The principle of equality prescribed by Article 7 of the Constitution does not mean equality that is absolute, mechanical, or formal. Instead, the principle of equality protects substantive equal status under the law, which requires that matters that are similar in nature be handled similarly, and that differential treatment be justified by appropriate reasons (see J.Y. Interpretation Nos. 547, 584, 596, 605, 614, 647, 648 and 666). Whether a particular legal rule is consistent with the principle of equality depends on whether the purpose of the differential treatment is constitutional, and whether there is a certain level of nexus between the classification and the purpose that the classification seeks to achieve (see J.Y. Interpretation No. 682).
Article 17, Paragraph 1, Sub-paragraph 1, Item 4, of the Income Tax Act as amended on January 3, 2001, stipulates: “The net consolidated income of an individual equals the gross consolidated income, as computed in accordance with the preceding three Articles, subtracted by the following exemption and deductions:
1. Exemption: Taxpayers may claim a prescribed amount of exemption for themselves, their spouses, and their family dependents that meet any of the conditions below. …(4) Other relatives or family members of the taxpayer within the meaning of Article 1114, Sub-paragraph 4, or Article 1123, Paragraph 3, of the Civil Code who are either under twenty years of age or over sixty years of age, are incapable of earning a livelihood, and are supported by the taxpayer.…” (The same requirement also appears in Article 17, Paragraph 1, Sub-paragraph 1, Item 4, of the Income Tax Act as amended on January 19, 2011. The requirement in Item 4 is referred to hereinafter as the provision in dispute). Taxpayers who seek to claim the exemption have to satisfy the following requirements: Their relatives or family members (hereinafter referred to as “other relatives or family members”) have to meet the requirement of the Civil Code set out above, to be incapable of earning a livelihood, to be supported by the taxpayer, and have to be under twenty years of age or over sixty years of age. The age requirement of the provision in dispute prevents the taxpayers who support other relatives or family members more than twenty years of age but less than sixty years of age from claiming an exemption, which constitutes differential treatment on the basis of the different ages of the dependents.
According to Article 15 of the Constitution, people’s right of existence shall be protected. Moreover, Article 155 of the Constitution stipulates that the State shall give appropriate assistance and relief to the aged, the infirm, and those who are unable to earn a living. One of the measures that may be used by the State to ensure people’s livelihood is the provision that taxpayers may claim an exemption when they support their relatives or family members who are incapable of earning a livelihood. If the State limits the age of the dependents to the range between twenty and sixty years of age, such a limit would decrease the will of taxpayers to support their relatives or family members who are more than twenty years of age but less than sixty years of age and are unable to earn a living. As a result, such a limit would adversely affect the livelihood or sustainability of these disadvantaged people. Therefore, whether the differential treatment caused by the provision in dispute violates the principle of equality should be subject to strict scrutiny, which means that the purpose of the provision in dispute has to be constitutional, and that the classifying standards and differential treatment are substantially related to the achievement of the purpose of the provision in dispute.
According to Administrative Order No. 10004139420, which was issued by the Ministry of Finance on November 21, 2011, the provision in dispute uses the age of dependents who are unable to earn a living as a classifying standard for the purpose of encouraging people to be filial, promoting fair taxation, raising tax revenue, and increasing the efficiency of tax administration. However, those who need support due to their inability to earn a living do not become self-sustaining simply because they become more than twenty years old and less than sixty years old. Similarly, the taxpayers who support their relatives and family members who are more than twenty years old and less than sixty years old face a financial burden that is the same as that faced by taxpayers who support dependents who are less than twenty years old or more than sixty years old. In other words, the financial burden of the taxpayers who support their relatives who are unable to earn a living is fixed across the different age groups of the supported family members. The provision in dispute affects the will of taxpayers to support relatives or family members who are over twenty years old but less than sixty years old, which may decrease the level of family support provided to these relatives or family members. Therefore, the provision in dispute is inconsistent with the purpose of encouraging people to be filial. Moreover, it amounts to unfair taxation that some taxpayers who are supporting their relatives or family members cannot claim an exemption when calculating their taxable income simply because the supported relatives or family members are over twenty years old but less than sixty years old. Furthermore, the taxpayers who want to claim the exemption pursuant to the provision in dispute have to provide documents proving that the dependents are indeed unable to earn a living. The provision in dispute not only requires that the dependents indeed are unable to earn a living, but also requires that the dependents be under twenty years old or over sixty years old. The requirement that the dependents be under twenty years old or over sixty years old does not enhance the efficiency of tax administration, but significantly harms the interests of taxpayers and their dependents. Therefore, the differential treatment caused by the age classification in the provision in dispute is a means that lacks substantial relationship to the end that the means seeks to achieve, which means that the differential treatment is arbitrary and thereby inconsistent with the principle of equality enshrined in Article 7 of the Constitution. The age restriction in the provision in dispute therefore shall become void within one year from the date of this Interpretation.
Translated by Chi CHUNG.