A Study on Input Tax Irrecoverable and the Derivative Problem

Autor: Shu-LingLi, 李淑鈴
Rok vydání: 2013
Druh dokumentu: 學位論文 ; thesis
Popis: 101
The J.Y. Interpretation No.660 agreed to the opinion of Ministry of Finance that for calculating penalties the input tax of valid certificates provided after being investigated can't be deducted from the evaded output tax which resulted from the sales amount under-reported or not reported. This brings to many criticisms. The tax authority wants to levy taxes by way of the automatically reporting system from the sellers and purchasers. Are the disadvantages borne by the taxpayer? Will it destroy the business tax reporting system if the input tax aforesaid is permitted to deduct from the output tax evaded? Is the Interpretation No.660 constitutional ? Four Taiwan branch companies of foreign enterprises that have well-known clothing brands(HANG TEN、GIORDANO、bossini、BaLeNO) were fined for more than NT$ 500 million. The operators said that perhaps they would retrieve the investments from Taiwan. After J.Y. Interpretation No.685, problems of the cases have not been resolved. Were the acts of these companies in breach of the purposes of the Value-Added and Non-Value-Added Business Tax Act(hereinafter referred to as Business Tax Act) ? Were the taxes really evaded? May the penalties not be reduced or remitted under certain circumstances? VAT payable is determined by using the tax credit method. Whether the input tax can be deductible is very important for the tax authority and the taxpayer. This paper discusses the reasonableness of the provisions on the input tax irrecoverable, the related tax pursued for payment and the administrative penalties, and also the topic of taxation on selling a car whose input tax was irrecoverable on purchasing. These will be discussed from the concept of value added, the essence of the VAT, principles of taxation, the essence of the right of deduction, the rules of the business tax, the legislative purposes, judicial decisions and J.Y. Interpretations, opinions of the scholars, the Administrative Penalty Act and the related legal theory, practice cases, and also the introduction of foreign rules and regulations for comparison. By the study, we here make the conclusions and propose the following recommendations for improvements on the legal system to provide solutions and reference on issues discussed. The value-added business tax is a sales tax in the legal system. Business entities that sell goods or services are taxpayers of the Business Tax Act. For the tax can be passed to the consumers according to the Act, it is a consumption tax in essence, and is called the indirect tax. In principle, the input tax which relates to the taxable transactions and is not for consumption should be recoverable in order to meet with the principles of neutrality and ability-to-pay in taxation. For input tax deduction, business entities should obtain the prescribed evidence from the direct sellers on purchases of goods or services. For the tax authority and the administrative court, it depends on facts, evidence, and judgement by experience and logical rules to decide if a purchase had occurred and a business entity had obtained the evidence from the direct seller to a transaction. The same case could have a different conclusion between the tax authority and the court according to the extent of investigation, analysis, and the discretion on intentionality or negligence. Usually it needs to prove that something exists or ever existed, and payments had been made by sources of funds which had not been returned, to decide if a purchase had occurred. When a purchase had occurred, the key point to judge the direct seller to a transaction is to justify whether the counterparty received the money (final flow of the funds). Based on the legislative purposes of article 19, paragraph 1, subparagraph 1 of the Business Tax Act— to cross-check the tax data of the former and subsequent parties to transactions, to ensure transactions not to be hidden, to avoid further levying cost, and to ensure that all the taxes payable have been levied, business entities failing to obtain the valid certificates from the direct sellers can't claim for deduction in principle. For taxes being pursued for payment and penalties being fined, it also should take into account the legislative purposes and the obligation of care by business entities, and fines should be applied only after the three-step inspections similar to those of the Criminal Code. Establishing the rules to claim for input tax deduction with invalid invoices like the UK, establishing the tax system for reducing or remitting the tax debts when there are fair and reasonable reasons like Germany, improving on the input tax credit system of resources recycled, and fulfilling article 18 of the Administrative Penalty Act should help to resolve the problems for many cases such as obtaining the invalid invoices, the cooperative stores, the second cooperative society of resources recycled and the operation of the construction business by using the registration certificate of another construction enterprise. For the interpretation and application of article 19,paragraph 1,subparagraph 2,3,4,5 of the Business Tax Act, whether the input tax is deductible should be decided by the expenditure for business operation, the legislative purposes, and the essence of consumption. Where a business entity was charged VAT on purchasing a car but could not recover any of that VAT, for equilibrium, the sale of the car shall be exempt. For a business entity that has to calculate the non-deductible part of the input tax amount according to article 19, paragraph 3 of the Business Tax Act, there can be other fair and reasonable allocation methods to be allowed besides the prescribed methods now in force; the fixed assets which cost a lot may extend the adjustment period to more than one year. As for calculating the penalties of the sales amount under-reported or not reported, taken into account the principle of proportionality, the input tax of the valid certificates provided after being investigated may be permitted to deduct from the output tax evaded under certain conditions prescribed by the Act suggested to be amended.
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