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  • Interpretation
  • No.234
  • Date
  • 1989/03/03
  • Issue
    • Does demarcation of national, provincial and hsien tax receipts contradict the Constitution?
  • Holding
    •        Under Article 107, Subparagraph 7, of the Constitution, the Central Government shall have the power of legislation and administration regarding the demarcation of national, provincial and hsien tax receipts.  Article 12, Paragraphs 2 and 3, of the Act Governing the Allocation of Government Revenues and Expenditures regarding the centralized organization and allocation of business tax and stamp duty receipts conform to Article 147 of the Constitution, which advocates balanced local economic development, and do not contradict the Constitution.
  • Reasoning
    •        The Central Government shall have the power of legislation and administration regarding the demarcation of national, provincial and hsien tax receipts.  It is prescribed respectively in Articles 107 and 147 of the Constitution that the Central Government, in order to attain balanced local economic development among the provinces, and the provinces, in order to attain balanced economic development among the hsiens, shall give appropriate aid to poor or unproductive provinces/hsiens. A special municipality under the direct jurisdiction of the Central Government like a province (“directly-governed municipality”) is at the same level as the province, and under Paragraph 1 of Article 12 of the Act Governing the Allocation of Government Revenues and Expenditures, business taxes and stamp duties are imposed by provinces and directly-governed municipalities. Article 12, Paragraphs 2 and 3, of said Act further provide that from business tax and stamp duty receipts, 50% of total receipts of the province shall be allocated through its centralized organization to hsiens (and cities and government agencies) that fall within its administrative zone, and 50% of total receipts of the directly-governed municipality shall be allocated through the centralized organization of the Central Government to the province and the directly-governed municipality.  The purpose is to pool the financial resources at the Central Government and local government levels into centralized organization, so as to achieve balanced local economic development.
      
    •        Business taxes and stamp duties are imposed by provinces and directly-governed municipalities.  However, factories and mines are, in most cases, located in various areas in hsiens and cities within a province, whereby related expenditure on education, public health, communications, police and other public-interest work inevitably increases the financial burden for the local government.  Under the existing system, business taxes are collected according to where the corporate headquarters are, and stamp duties are also mostly collected according to the location of the corporate headquarters, which are often in a directly-governed municipality.  As a result, hsiens and cities fail to collect much business taxes and stamp duties from local factories and mines. The provisions of Article 12, Paragraphs 2 and 3, of the Act Governing the Allocation of Government Revenues and Expenditures purport to adjust tax receipts of provinces and cities reasonably through centralized organization and allocation, thereby facilitating normal economic development even in poor regions, so as to build a self-sufficient society.  The aforesaid fulfills the purpose of Article 147 of the Constitution.  The provincial revenue to be legislated and administrated by the provinces or to be delegated to the hsiens for administration referred to in Article 109, Paragraph 1, Subparagraph 7, of the Constitution means the tax receipts already authorized to be allocated to the provinces under the reasonable division of taxation at the national, provincial and hsien levels per legislation of the Central Government. Article 12, Paragraphs 2 and 3, of the Act Governing the Allocation of Government Revenues and Expenditures do not contradict the aforesaid Article of the Constitution. 
      
    • *Translated by Dr. C.Y. Huang of Tsar & Tsai Law Firm.
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