Last year we were treated to some tortuous legal arguments about whether the Revenue Department could try to collect tax from former prime minister Thaksin Shinawatra on a share sale, even if it was made through the stock market, based on a summons issued to his son many years ago.

A senior cabinet minister admitted at the time that such an attempt would need to rely on a “miracle of law”, but the government is intent on pursuing the case no matter how many more years it takes. One interesting question arises: could the taxman apply a similar concept to assess a taxpayer based on a summons served on his or her spouse?

While taxpayers are entitled to defend against all tax claims, evidence goes stale and witnesses’ memories get hazy with the passage of time. To be fair to them, the statute of limitations imposes a timeframe within which tax authorities need to exercise their power diligently.

Where income tax is concerned, if an official suspects errors in a tax return, the Revenue Code requires that he or she must “issue a summons to the person who filed such tax return” for audit purposes within two years from the day the return was filed. The deadline can be extended to five years if tax evasion is suspected, or if a tax refund is being contested. In a case where no tax return has been filed, the law does not really impose any deadline and the general rule of 10 years will apply instead.

After issuing a summons and conducting an audit, tax authorities may decide to issue a tax assessment letter, which will empower them to confiscate assets without having to petition for a court order.

Cases arise from time to time in which a deadline expires and tax authorities are unable to issue a summons directly to the correct person. Can the Revenue Department actually rely on a summons issued to a taxpayer’s spouse in order to pursue an assessment against the taxpayer? If this happened to you, what legal arguments could you use to defend yourself?

In other words, can a spouse, who receives a summons related to his or her own tax matter, be treated as an “agent” of the taxpayer simply because the Revenue Code contains a provision that requires the incomes of married persons to be itemised in the same tax return?

In one precedent case, the department assessed tax against a politician and subsequently claimed that the summons issued to him could be treated as a summons issued to his wife, so that it could assess tax against her as well. This assertion was based on the provision in the Revenue Code (modified in 2013), which treats the income earned by a wife as her husband’s for tax purposes. The same provision holds the husband liable for the wife’s tax, together with a tax return filing on her account.

The court rejected the taxman’s argument. It said: “The purpose of such a provision in the Revenue Code was only to identify the person who was liable to pay and file tax. The law still requires the tax assessment official to issue a summons so as to allow the taxpayer to understand the potential liabilities of the tax assessment. As the assessment official failed to issue a summons to the wife for inquiries, the tax assessment on the wife, including the ruling by the Appeal Committee in favour of the Revenue Department, was not legitimate.”

To be fair, the Revenue Department is not only one that has tried the “agent” argument. In another Supreme Court case, a taxpayer who had failed to file a return and pay taxes for 2001 was assessed by the department. The man asserted that, since his wife had filed her tax return, by declaring in Form PND 90 that he had no income on which to pay tax, it meant that he had already filed via his wife’s return. Consequently, he argued, the Revenue Department’s issuance of a summons to him after two years from the deadline, based on the 10-year rule for a taxpayer who fails to file a return, was not legitimate.

The Supreme Court threw out this argument as well. It said: “Since the tax return filing of a wife, with a declaration that her husband had no income, could not be counted as the husband’s tax return filing, the Revenue Department’s issuance of a summons was legitimate.”

In the department’s case against the former prime minister, based on the sale of shares by his children in 2006, it failed to serve a summons on him by March 31, 2012 (five years from March 31, 2007, the tax filing deadline in question) but claimed the summons had already been issued to him within the five-year deadline via his children. This, it said, was based on the judgement of the Supreme Court’s Criminal Division for Holders of Political Positions that Thaksin’s children had sold shares for his benefit.

Whether the above interpretation is correct or not, it seems that where there is no related precedent case stating that the person receiving a summons can include a nominee or an agent, the Revenue Department appears bound by law to issue a summons within the deadline directly to a person against whom it intends to assess tax.

This article was published in NEWSPAPER SECTION: BUSINESS of Bangkok Post dated 6 Mar 2018