Article 7 of the Constitution provides that the right to equality of the people shall be protected. The determination as to whether the stipulations of a law are in accordance with the requirement of protection of the right to equality should be decided inasmuch as the purpose of the discrimination is in accord with the Constitution, that is, whether between the distinctions created and the stated purpose of the law there is a certain degree of connection. (see J.Y. Interpretations Nos. 682 and 694).
The first part of Article 17, Paragraph 1, Subparagraph 2, Item 2, Division 3 of the Income Tax Act revised and publicized on December 28, 2005 provides: “ 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 exemptions and deductions:…II.deductions: a taxpayer apart from according to the standards for deductions listed below or one of the itemized deductions listed below, and deducting special deductions:.....(2)Itemized Deductions: ..... 3.Medical Expenses: The medical expenses deductible by a taxpayer, spouse, and supported family members are limited to public hospitals, contract hospitals of the Civil Servants Insurance Plan, contract hospitals of the Labor Insurance Plan, and hospitals with sound accounting records certified by the Ministry of Finance (The name of the said “contract hospitals of the Civil Servants Insurance Plan, and contract hospitals of the Labor Insurance Plan” has been revised and publicized on December 26, 2008, as “contract hospitals of the Public Health Insurance Plan,” with the same legislative intent, hereafter called “the provision at issue”)., This provides that for the medical expenses of a taxpayer, spouse, and supported family members to be eligible for itemized deductions, it must be paid to health care providers prescribed in the abovementioned provision. For the medical expenses of disabled persons in need of long-term care (e.g. persons with mental disability, persons in a vegetative state, persons with severe chronic psychosis, persons bedridden as the result of a stroke or other severe disease; hereinafter called persons in long-term care),the provision at issue allows itemized deduction only for expenses paid to the abovementioned health care providers and excludes expenses paid to other lawful health care providers. As a result, there is discrimination against patients receiving medical care from other health care providers. The scope of this Interpretation is confined to whether such discrimination violates the principle of equality guaranteed by Article 7 of the Constitution.
Article 15 of the Constitution provides that the right of survival of the people shall be protected. Article 155 of the Constitution provides that elderly persons, feeble and disabled persons incapable of being self-sufficient and victims of major catastrophes shall be liable to receive adequate help and relief from the government. There are many measures of assistance that can be taken by the government to protect people’s survival and life, preferential tax treatment being one such. According to the provision at issue, medical expenses paid by a taxpayer for persons in need of long-term care may be permitted for inclusion in itemized deduction only if they were paid to the abovementioned health care providers, whilst expenses paid to other lawful health care providers not listed above are not allowed. This is due to a disparity in the distribution of the nation’s medical resources and a limitation on the geographic spread of the abovementioned health care providers. As such the provision frustrates the constitutional intent of granting equal protection of the right of survival for persons in need of long-term care. Therefore, whether the discriminatory measures taken by the said provision violate the principle of equality should be scrutinized closely. To be consistent with the Constitution’s principle of equality, not only there shall be a legitimate government purpose, there must also be a substantial connection between the discriminatory measure taken and the purpose it aims to achieve.
The purpose of the provision at issue in classifying health care providers for itemized deduction was to avoid superfluous claims and to guard against tax avoidance. Furthermore the medical expenses of taxpayers are numerous and complicated, whilst the manpower of the tax agencies is limited and unable to verify all medical bills. In order for tax agencies to have a firm and accurate grip on all medical expense claims, also, in light of the verifiability of the abovementioned health care providers given their sound accounting system which can facilitate tax audits, it was determined that itemized deduction for medical expenses should be allowable only for expenses paid to the abovementioned health care providers (Letter of Ministry of Finance, Tai_Chai_Sui No. 09900181230, issued on July 8, 2010). Yet the nature of medical expenses for persons under long-term care is an expense essential for survival. They should be deductible when calculating net taxable income. There should be no difference solely because it was paid to a lawful health care provider other than the abovementioned health care providers. Also, whether it is a genuine medical expense may be reviewed by the tax agencies. The review will not add onerous administrative costs to the collection of taxes. Therefore, the benefit for tax enforcement generated by the discrimination of the provision at issue is not significant, yet it has an adverse and substantial effect on the right of survival of persons in long-term care. It cannot be said that this is in line with the intent of the Constitution. Therefore, with regard to the provision at issue limiting itemized deduction of medical expenses for long-term care to expenses paid to the abovementioned health care providers and disallowing expenses paid to other lawful health care providers, there is no substantial connection between the discriminatory measures taken and the purpose it aims to achieve. The said provision is inconsistent with the principle of equality in Article 7 of the Constitution. To the extent that such inconsistency exists, the said provision shall not be applicable.
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＊ Translated by Huai-Ching TSAI.