Research Report
Meaning and Limitation of Principle of No Taxation Without Law and Substance-Over-Form Taxation in Tax Law
Ⅰ. Backgrounds and Purposes
▶ Need to consider the meaning of the Principle of No Taxation Without Law and the Substance-Over-Form Taxation
○ The Principle of No Taxation Without Law and the Substance-Over-Form Taxation are the methods that offer the theoretical outline in the tax law, and are the basic and useful concepts.
○ It is difficult to briefly explain about the relationship between the two. If one side is emphasized, the other side is damaged or exists in name only, so they seem to be in conflicting positions.
○ The purpose of this study is to examine the Principle of No Taxation Without Law and the Substance-Over-Form Taxation, the relationship between the two, the meaning and limitation of related concepts to enhance understanding.
Ⅱ. Major Content
▶ Meaning of Principle of No Taxation Without Law
○ Taxation details such as tax type, rate, and requirements should be stipulated under the law, and those that are not delegated in the law cannot be enacted in enforcement ordinances or regulations.
▶ Formal and Substantial Principles of No Taxation Without Law
○ In general, the Principle of No Taxation Without Law indicates the formal principle.
○ If the tax law, which was legislated under the Formal Principle of No Taxation Without Law, violates the fundamental rights of the Constitution, it is against the Substantial Principle of No Taxation Without Law.
▶ Strict interpretation as analysis standard of tax law
○ Strict interpretation means literary interpretation in general terms, but in the case of unintended legislative irregularities or legislative errors, the criteria for strict interpretation cannot be applied.
○ Applying strict interpretation means that the analysis is in accordance with the law articles "unless there are extraordinary conditions" and does not allow extended or analogous analysis "without legitimate reasons.“
▶ Meaning of Substance-Over-Form Taxation
○ The concept is based on the equal rights which are stipulated in the Constitution, and supplements the blind spots of the Principle of No Taxation Without Law.
▶ Meaning of “Substance” in Substance-Over-Form Taxation
○ “Substance” can be categorized into legal substance and economic substance, but legal substance is just the opposing concept of economic substance.
▶ Substance-Over-Form Taxation and Rejection of Unfair Act and Calculation
○ Substance-Over-Form Taxation and Rejection of Unfair Act and Calculation have something in common in a way that they are based on the conception of the equal rights in the Constitution. But Rejection of Unfair Act and Calculation is based on special relationship and detailed requirements are prescribed in a separate tax law.
▶ Principle of No Taxation Without Law and Substance-Over-Form Taxation
○ There are conflicting aspects between the Principle of No Taxation Without Law and Substance-Over-Form Taxation as the former should be based on tax law and the latter recognizes the substance even without the taxation ground in the tax law.
○ Substance-Over-Form Taxation is a valuable concept for realizing equal taxation, which cannot be actualized under the Principle of No Taxation Without Law. It reinforces the Principle of No Taxation Without Law eventually.
Ⅲ. Expected Effects
○ This study clearly defined the meaning of the Principle of No Taxation Without Law and the Substance-Over-Form Taxation, and suggested to use the latter as a helpful measure to respond to the rapidly changing taxation environment when setting the boundary of tax interpretation. But it suggested to put priority on the Principle of No Taxation Without Law and restrictively use the Substance-Over-Form Taxation so as not to damage trust of the tax authorities. The study has great significance as it offered reasonable and feasible standard for the administrative judgement and court disputes as well as the legislation and interpretation of the tax law.