A Review And Propsective Study Of China's Criminal Legal System Of Tax Fraud And Tax Evasion

"Tax Fraud" was not only abolished as a legal term after the release of 7th Amendments to the Criminal Law,but also its administrative penalty was altered to precede its criminal penalty.With the proposed adoption of "Evading Tax Obligations"instead of "Tax Fraud" in the Amendments of Tax Administration Law(Draft)in 2015,"Tax Fraud",as a legal term,is again expected to withdraw from China's tax law.Consequently,the changes mentioned above would presumably lead to enforcement mismatches between administrative penalty and tax criminal penalty.On top of the mismatches,other underlying problems include:unclear legal definition of "Evading Tax Obligations",un-unified standards of related legal enforcement activities,and uncoordinated activities among different level of courts to solve the mismatches between administrative penalty and tax criminal penalty.Thus,this paper is significant in terms of legal theory and enforcement practice,because it examines the underlying problems and provides policy and implementation recommendations to address the issues above.There is a long history regarding punishments for people evading tax obligations in China.Even before the Republic of China,there were records of "Ni Tian"(literally translated as under-reporting farmland rent)or "Ni Shui"(literally translated as under-reporting taxes),illustrating a mixture of physical punishments and property punishments to people paying no or less amount than their tax obligations.For example,the Imperial Canon of Laws and Regulations of the Qing Dynasty provided a clear definition of "Ni Shui" as behaviors of undeliterably evading tax and/or tax fraud,but these behaviors were not sorted under independent charges.Then during the period of the Republic of China,the term of "Ni Shui" was removed from the legal documents,whereas the terms of "tax fraud" and "unintentional tax default" were adopted.Meanwhile,the criminal law of the Republic of China included the charges of counterfeiting and altering stamp tax certificates.Notably,there is no expression of tax fraud in Taiwan Criminal Law,while the expression of "unintentional tax default" was inherited and adopted by Taiwan in its Tax Investigation and Administration Law.When drafting the Criminal Law of People's Republic of China(hereinafter referred as the Criminal Law),five tax charges including evading tax obligations and unintentional tax default etc.,were listed with distinctive punishments from 7-year imprisonment to admonition and education.After The Criminal Law was promulgated in 1979,the charges of tax fraud and resistance against tax obligations were instituted with penalties from no more than 3-year imprisonment to detention.Thereafter,the criminal law on taxation was supplemented once and revised thrice while the number of criminal charges relating to taxation increased to nine,with penalties varying from the death penalty to fine or property being confiscated.After tax law regime was established in new China,the tax laws have been revised several times in line with the development of tax landscape.One of the most remarkable change is the distinctions between Tax Fraud and Unintentional Tax Default,with an independent charge under the former term.In the meantime,the death penalty for extremely severe tax frauds and tax crimes has been abolished,demonstrating a significant progress of legislation.However,after the legal term of unintentional tax default was abolished,a problem rose as the lack of legal definition for penalties against unintentionally paying less than tax due.After preceding the administrative penalty to criminal penalty,the gap of legal implementations between these two penalties is in great need to be bridged.Recommendations to bridge the legal gap include:conducting further research on mismatches of enforcement implementations between the Criminal Law and the Tax Administration Law;changing the term of "evading tax obligations" to "evading tax obligations and under-reporting taxable incomes"(or under-reporting for short);incorporating "evading tax arrears" into the charge of under-reporting;restoring the legal concept of "unintentional tax default";and clarifying the convictions for criminal and administrative penalties respectively.The convictions between tax fraud and evading tax obligations in The Criminal Law should be distinguished from those in the administrative laws.The Procedural Law on Crimes in China adopts the standards of proof---"clear criminal facts with sufficient and reliable evidence",while The Administrative Review Law and The Administrative Procedural Law require the evidence to be "conclusive",where the wording of"conclusive" is not a standard of conviction but a legal requirement.Thus,there is a gap of conviction to conduct administrative enforcement between The Criminal Law and relevant administrative laws.This paper suggests to adopt preponderant standards of conviction to measure tax frauds in administrative law,whereas to accept the "strict standards of conviction" for cases with criminal implications.Also,for cases being self-admitted after being prosecuted and those under tax preservation measures,the preponderant standards of proof should apply.