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  • Interpretation
  • No.248
  • Date
  • 1989/11/24
  • Issue
    • The Operational Outlines Regulating the Audit of Income Taxes of Small-Scale Businesses("the Outlines"), Standard Fee Schedule for the Audit and Levy of Business Tax on Small-Scale Businesses("Fee Schedule"), Specific Tax Rates for the Audit and Levy of Business Tax on Small-Scale Businesses("Tax Rates"), and the Measures Governing the Audit of Special Amounts of Business Income Taxes ("the Measures") were enacted according to Article 17 of the Business Tax Law. Are the Outlines, Fee Schedule, Tax Rates and Measures unconstitutional?
  • Holding
    •        The Operational Outlines Regulating the Audit of Income Taxes of Small-Scale Businesses, Standard Fee Schedule for the Audit and Levy of Business Tax on Small-Scale Businesses, Specific Tax Rates for the Audit and Levy of Business Tax on Small-Scale Businesses, and the Measures Governing the Audit of Special Amounts of Business Income Taxes, enacted and published on May 17, 1984, by the Ministry of Finance, were promulgated according to Article 17 of the Business Tax Law, amended and published on June 29, 1980. This Law was again amended and published on November 15, 1985 and came into force on April 1, 1986. The Ministry of Finance then concurrently enacted the Measures pursuant to Section 3, Article 40, of the said Law. These Measures make up the "method of deduction from expenses," which appraises business revenues of taxation from business expenses over the expense rate. The method serves to simplify the taxation procedure for the owners of small-scale businesses. For practical purposes, it applies to economically diverse areas in different ways. In case the owner of a small-scale business does not wish to pay taxes according to the method, he or she is entitled to file an ordinary tax return. This arrangement is consistent with the equal taxation principle. Therefore, the abovementioned regulations are not unconstitutional.   
      
  • Reasoning
    •        Article 19 of the Constitution stipulates that the people have the obligation to pay taxes according to the law. This provision does not restrict the law from adopting appraising measures to levy tax under special circumstances, as declared by Interpretation No. 218 of this Yuan. Article 17 of the Business Tax Law was amended on June 29, 1970, to provide that small-scale businesses and dispersed transactions under Paragraph 3 of Article 12, and other businesses permitted to declare no tax under the rules of the Finance Ministry, are assessed at the discovered materials according to the tax bracket stipulated by the competent agency. The tax is levied once every three months. The above assessment formula is stipulated by the Provincial (or City) government, and approved by the Ministry of Finance. Thereafter, the Law was amended on November 15, 1985, and enacted on April 1, 1986. Paragraph 2 of Article 13 declares that the small-scale business is excluded by Articles 11 and 12 because of its size and because its average sales per month are below the standard set by the Ministry of Finance. Paragraphs 2 and 3 provide that the pawn shop business, whose business taxes are assessed under Article 21, and the business, whose business taxes are assessed under Article 23, should calculate their sale amount and tax, and serve the notification of payment of taxes to be collected once every three months. The abovementioned method of assessment is regulated by the Ministry of Finance, and is used by the Law to appraise the tax under special circumstances. Pursuant to these provisions, the Ministry of Finance subsequently published the Operational Outlines Regulating the Audit of Income Taxes of Small-Scale Businesses, the Standard Fee Schedule for the Audit and Levy on Business Tax of Small-Scale Businesses, and the Specific Tax Rates for the Audit and Levy on Business Tax of Small-Scale Businesses on May 1, 1984, and the Measures Governing the Audit of Special Amounts of Business Income Taxes, which were enacted concurrently with the amendment to the Business Tax Law, on July 7, 1976. These provisions are consistent and can be applied together since they all use the "method of deduction from expenses," which appraises business revenues of taxation from business expenses over the expense rate. The method serves to simplify the taxation procedure for the owners of small-scale businesses; it is a formula for the expenses calculated by dividing the expense ratio to appraise the sales amount and serves as a basis for taxation under the statutory tax rate in order to simplify the taxation procedures. For practical purpose and completeness, the standard fee schedule is provided in the list of assessment levels enacted by the Provincial (or City) taxation agency pursuant to Paragraph 3 of Article 5 of the Measures regarding separate economically diverse areas, filed and approved by the Ministry of Finance. In case the owner of a small-scale business does not wish to pay taxes according to the method, he or she is entitled to file an ordinary tax return under the abovementioned Paragraph 1 of Article 24 of the Business Tax Law, amended and implemented on November 15, 1985. This rule stipulates that small business entities or other business entities that are exempted from reporting their sales amount by the Ministry of Finance shall compute their tax amounts under Section 1 of this Chapter. They shall file tax returns in accordance with Article 35 to calculate their taxes in the ordinary way consistent with the way general businesses report and pay taxes. This arrangement is consistent with the equal taxation principle. The abovementioned regulations, therefore, are not unconstitutional. Article 8 of the Regulations Governing the Encouragement of Uniform Invoices, which was not applied in the final decision, should not be interpreted.      
      
    • *Translated by Chi-chang Yu
      
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