Revenue Rule

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United States of America v. Harden, 63 DTC 1276, [1963] CTC 450, [1963] S.C.R. 366

U.S. tax judgment not enforceable in Canada

The U.S. government obtained a judgment from a U.S. court for U.S. income taxes owing by the respondent, who now was resident in B.C. In affirming the findings below that this judgment was unenforceable in the B.C. Supreme Court, Cartwright J stated (at pp. 369, 371, SCR):

[T]he appellant [did not] question the well-established general rule...that a foreign state is precluded from suing in this country for taxes due under the law of the foreign state... .

[A] foreign State cannot escape the application of this rule, which is one of public policy, by taking a judgment in its own courts and bringing suit here on that judgment. The claim asserted remains a claim for taxes.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Territorial Limits revenue rule 48

See Also

Skatteforvaltningen v Solo Capital Partners LLP, [2022] EWCA Civ 234

revenue rule does not apply to fictitious tax refund claims made by a non-taxpayer

The Danish Customs and Tax Divisions (“SKAT”) brought claims in an English civil court seeking to recover £1.44 billion which it had paid based on allegedly fraudulent claims for refunds of Danish dividend withholding tax – SKAT alleged that most of the defendants had fraudulently misrepresented that they, as shareholders of Danish companies, had been subject to withholding at a rate in excess of the Treaty-reduced rate on dividends when, in fact, they never had held any shares in any of the relevant Danish companies. The judge below concluded that all SKAT's claims were inadmissible as a consequence of the revenue rule (“Dicey Rule 3”), which was expressed as follows by Sir Julian Flaux, Chancellor as follows (at para. 1):

English courts have no jurisdiction to entertain an action … for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State.

In allowing SKAT’s appeal from this judgment, Sir Julian stated (at paras. 128, 134 and 143):

[T]his claim against the SKAT defendants is not a claim to unpaid tax or a claim to recover tax at all. It is a claim to recover monies which had been abstracted from SKAT’s general funds by fraud. …

[T]he fraud here was not fraud by the taxpayer in evading tax. There was no tax due and those who committed the fraud were never taxpayers. …

[W]hat SKAT is saying entitles it to repayment is not that the … Applicants or the alleged fraud defendants owe it tax or have cheated it out of tax, but that it was induced by fraudulent misrepresentation to pay away monies to these persons to which they were not entitled on any basis.

Ben Nevis (Holdings) Ltd. v. Revenue and Customs Commissioners, [2013] BTC 485, [2013] EWCA Civ 578

Before rejecting the taxpayer's submission that Article 25A did not apply to permit the collection through the respondent (HMRC) of South African tax debts arising prior to the coming into force of the 2002 Convention between South Africa and the U.K., Lloyd Jones LJ stated (at para. 23):

For centuries, courts in this jurisdiction have refused to entertain claims for the enforcement of revenue or other public laws of a foreign State (See, for example, Government of India v Taylor [1955] AC 491). …[T]his reflects a well-established and almost universal principle that the courts of one country will not enforce the penal and revenue laws of another country. The principle is, however, subject to contrary agreement by treaty… .

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Retroactivity/Retrospectivity creation of new collection right did not entail retrospectivity 182
Tax Topics - Treaties - Income Tax Conventions Vienna convention approach applies to non-signatories 207
Tax Topics - Treaties - Income Tax Conventions - Article 26A new tax collection Article applied to old tax debts 228

Relfo Ltd. v. Varsani (2008), 11 ITLR 783 (Singapore HC)

The day before going into liquidation, the directors of a company transferred all the company's assets to an overseas bank, with the equivalent sum of money appearing in the defendant's account in another overseas bank. The claim of the liquidator of the company against the defendant was unenforceable given that the interests of the liquidator of the plaintiff were aligned with those of the UK Inland Revenue as the sole creditor of the company at the time of the action and given that the current liquidator had been appointed by the UK Inland Revenue.