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  • Interpretation
  • No.537
  • Date
  • 2002/01/11
  • Issue
    • Does the MOF letter requiring the taxpaying house/building owner to report to the local tax collection authority the utilization condition of such house/building before being entitled to a 50% discount in housing tax contradict the principle of taxation by law as provided in the Constitution?
  • Holding
    •       According to Article 15, Paragraph 2, Subparagraph 2, of the House Tax Act as amended and promulgated on July 30, 1993, a private house/building used for manufacturing purposes owned by a duly registered factory should be entitled to a 50% discount in housing tax. Article 7 of the said Act also provides: "A taxpayer shall, within 30 days from the date on which construction of a house/building is completed, report to the local tax collection authority the current value of such house/building and its utilization condition. The aforesaid shall also apply to the cases of extension, reconstruction, any change in utilization, creation of dien right or transfer of ownership of the house/building." The tax collection authority shall in principle conduct investigations at its own initiative during tax collection processes. However, most taxable conditions occur within the control of taxpayers, and it is difficult for the tax collection authority to ascertain all the details on its own. To achieve the goal of fairness and legitimacy in tax, taxpayers are obliged to assist by reporting the required information. The letter Ref. No. Taiwan-Finance-Tax-36712 issued by the Ministry of Finance (MOF) on September 9, 1982, states: "According to the provisions of Article 7 of the House Tax Act, where a house/building is eligible for tax relief, the taxpaying owner shall report to the local tax collection authority the utilization conditions eligible for tax relief, together with relevant papers (such as factory registration certificate, etc.). The 50% discount in housing tax provided in Article 15, Paragraph 2, Subparagraph 2, of the Act does not apply to the housing tax already paid at the business tax rate prior to the aforesaid report." This is in alignment with the above Article and does not contradict the principle of taxation by law provided in the Constitution.
  • Reasoning
    •       According to Article 15, Paragraph 2, Subparagraph 2, of the House Tax Act as amended and promulgated on July 30, 1993 (this remains unchanged in the said Act as amended and promulgated on June 20, 2001, and put into effect on July 1, 2001), a private house/building used for manufacturing purposes owned by a duly registered factory shall be entitled to a 50% discount in housing tax. Article 7 of the said Act also provides: "A taxpayer shall, within 30 days from the date on which construction of a house/building is completed, report to the local tax collection authority the current value of such house/building and its utilization conditions. The aforesaid shall also apply to the cases of extension, reconstruction, any change in utilization, the creation of dien right or transfer of ownership of the house/building" (this remains unchanged in the current said Act). Under Article 30 of the Tax Levy Act, the tax collection authority may conduct investigations on relevant institutions, groups or individuals for information pertaining to tax collection, and the subject party shall not refuse such investigation. The tax collection authority shall in principle conduct such investigations at its initiative during tax collection processes and shall make use of all necessary and available information required for clarifying facts, so as to verify the facts and levy taxes accordingly. However, the tax collection authority has to process a heavy and complex case load. Furthermore, most taxable conditions occur within the control of taxpayers, and the taxpayers are the ones who know best about the items eligible for tax relief. If the tax collection authority has to investigate and review all the conditions eligible for tax relief or other favorable treatments on its own without report from taxpayers, the cost for tax collection will multiply. Article 19 of the Constitution stipulates: "The people shall have the duty of paying tax in accordance with the law." Accordingly, taxpayers are obliged to assist by reporting the required information in accordance with respective tax laws and regulations, so as to achieve the goal of fairness and legitimacy in taxation. Article 41 of the Land Tax Act, and the provisions for tax relief and favorable treatments regarding land tax in Article 24 of the Regulations Governing the Reduction or Exemption of Land Tax also contain the precondition of report by taxpayers; those who fail to apply for tax relief before the deadline can only become eligible for the special tax rates in the year following the said application. According to the amended Paragraph 3 of Article 15 of the current House Tax Act: "In case of tax relief for house tax per Subparagraphs 1-8, 10, 11 of Paragraph 1 and Paragraph 2, the taxpayer shall report to the local tax collection authority within 30 days upon occurrence of the legitimate reason and facts for verification; where the taxpayer fails to file such report prior to the deadline, the tax relief will be applicable starting on the date of report." The purpose is the same, that the obligation of report by the taxpayer is necessary during the tax collection processes, regarding eligibility for favorable tax rates. The letter Ref. No. Taiwan-Finance-Tax-36712 issued by the Ministry of Finance (MOF) on September 9, 1982, states: "According to the provisions of Article 7 of the House Tax Act, where a house/building is eligible for tax relief, the taxpaying owner shall report to the local tax collection authority the utilization conditions eligible for tax relief, together with relevant papers (such as factory registration certificate, etc.). The 50% discount in housing tax provided in Article 15, Paragraph 2, Subparagraph 2, of the Act does not apply to the housing tax already paid at the business tax rate prior to the aforesaid report." This is in alignment with the above Article and does not contradict the principle of taxation by law provided in the Constitution.  
      
    • *Translated by Dr. C.Y. Huang of Tsar & Tsai Law Firm.
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