreement (APA) or Mutual Agreement Procedure (MAP) where a Transactional Net Margin Method (TNMM) methodology or approach has been agreed by Revenue;
3. All records of any APA or MAP where a Comparable Uncontrolled Price (CUP) methodology or approach, applied in respect of an Irish taxpayer, has been agreed by Revenue; and
4. All records of any other opinion, ruling, written confirmation, aspect query or audit activity made in the preceding five years where the TNMM methodology or approach has been accepted or agreed by Revenue.

On 13 November 2019, the applicant agreed to refine items 2 and 3 of the request by specifying that it sought records of any APA or MAP where Revenue agreed within the preceding five years to apply either a TNMM methodology or approach and/or CUP methodology or approach (applied in respect of an Irish taxpayer) which contain details of the decision by Revenue to apply this approach and/or the reasons for the decision.

In a decision dated 10 December 2019, Revenue’s Large Corporates Division (LCD) refused access to items 1 to 3 of the request under section 15(1)(a) of the FOI Act. It identified six records of audits as relevant to item 4 of the request but refused access to these records under sections 29(1), 30(1)(a), (c), and 41(1)(a) of the FOI Act. In a separate decision dated 10 December 2019, Revenue’s International Tax Division (ITD) refused access to 42 records falling within the scope of the request under sections 33(1)(d), 36(1)(b), and 41(1)(a) of the FOI Act.

On 20 December 2019, the applicant sought an internal review of the matter. In decisions dated 24 January 2020, both LCD and ITD effectively affirmed their original decisions. On 21 July 2020, the applicant applied to this Office for a review of the matter.

I have now completed my review in accordance with section 22(2) of the FOI Act. In carrying out my review, I have had regard to the submissions made by Revenue and the applicant. I have decided to conclude this review by way of a formal, binding decision.

Scope of the Review

My review in this case is concerned solely with the question of whether Revenue was justified in refusing access to items 1 to 4 of the applicant’s request under the FOI Act.

Preliminary Matters

There are a number of preliminary matters that I wish to address at the outset.

First, section 25(3) of the FOI act requires me to take all reasonable precautions in the course of a review to prevent the disclosure of information contained in an exempt record or that would cause the record to be exempt if it contained that information. For this reason, the description I can give of the contents of the records is limited.

Secondly, section 18 of the FOI Act provides for the deletion of exempt information and the granting of access to a copy of a record with such exempt information removed. This should be done where it is practicable to do so and where the copy of the record thus created would not be misleading. However, the Commissioner takes the view that neither the definition of a record nor the provisions of section 18 envisage or require the extracting of particular sentences or occasional paragraphs from records for the purpose of granting access to those particular sentences or paragraphs. Generally speaking, therefore, the Commissioner is not in favour of the cutting or "dissecting" of records to such an extent.

Lastly, it is important to note that release of records under the FOI Act is regarded, in effect, as release to the world at large given that the Act places no restrictions on the uses to which records released under FOI may be put.  In contrast, in the case of a court order for discovery, records are released subject to an undertaking that they are to be utilised solely for the purposes of the legal proceedings in question; no further use or passing-on is allowed.

Analysis and Findings

Section 22(12)(b) of the FOI Act provides that a decision to refuse to grant a request shall be presumed not to have been justified unless the FOI body shows to the satisfaction of the Commissioner that the decision was justified. The onus is therefore on Revenue to justify its decision to refuse access to the records concerned.

Item 1

Revenue’s position is that no records of meetings between Revenue and interest groups such as the American Chamber of Commerce or the Silicon Valley Tax Directors Group exist. Section 15(1)(a) of the FOI Act provides for the refusal of a request where the records sought do not exist or cannot be found after all reasonable steps to ascertain their whereabouts have been taken. The role of this Office in a case involving section 15(1)(a) is to decide whether the decision maker has had regard to all the relevant evidence and, if so, whether the decision maker was justified in coming to the decision that the records sought do not exist or cannot be found.

Revenue has explained that LCD carried out two separate searches for relevant records. It says that a thorough search was carried out of all Revenue systems and paper files held, and that staff conducted a search of their emails and any system drives relevant to the requests. It says that a thorough search was also carried out in other Revenue divisions, including ITD. However, it emphasises that the basis for its section 15(1)(a) claim is that the records of the meetings sought do not exist. As there is nothing to suggest that any such meetings took place, I find no reason to dispute Revenue’s position on the matter. Accordingly, I am satisfied that Revenue was justified in refusing item 1 of the applicant’s request under section 15(1)(a) on the basis that no relevant records exist.

Items 2 & 3

The 42 relevant records held by ITD relate to items 2 and 3 of the applicant’s request, i.e. they are the APA and MAP records sought. Given the nature of the APA and MAP records, I accept that ITD is the only relevant division that would be expected to hold such records.

Revenue has refused access to the APA and MAP records on various grounds. In addition to the exemptions claimed in its decisions, it now seeks to rely on section 33(3)(c)(i) of the FOI Act. Section 33(3)(c)(i) is a mandatory exemption that applies where the record concerned contains information communicated in confidence to any person in or outside the State from any person in or outside the State and relating to, among other matters, the international relations of the State. Section 33(3) does not require a harm test, nor is it subject to a public interest override which would allow for the consideration of whether the public interest would be served by release.

It is Revenue’s position that the 42 APA and MAP records contain confidential information shared under the Exchange of Information (EOI) procedure governed by an applicable Double Taxation Agreement (DTA) entered into between Ireland and a foreign State. Each DTA is based on the provisions of the OECD Model Tax Convention on Income and on Capital (“the Model Treaty”). Revenue emphasises that the terms of the Model Treaty and the OECD Model Tax Convention Commentary highlight the importance of confidentiality in relation to the EOI procedure. Revenue also notes that DTAs are given the force of law by virtue of section 826 of the Taxes Consolidation Act 1997 (TCA 1997).

However, Revenue has also confirmed that all 42 records relate in full to other taxpayers and therefore fall within the confidentiality provision set out at section 851A of TCA 1997. Generally speaking, section 851A (1) of the TCA defines taxpayer information as information of any kind and in any form relating to one or more persons that is obtained by a Revenue Officer or for the purposes of the Acts, purportedly for the purposes of the Acts or prepared from information so obtained, but does not include information that does not directly or indirectly reveal the identity of the person to whom it relates. Subsection (2) provides that all taxpayer information held by the Revenue Commissioners or a Revenue Officer is confidential and may only be disclosed in accordance with section 851A or as is otherwise provided for by any other statutory provision. Section 851A of the TCA is not listed in column (3) in Part 1 or 2 of Schedule 3 to the FOI Act. 

In the circumstances, I consider that section 41(1)(a) is the most relevant exemption to consider in relation to the APA and MAP records. Section 41(1)(a) provides for the mandatory refusal of a request if the disclosure of the record concerned is prohibited by law of the European Union or any enactment (other than a provision specified I column (3) of Part 1 or 2 of Schedule of an enactment specified in that Schedule).

An APA is an agreement between two tax administrations and the taxpayers concerned. It is entered into in advance of transactions between associated taxpayers for the purpose of defining the tax treatment of the future transactions in reference to the relevant double taxation convention. Any such agreement arises from a request made by the taxpayers concerned. The MAP is a mechanism through which competent tax authorities consult to resolve disputes regarding the application of double taxation conventions. Such disputes involve cases of double taxation where the same profits have been taxed in two jurisdictions. Again, the MAP applies in respect of particular taxpayers who have requested the procedure. As Revenue states in its submissions:  “The 42 records relate to requests made by taxpayers, all of whom are unrelated to the [applicant], for a Mutual Agreement Procedure or an Advance Pricing Agreement under the terms of a Double Taxation Agreement between Ireland and another country.” Relevant information about Revenue’s approach to transfer pricing, including APA and MAP requests, is available on its website (see https://www.revenue.ie/en/companies-and-charities/international-tax/transfer-pricing/index.aspx and https://www.revenue.ie/en/tax-professionals/ebrief/2018/no-1192018.aspx.

The applicant does not dispute that the requested records relate to other taxpayers, but it has suggested that redacted copies could be provided. However, I am satisfied that this is not a case in which section 18 applies. As this Office observed in Case 53571 (Company X and Office of the Revenue Commissioners), in relation to the question of the partial release of taxpayer information:

“It seems to me that the relevant part of section 851A is concerned with references to taxpayer issues in more general records, such as policy related documentation for instance, and is intended to ensure that such papers are not categorised as containing taxpayer information such that they cannot be disclosed or published. While granting partial access to records may be appropriate in the case of a taxpayer seeking access to their own records, I do not consider that the relevant part of section 851A intends to provide for granting partial access to records that as a whole contain third party taxpayer information for the purposes of section 18 of the FOI Act.”

In the circumstances, I am satisfied that section 41(1)(a) applies in full to the records falling within the scope of items 2 and 3 of the applicant’s request. I therefore do not consider it necessary to determine whether and to what extent the other claimed exemptions may also apply.

Item 4

All six of the LCD records relevant to item 4 of the applicant’s request relate to audits of other taxpayers. These records likewise fall within the confidentiality provision set out at section 851A of TCA 1997. I am therefore satisfied that section 41(1)(a) applies as claimed.

Decision

Having carried out a review under section 22(2) of the FOI Act, I hereby affirm the decision of Revenue in this case.

Right of Appeal

Section 24 of the FOI Act sets out detailed provisions for an appeal to the High Court by a party to a review, or any other person affected by the decision. In summary, such an appeal, normally on a point of law, must be initiated not later than four weeks after notice of the decision was given to the person bringing the appeal.

 

Stephen Rafferty

Senior Investigator