Theory Of Constitutive Elements Of Taxation

Taxation provides fiscal support for the existence of the state and required funding for public services.The rule of law in taxation realm is one of the key pillars and areas for building a China under rule of law.The importance of the constitutive elements of taxes is not less than that of criminal offences.It should serve as a check to balance the power of the state and protect the rights of the citizens.It is also a piece of bedrock for supporting the autonomous development of the taxation studies and the taxation system.The logic starting point for studies on the constitutive elements of taxes should be based on the inherent factors of taxation and beyond the traditionally three attributes of taxation.Comparison with the constitutive elements of criminal offences,administrative acts and juridical acts provides sufficient lubricant for the study on the origins of the constitutive elements of taxes.By sorting out the theories on taxation both in China and abroad,the author has sorted out the constitutive factors,individual characteristics,inherent effect and system types,in an effort to shape a theoretical taxation constitution framework with Chinese characteristics.The function of the tax constitution elements is that it provides a competing and balancing ground for state power and individual rights.In legislation,it reflects the settled distinction between state taxing power and individual taxation rights;in enforcement,it involves the satisfaction of public obligations and the protection of fundamental rights and liberties;in judiciary,it involves the review of the legitimate exercise of state taxing power and the protection of the taxation rights of the taxpayers.The legal relationships and paradigms applicable to taxation are quiet messy.The tax constitutive elements theory is the best model which should become the theoretical model and determination standard for taxation obligations.The tax constitutive elements theory supports the proposition that the taxation law is independent of civil law and administrative law.It is also the theoretical underpinning for welding the public and private law dimensions together for taxation law.It is also a theoretical guidance for improving the taxation law and the taxation system.The practical value of the tax constitutive elements theory is that,it comprises of facts and legal consequences.The imposition and administration of taxes are guided by economic efficiency principles.The imposing authorities shall do due diligence investigation according to law.The taxpayers shall assume the obligation of assisting such taxing authorities but also enjoy the right “not to self-incriminate” themselves.China's taxation assessment system is a an “specialized” procedure,mainly targeting the tax invaders and those who violate their duties of assistance,and featuring piercing of the formal veil or taxation adjustment or tax amount determination by the taxation authorities based on the ability-to-pay principle.The burden of proof standard for taxation litigation should adopt the principle of “objectivism supplemented by subjectivism”.Its purpose is to encourage both parties to assert and prove the facts corresponding to the constitutive elements based on their respective interests.The level of proof for the facts corresponding to the constitutive elements,and for the creation,reduction and extinction of the taxation obligations,should be,in principle,the preponderance standard,which means one party should prove that its claim is more likely than not true.The theoretical foundation for the tax constitutive elements theory is the unity of form and substance.Form and substance both have their independent values.The legalism in taxation,the ability-to-pay principle,the substantive taxation principle and reliance protection principle provide the theoretical streams of validity,effect,determinateness and enforceability for the tax constitutive elements theory.The tax constitutive elements theory refers to a set of elements.The subjects of the tax constitutive elements are the taxpayers who have independent legal standing.It emphasizes on encumbrance created by the taxation obligations.It is a result-oriented legal and acting capacity,which is different to the identity or eligibility-based approach.The taxation obligation is a category of public obligation which is absolute,natural,limited and encumbrance-based.The object of taxation implies both economic payment ability and legal capacity for assuming obligations.It is the summarized,categorized and legalized result of the object of the private rights and economic wealth.The legitimacy of using the object of the rights for assuming the obligations,comes from,first,the duty of ethics which means that the property rights should serve human value and thus are recognized and restricted,second,the statutory duty which means the close relationship between the properties and the public means more and more social obligations.The economic categorization of the object of taxation is one key aspect of the development taxation theory created by the economics school.The categorization of the taxation law is achieved in three ways.The tax base is a quantitative measurement of the ability to assume taxation debt.It is the quantification of the object of taxation.The legal structure of the tax base is determined by unit area,weight,contract amount or other identifiable mark.It can also be measured based on complicated total income,nontaxable income,extreme income,cost deduction and etc.The tax base connects the value of the taxation object and technical measurement standards.But the accounting treatment might not be completely consistent with the taxation treatment.In taxation law,special adjustment is often made.Attribution is combination relationship between the taxation object and specific taxpayer.It is a relationship of an economic or legal dimension.The difference between formal and substantive attribution is the reflection of different legal reasoning.The foundation for the application of taxation law is the personal and property rights of legal persons in civil law,which should serve as the starting point for determining the capacity to assume taxation obligations.When the substantive ability-to-pay principle is violated,the substance of the taxation law shall be imputed to the facts under formal civil law.Tax rate is the percentage of the payable tax in total taxable amount and is the measurement for calculating the amount of taxes payable.In legislation,the determination of tax rate depends on the realization of the income redistribution function of the ability-to-pay principle and the taxation adjustment system.The taxation system has basically been established after three major tax reforms.However,the level of rule of law is not sufficiently high.Using the tax constitutive elements theory to push for the rule of law in taxation is one of the critical aspects of the tax reform.By making comparisons with Germany,France,Japan,South Korea,UK and USA,the author has provided legislative proposals on the constitutive elements of the corporate income tax,personal income tax and VAT.As for corporate income tax,the name of this statutory tax should be company income tax or legal person income tax.in principle,the resident taxpayer and non-resident taxpayer should be classified according to the principle of territoriality.The definition of legal person should comply with the provisions of civil law,company law,administrative law and other basic laws and regulations.The taxation privileges and benefits of the non-resident businesses should be cancelled.The object of taxation should be provided in a separate chapter which should become the institutional consideration for creating inter-departmental law.A differentiated tax rate system should be adopted for different taxable amounts to avoid distorting the economy.As for personal income tax,the taxpayer and taxpaying organization system should be improved.The income type taxes should be added and integrated into all existing income type taxes.The nontaxable income system should be improved as well as the cost deduction system.The excessive amount progressive tax rate should be mainly adopted as the main tax rate practice.As for VAT,the system on general taxpayer,small-sized taxpayer,taxation privileged taxpayer and starting amount for taxation should also be improved.The taxation object and exemption object of the VAT should be unified.A uniform definition of non-taxable objects of VAT should be provided.The general rules on the tax base for output VAT should be improved.The input taxable amount setoff should also be improved.The tax rate system should be improved and the total number of levels of tax rates should not exceed four.The constitutional provisions,as the source of all taxation law,should be strengthened.The basic principles of taxation under rule of law and taxation based on ability-to-pay should be incorporated into the Constitution.A simplified constitutional provision on central and local government tax legislation,imposition and allocation,should be added.The constitutional provision on the basic factors of the tax constitutive elements should be identified.The taxation provisions are the end provisions of the tax constitutive elements.Due to the concern that the explosive administrative legislation might override the taxation provision,there must be a control on its quality implementation system.Once the constitutive elements are satisfied,the taxation obligations are created.The tax return and tax assessment are the key systems for identifying taxation obligations.The corrective system for the tax constitutive elements system should be put in place,including fostering of compliance with taxation law and prevention of tax evasion.The general provision on anti-tax evasion should be improved.The excessive factor subject system should be created,which highlights the power-responsibility system according to law and serves as the ancillary system of the tax constitutive elements system.The taxation bureaus are the lawfully authorized legal subjects.The inspection bureau is the lawfully authorized party for prosecuting tax fraud and evasion cases.Emphasis should be given to the rights-oriented approval reform system.The rights with no constrains are not concussive to the fostering of rights awareness.The tax benefit should be governed by law and the enjoyment of the benefits should be supervised.The supplementary measures should be strengthened for tax benefit system.The list of executive powers should be highlighted such as a menu-like list.The theories on hidden institutional value,functional positioning and essential attribute should be reflected in the practices and constantly updated to promote institutional development and revitalize the institutions.Emphasis should be placed on joint law enforcement programs to ensure seamless integration of administrative and criminal justice to shape a sound interactive system among law enforcement agencies and create deterrence to ensure the realization of the taxation obligations.