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  • Interpretation
  • No.642
  • Date
  • 2008/05/09
  • Issue
    • Are Article 44 of the Tax Levy Act and the related Ministry of Finance directive consistent with the Constitution?
  • Holding
    •        As prescribed in Article 44 of the Tax Levy Act, if a profit-making enterprise preserves vouchers and certificates as evidence according to law, yet fails to comply with the Act, it shall be liable for a fine of five (5%) percent of the total amount of the aforesaid relevant vouchers and certificates, as verified and determined. In the event that a profit-making enterprise has given or obtained vouchers, and they are duly and accurately recorded in account books, and if, prior to the completion of the administrative procedures or conclusion of relief measures, the original evidence has been furnished or equivalent evidence required to be preserved can be obtained, then such profit-making enterprise will be in accord with the legislative purpose. In such case, a business enterprise shall not be punished under the Act since the obligation of preservation of vouchers and certificates has not been violated. Within the scope of this application, the part of said Article 44 that levies a fine for the failure to preserve evidence does not contradict the principle of proportionality (Verhaltnismassigkeitsprinzip) set out in Article 23 of the Constitution or the protection of the people’s right of property stated in Article 15 thereof.
      
    •        As indicated in the Ministry of Finance Directive Tai-Tsai-Shui-Tze No. 841637712 (July 26, 1995), a profit-making enterprise that fails to preserve vouchers according to law shall obtain equivalent evidence that is required to be preserved so as to be exempted from the relevant punishment provisions before a report is made to, or an investigation proceeding is initiated by the examiner of the taxing authority or the Ministry of Finance. In regards to the extent that it is inconsistent with the scope of this Interpretation in the subject case, the above Directive shall no longer be cited as of the date of this Interpretation.
      
  • Reasoning
    •        Article 44 of the Tax Levy Act provides: “Where a profit-making enterprise fails to give others vouchers as required by law, or fails to obtain vouchers from others, and fails to preserve documentary evidence as required, a fine in an amount equivalent to five (5%) percent of the total amount of the relevant certificates as verified and determined shall be imposed on such enterprise.” Such fine is proper and legitimate, based upon the legislative purpose of Article 44 stated above, to compel a profit-making enterprise to give vouchers to, or obtain vouchers from, others and to preserve such vouchers as required, which will truly reflect all transactions that have taken place. This is necessary to ensure that there will be detailed and accurate documentation of such transactions to maintain the integrity of the tax voucher system so as to achieve the legislative intent as set out in Article 19 of the Constitution (see J.Y. Interpretation No. 252). The requirement of preservation of documentary evidence above-mentioned is to urge the people to observe the obligations as stipulated in Article 11 of the Tax Levy Act by way of imposing a fine for non-compliance. In view of the protection of the property right in Article 15 of the Constitution and the principle of proportionality (Verhaltnismassigkeitsprinzip) in Article 23 thereof, if a profit-making enterprise has given vouchers to, or obtained vouchers from, others and duly entered the relevant data into account books, and prior to the rendering of a decision by the administrative agency or relief procedures thereof, the original evidence, or other evidence equivalent to the original required to be preserved has been provided, then the legislative purpose will be satisfied and no obligation to preserve the evidence will be violated. No fine shall therefore be imposed. As regards the extent of the explanations above, a fine imposed due to violation of the obligation to preserve vouchers in the foregoing Article 44 of the Tax Levy Act does not contradict the legislative purpose of Articles 15 and 23 of the Constitution.
      
    •        As stated in the Ministry of Finance Directive Tai-Tsai-Shui-Tze No. 841637712 (July 26, 1995), a profit-making enterprise that fails to preserve vouchers as required by law shall obtain equivalent evidence that is required to be preserved so as to be exempt from punishment; however, the deadline for obtaining equivalent evidence shall be prior to the report made to, or the investigation proceeding initiated by, the designated examiner of the taxing authority or the Ministry of Finance. Only when the above timeline is met can the punishment be waived pursuant to Article 48-1 of the Tax Levy Act. The above Directive has overlooked the situation where a profit-making enterprise has kept a clear record in the account books, yet without the evasion of tax. If, prior to the rendering of a decision by the administrative agency or completion of administrative relief, the original evidence has been submitted or other vouchers equivalent to the original required to be preserved can be obtained, then it does not fall under the scope of punishment set forth in Article 44 of the Tax Levy Act. Further, the above Directive will only exempt such business enterprise that has not been reported to, or investigated by, the taxing authority or the Ministry of Finance. In regards to the extent that it is inconsistent with the scope of this Interpretation in the subject case, the above Directive shall no longer be cited as of the date of this Interpretation.
      
    • *Translated by Spenser Y. Hor, Esq. and Chien Yeh Law Offices.
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