A Research On The Legal Relationship Of Tax Withholding

The legal relationship of tax withholding, is the general term for a variety of legal relationships among withholding agents, tax creditors, tax authorities and taxpayers as a result of the withholding obligations set by the taxation law. Formally, the structure of rights and obligations among all subjects in this relationship is clear, but as far as the deeper theoretical aspects of the relationship (e.g. the essence of the relationship & the legal roles taken by all subjects in the relationship) are concerned, it is still a controversial issue among tax law experts. Through the study of those issues above, we hope to establish a relatively reasonable theory about the relationship so as to both enrich the theory of tax law and guide the practice of tax collecting significantly.The contents of this thesis are divided into two parts:the first part , a theoretical analysis of the legal relationship of tax withholding,is composed of the first three chapters while the second part, the fourth chapter, is contributed to the application of the theory based on the first part.The first chapter deals with the formal structure of the legal relationship of tax withholding. To discern this level of the legal relationship, our research centers on the concept and contents of the withholding obligations, for the existence of withholding obligations is the key factor to distinguish the legal relationship of tax withholding from the legal relationship of ordinary tax levy. So, the chapter focuses on the issue of what obligations should be included into the content of the withholding obligations. To state it clearly, it is necessary to draw a line between"the withholding obligations"and"the withholding agent's assistance obligations". In line with this understanding, the withholding obligations will be grouped into the following three, namely, the obligation of withholding, the obligation of reporting and transferring, and the obligation of issuing certificates of tax withholding. In addition, the purpose of exploring"the significance of withholding system " is not only to find a basis for the legitimacy of withholding obligations (in the constitutional state, the law shall not create obligations for the people without good reasons), but also to clarify the design principles of withholding system, in order to lay the foundation for later arguments. The last part of this chapter gives the formal structure of legal rights and obligations of the withholding relationship: in the relationship between the withholding agent and the taxpayer, on one hand, the withholding agent has the right to withhold the taxpayer's taxes, and taxpayers will bear the obligation to tolerate or cooperate; on the other hand, as long as the withholding agent has withheld the taxes, it will have to issue a withholding certificate to the taxpayer, and the taxpayer has the right to ask for it, too. In the relationship between the withholding agent and the tax authorities, the withholding agent has to report and transfer the taxes which the agent has withheld from the taxpayer to the tax authorities, while the latter has the right to take the transferring.The second chapter focuses on exploring the effectiveness and nature of the withholding agent's behaviors. According to my research, the reason why scholars have quite different opinions about the nature of the legal relationships of tax withholding is that they have not formed their own theory on the establishment of certain micro-basis, which should be started with discussing the possible effectiveness of the withholding behavior. This chapter borrows conceptual system of private law (credit, real right, possession, etc.), bases on the premise of the different possibilities of the effectiveness of the withholding behavior, and finally establishes three non-compatible withholding relationship models through the method of deductive logic:(i) The first model is built on the hypothesis that the withholding behavior does not have the effect of eliminating the taxpayer's tax debt, which is sure to lead to the co-existence of two kinds of debt: one is the tax debt between the taxpayer and the tax creditor while the other is the debt whose content is that the withholding agent liquidates the tax debt on behalf of the taxpayer. The latter debt is formed between the withholding agent and the taxpayer, and is created by the withholding behavior. Reporting and transferring behavior is the object of this debt.(ii) The second model is based on the hypothesis that the withholding behavior makes the withholding agent assume the taxpayers'tax debt, so the withholding agent replaces the original taxpayer to be a new debtor of exactly the same tax debt. The nature of reporting and transferring behavior has no difference from the reporting and paying behavior of the original taxpayer since both of them are the settlement of the same debt.(iii) The third model is produced on the hypothesis that the withholding behavior has the effect of absolutely eliminating the taxpayer's tax debt, but at the same time, it creates a new debt between the withholding agent and the tax creditor, which is labeled"the transferring debt"in this thesis. The reporting and transferring behavior is the object of the transferring debt, not of the tax debt.As for the three models above, they are simply logical constructions, so we cannot just put a label of right or wrong on them. Therefore, the last part of the chapter carries out a normative evaluation of these models, out of which the conclusion is that the third model is a normatively-better one, and has been chosen as the micro-basis for the further reasoning.The third chapter is a further study on the issue of the nature of withholding relationship and the legal status of all subjects in this relationship on the basis of the model chosen through last chapter. First, through the exploration of how"the transferring debt"happens, we confirm that the relationship between the withholding agent and the tax creditor is the one of statutory commission created by public laws, and the former is the latter's statutory agent of collecting taxes; but the authorization to the withholding agent is limited within the scope of fulfilling its withholding obligations, and once exceeding the limit, the withholding agent's behavior is no longer public performance, but simply a private act. Thus, withholding authorization is quite different from a typical grant of administrative power. Second, it's an agent-based administrative legal relationship between the withholding agent and the taxpayer. Once the withholding agent exceeds the limit of legal authorization, the relationship mentioned above will lose its nature of public administration, and in principle, the tax creditor will not bear the administrative liability due to this ultra vires act. On the contrary, the withholding agent should take a civil law liability itself. Therefore, the agent-based administrative legal relationship is not a typical one of public administration. At the same time, even acting within the scope of legal authorization, the withholding agent is not qualified as an administrative subject, but a personal subject, whose acts will not legally affect itself but the tax creditor. Third, it is a typical administrative relationship between the withholding agent and the tax authorities. The withholding agent, as well as the tax payer, are the administrative counterparts to the tax authorities, but the tax authorities performs its administrative power over the withholding agent as the representative of the tax creditors over the agent of the tax creditors. At the same time, from a functional point of view, the withholding agent is also a statutory tax-collecting supporter of the tax authorities.Chapter IV offers the application examples through the manipulation of the theory about the legal relationship of tax withholding, which has been built on the discussion in the first three chapters. This chapter examines the value of the theory through three dimensions, trying to prove that the theory is not only an update of research path, but also has its application value. This is mainly reflected in two aspects: firstly, to make a positive and reasonable explanation to the existing legal phenomenon, and secondly, to provide theoretical support for improving the withholding system design.