Analysis Of Tax Administrative Penalty Case Between Nantian Co.,Ltd. And The Fucheng District Tax Inspection Bureau

The increasing complexity of economic form determines the diversity of income sources.The proportion of illegal income in GDP is getting higher and higher.Therefore,it has practical significance to discuss the taxability of illegal income.There has been a long-term dispute in China’s theoretical and practical fields about whether illegal income should be taxed.Although western countries such as the USA and Germany have made it clear in laws or precedents that illegal income is taxable,China’s laws have not made clear provisions on this issue,The blank of legislation leads to inconsistent judicial application.The case of Nantian Co.,Ltd.v.Fucheng Tax Inspection Bureau is a typical case about the taxability of illegal income.The case involves five controversial focuses.First,whether the interest of illegal fund-raising needs to pay personal income tax.Because the illegal income is taxable,the interest of illegal fund-raising also taxable;Second,whether tax disputes can be examined in the lawsuit of administrative penalty.According to the principle of comprehensive review of administrative litigation and the theory of associated administrative acts,the legitimacy of tax disputes should be examined in the lawsuit of administrative penalty,and it is most reasonable to adopt the examination mode of obvious major violations of law;Third,whether the segmented collection of real estate tax involved in the case complies with the legal provisions.The economic essence of the two joint venture contracts signed by Nantian company is significantly different.The collection method of real estate tax by Fucheng District Tax Inspection Bureau complies with the legal provisions.At the same time,this focus also reflects the important role of tax normative documents in coordinating the principle of substantive taxation and the principle of taxation by consent;Fourth,whether the substantive taxation principle can be used to judge the nominal lending behavior.Although the tax law does not clearly define the scope of application of the substantive taxation principle,its scope of application is not limited to several fields such as anti-avoidance.It should have a broader application space.At the same time,the substantive taxation principle is not the exclusive tool of the tax authorities,and taxpayers can also use the substantive taxation principle to protect their own rights;Fifthly,whether the tax authorities involved in the case infringed upon the taxpayer’s right of statement and defense.According to the law,Fucheng District Tax Inspection Bureau did not review the taxpayer’s defense opinion,and did not elaborate the reasons for the rejection of the defense opinion in the administrative penalty.The administrative penalty procedure of Fucheng District Tax Inspection Bureau was illegal and had reached the degree of revocability.Therefore,It is reasonable for the people’s court to revoke the administrative penalty decision.The focus of disputes reflect many hot issues in the current tax theory and judicial fields.The in-depth study and analysis of this case is conducive to improve the legislation and play a beneficial role in tax administration and judicial activities.