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  • Interpretation
  • No.619
  • Date
  • 2006/11/10
  • Issue
    • Are the provisions of Article 15 of the Enforcement Rules of the Land Tax Act unconstitutional?
  • Holding
    •        A punitive administrative action taken against a person for an act in breach of his or her duty under administrative law involves a restraint on his or her right, and the constituent elements required for and the legal consequence of such punishment must be prescribed by law.  Where the law authorizes the establishment of supplementary rules in the form of administrative ordinances with respect to such constituent elements, such authorization must be made in a clear and specific manner insofar as the substance and scope of such authorization is concerned, before an administrative ordinance may be issued on the basis of such authorization, so as to be in line with the principle of legal reservation under Article 23 of the Constitution (See J.Y. Interpretations Nos. 394 and 402).  The phrase “reduction or exemption of land value tax” referred to in Article 54-I (i) of the Land Tax Act shall be so interpreted as to be limited to the reduction or exemption of land value tax that follows the criteria and procedure set forth in the Regulation Governing the Reduction or Exemption of Land Tax as prescribed by the Executive Yuan under the authorization of Article 6 of the Land Tax Act in that it involves the constituent elements of a punitive law and the literal meaning of said provision and the systemic construction of Articles 6 and 18-I and -III of the Land Tax Act require such interpretation.  Article 15 of the Enforcement Rules of the Land Tax Act provides, “Where the reason for and facts concerning the applicability of a special tax rate cease to exist, the land owner shall report such to the competent tax authority within thirty (30) days; failure to so report within the specified time limit shall invoke Article 54-I (i) of the Act.”  The said provisions, by subjecting the land owner who fails to report the cessation of the reason for and facts concerning the applicability of a special tax rate within thirty (30) days to a fine of triple the underdeclared or undeclared taxable amount where it involves the kind of reduction or exemption of land value tax that fails to follow the criteria and procedure set forth in Article 6 of the Land Tax Act and the Regulation Governing the Reduction or Exemption of Land Tax, have clearly extended the imposition of penalties by means of regulations to those who are not specified by a punitive law.  Furthermore, short of clear and definite authorization by law, the provisions are not consistent with the aforesaid principle of legal reservation and thus are in conflict with Article 23 of the Constitution.  Therefore, the foregoing provisions shall become void no later than one year from the date of this interpretation.
  • Reasoning
    •        A punitive administrative action taken against a person for an act in breach of his or her duty under administrative law involves a restraint on his or her right, and the constituent elements required for and the legal consequence of such punishment must be prescribed by law.  Where the law authorizes the establishment of supplementary rules in the form of administrative ordinances with respect to such constituent elements, such authorization must be made in a clear and specific manner insofar as the substance and scope of such authorization is concerned, before an administrative ordinance may be issued on the basis of such authorization, so as to be in line with the principle of legal reservation under Article 23 of the Constitution (See J.Y. Interpretations Nos. 394 and 402).
      
    •        The 1st half of Article 6 of the Land Tax Act provides that, in order to develop the economy, promote land utilization and improve social welfare, proper land tax reduction or exemption may be provided in respect of the land used for national defense; governmental infrastructures; public facilities, passageways and corridors; research, educational, and religious institutions; roadways; water utility; waterworks; saltworks; medical, health, and sanitation facilities; public and private cemeteries; charitable organizations or public interest enterprises; and reasonable self-use residences, as well as for land rezoning, wasteland reclamation and land improvement [Facilities, institutions, etc., have been grouped together, though of course they do not have to be grouped in this way.—Ed.].  The 2nd half of said article further authorizes the Executive Yuan to prescribe the Regulation Governing the Reduction or Exemption of Land Tax whereby the criteria and procedure for the said reductions and exemptions are clearly formulated.  In respect of the land that satisfies the criteria for the reduction or exemption of land value tax as set forth in the Regulation Governing the Reduction or Exemption of Land Tax, Article 24-I of said Regulation requires that the application for such reduction or exemption be submitted at least forty days before the collection starting date each year (period), and that, if and when the reason for such reduction or exemption ceases to exist, taxation be resumed starting from the following year (period).  Article 29 thereof further provides that, when the reason for such reduction or exemption ceases to exist, the land title owner or administrator shall, within thirty days, file with the competent tax authority for the resumption of taxation.  If the land title owner or administrator fails to file with the competent tax authority within thirty days and is found to have evaded tax, he or she shall be subject to a fine of triple the underdeclared or undeclared taxable amount as provided in Article 54-I of the Land Tax Act in addition to having to pay back the underdeclared or undeclared tax.
      
    •        Instead of the progressive tax rates as specified in Article 16 of the Land Tax Act, Article 18-I of the Land Tax Act provides for a special tax rate for industrial land, mining land, private parks, zoos, land for sporting facilities, temples, land for churches or temples, government-designated land for historical sites, land for gas stations approved by the competent authorities and for public parking lots established pursuant to the Urban Planning Act, or other large areas of land approved for use by the Executive Yuan so as to advance the development of the national economy, encourage the establishment of public amusement facilities, award the establishment of new public utilities and protect historical sites.  In respect of the land to which the special tax rate specified in said Article 18 is applicable, Article 41-I of said Act requires that the application for such special tax rate be submitted at least forty days before the collection starting date each year (period).  And, according to Paragraph II of said article, if and when the reason and facts for such special tax rate cease to exist, a report shall be filed with the competent authority.  Furthermore, Paragraph III of said article provides that any land value tax that satisfies the criteria for the special tax rate, i.e., 0.1%, specified in Paragraph I thereof but is not subject to the progressive rates may be further reduced or exempted pursuant to Article 6 of said Act if the criteria for the reduction or exemption as set forth therein are met.
      
    •        Despite the tax relief effects shared by both Article 6 of the Land Tax Act, which provides for the reduction or exemption of land value tax, and Article 18-I thereof, which specifies a special tax rate for land value tax, they do not necessarily share the same purposes, nor do they follow the same criteria and procedure in reducing the tax burdens.  Besides, in respect of the land to which the special tax rate is applicable, additional tax reduction or exemption may also be granted where the law specifically provides for any reason for such reduction or exemption.  As such, the provisions of said articles are not on a par with each other.  Article 54-I (i) of the Land Tax Act provides, “Where a taxpayer fails to report to the competent tax authority by virtue of changing or concealing the category or class of land or when the reason for and facts concerning the reduction or exemption of land value tax or agricultural land levy cease to exist, the following provisions shall apply: (i) If the taxpayer is found to have evaded tax or reduced tax burdens, he or she shall be subject to a fine of triple the underdeclared or undeclared amount of tax or levy in addition to having to pay the amount of tax or levy payable...”  The phrase “reduction or exemption of land value tax” referred to in said article shall be so interpreted as to be limited to the reduction or exemption of land value tax that follows the criteria and procedure set forth in the Regulation Governing the Reduction or Exemption of Land Tax as prescribed by the Executive Yuan under the authorization of Article 6 of the Land Tax Act in that it involves the constituent elements of a punitive law and the literal meaning of said provision and the systemic construction of Articles 6 and 18-I and -III of the Land Tax Act require such interpretation.
      
    •        Although Article 58 of the Land Tax Act enables the Executive Yuan to prescribe the enforcement rules of said Act, no clear and definite authorization is given in respect of the punishability or punishment where there is any failure to file a report as provided for in Article 41-II of said Act when the reason for and facts concerning the applicability of the special tax rate cease to exist.  Article 15 of the Enforcement Rules of the Land Tax Act provides, “Where the reason for and facts concerning the applicability of a special tax rate cease to exist, the land owner shall report such to the competent tax authority within thirty (30) days; failure to so report within the specified time limit shall invoke Article 54-I (i) of the Act.”  The said provisions, by subjecting the land owner who fails to report the cessation of the reason for and facts concerning the applicability of a special tax rate within thirty (30) days to a fine of triple the underdeclared or undeclared taxable amount where it involves the kind of reduction or exemption of land value tax that fails to follow the criteria and procedure set forth in Article 6 of the Land Tax Act and the Regulation Governing the Reduction or Exemption of Land Tax, have clearly extended the imposition of penalties by means of regulations to those who are not specified by a punitive law.  Furthermore, short of clear and definite authorization by law, the provisions are not consistent with the aforesaid principle of legal reservation and thus are in conflict with Article 23 of the Constitution.  Therefore, the foregoing provisions shall become void no later than one year from the date of this interpretation.
      
    • *ranslated by Vincent C. Kuan.
      
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