Jurisprudential Study On Substantive Taxation Principle

Taxation refers to a kind of activities or means that the state, in accordance with the law, obligatorily gains financial revenue free by using its political power, with the purpose of realizing its public functions. Tax law is the tool of adjusting redistribution of property of citizens, so it is imperative to pay attention to taxation justice. The substantive taxation principle emerged with requirements of taxation justice, but it is questioned for its impact on taxation justice. For jurisprudential study on the substantive taxation principle, how to correctly understand and apply this principle is the central problem. There is no unified definition of the substantive taxation principle in academic circles. However, it is generally recognized that when "substance"does not conform to "form"in an economic activity, tax shall be collected according to "substance"rather than "form"based on this principle. The substantive taxation principle originates from Economic Observation Law in Germany. It is firstly confirmed the substantive taxation principle in law in Germany in 1919 and it developed in Japan after WWII. After looking back the history of emergence of economic observation law in Germany and development of the substantive taxation principle in Japan, the realistic origin of its emergence and development lies in tax payers'repeated games between taxation legislation and enforcement. The substantive taxation principle breaks through formalism, manifesting that tax law is a special rule, different from other laws. The nature of the spirit of this principle is fair values, substance doctrine and priority of national treasury. The theoretical foundation of substantive taxation principle is principle of fair taxation and principle of taxation according to ability to pay. Tax law puts much emphasis on taxation fairness and taxation according to ability to pay and it also pay much attention to facts enough to represent ability of paying tax. Therefore, the explanation and application of tax law shall be based on substance rather than form. Substantive taxation principle can be deducted from principle of fair taxation and principle of taxation according to ability to pay. Since the emergence of principle of taxation by the substance, there is continuous academic and practical discussion on of the determination of "substance"in substantive taxation principle, relationship between substantive taxation principle and principle of tax legality and the status of this principle in principles of tax law. As for content of "substance", there are two conceptions in academic circles, that is, "doctrine of substance of law"and "doctrine of substance of economy". These two conceptions have their own ideas and refute each other. Though there are eclectic ideas in them, these two conceptions can not conform to each other. But, there is unified opinion about the evaluation of the relationship between substantive taxation principle and doctrine of tax legality. In academic circles, it is accepted that the conflict between principle of taxation by the substance and doctrine of tax legality actually exists. The origins of this conflict are: first, substantive taxation principle endows taxation authorities with some right of discretion for the pursuit of economic substance, but it is hard to constrain the right of discretion; second, the doctrine of sovereignty of taxpayer embodied in doctrine of tax legality basically conflicts with priority of national treasury embodied in substantive taxation principle. However, substantive taxation principle should be coordinated with doctrine of tax legality, because the former is the means of substance to realize taxation justice and the latter is the means of form to realize taxation justice. These two conform in deep level. There are four theories concerning status of substantive taxation principle, that is, theory of basic principles of tax law, theory of applying principle of tax law, theory of lower level principle of fair taxation principle and theory of negation. Among them, the author agrees with opinion that principle of taxation shall act as applying principle of tax law. Through the study and analysis the above-mentioned theories in three aspects, the author thinks that it is necessary to find a balance point between doctrine of tax legality and substantive taxation principle. The whole scheme should be based on doctrine of tax legality. Adopt doctrine of substance of economy in legislation while doctrine of substance of law in explanation and application. The substantive taxation principle is manifested more or less in taxation legislation in all countries. There are three kinds of manifestation of legal3 form of substantive taxation principle in taxation legislation. First, provide articles concerning substantive taxation principle in tax basic law; second, provide articles concerning substantive taxation principle in specific tax law; third, provide special tax system that manifests spirit of substantive taxation principle in specific tax law. The continental tax law in our country adopts the third to apply substantive taxation principle. Though there is no general provision concerning this principle, it is manifested in some articles in law. The author thinks that to adopt the third kind of legislative form conforms to the actual conditions of our country and it is applicable to conditions of theoretical study of tax law, rule of tax law, practices of tax law and tax collection. It is necessary to continue to adopt this legislative form, not to provide general articles that are too broad and just provide legislative regulations for some special cases. As for explanation and application of tax law, apply substantive taxation principle only in specific cases prescribed in legislation without any extended explanation. At present, in theoretical and practical fields, it is generally accepted that substantive taxation principle can be applied in following four aspects: first, negate taxation elusion; second, impose taxes on invalid legal act that live up to requirements of taxation; third, impose taxes illegal income that live up to requirements of taxation; fourth, determine economic ownership of object of taxation. However, at present, the scope of application of substantive taxation principle in continental tax law only limits to negation of tax elusion with other three aspects blank. The author thinks that the application of substantive taxation principle in other three aspects also plays an important and active role. Therefore, it is necessary for our country to enhance study and expand scope of application in other three aspects besides the studies concerning tax elusion for the purpose of realize taxation justice to a broader extent. As for negation of tax avoidance, first, the nature of tax avoidance is to hide the act of evading taxes in a legal but irrational form by taking advantage of loopholes of tax law. Because this act has economic effect, living up to requirements of taxation, taxation authorities shall impose taxes; second, tax avoidance is act of evasion of law. It is irrational, but it is legal, so it should not be negated totally. At the meantime, the distinction betweenact of tax elusion and act of tax saving is not clear, as a result. If substantive taxation principle is applied when there is no specific regulation, taxation authorities may abuse their right of taxation. Therefore, substantive taxation principle shall be applied for act of tax elusion only when there are specific regulations in law. Taxes of invalid legal act and illegal income shall be collected fairly after reasonable judgment of its economic effect. However, it is necessary to insist doctrine of tax legality, considering tax law as general principles. Economic ownership of object of taxation shall be determined based on reality of economic life and facts and therefore determine real subject of tax paying. However, under the doctrine of tax legality, when owners of substance and form are separated, if there is no specific regulation that only impose taxes on owner of substance, as long as the nominal owner satisfies requirements of taxation, he shall assume the obligation of paying taxes, and at the meantime taxation authorities shall execute their right of collecting taxes. Therefore, only when prescribed by legislation, substantive taxation principle can be applied to determination of ownership of object of taxation.