On the Connection between Tax Collection and Civil and Commercial Law

Abstract: Tax law, as the law most closely related to every taxpayer, has the basic characteristics of civil law and also has the color of public law. Among them, the the People's Republic of China Law on Tax Collection and Management is particularly obvious on this issue. In the process of tax collection, the exercise of public power of tax authorities is based on the legal rights of civil and commercial affairs when it comes to taxpayers' property, this paper starts with the convergence of civil and commercial law and tax collection laws and regulations, and makes a preliminary thinking on the problems of its convergence.

Keywords: tax law priority right of revocation right of subrogation convergence

"Although the administrative enforcement power exercised by the tax authorities is a public power that deals with the relationship between the tax authorities and the taxpayer, the tax law and private law need to be harmonized with each other when it comes to the trial and civil enforcement of civil cases relating to the taxpayer's property. The tax issue is fundamentally the issue of redistribution of property between the state and the taxpayer, which means that tax power and property rights are inseparable." [1] When tax authorities levy taxes in accordance with the law, they must carefully handle the relationship between the public rights of the State and the private rights of citizens. The the People's Republic of China Tax Collection and Administration Law (hereinafter referred to as the "Collection and Administration Law") stipulates that the housing and supplies necessary for individuals and their dependent family members to maintain their lives are not within the scope of preservation measures and enforcement measures, which reflects the basic right to survival of citizens, The spirit of realizing the country's fiscal revenue in accordance with the law on the basis of the protection of property rights. A major breakthrough in the Collection and Administration Law is that it "provides for some systems that are similar to private law but not identical to private law, such as the tax priority system, the system of subrogation and the system of revocation, and the normal operation of these rights must rely on the civil and commercial legal system to provide protection. However, due to the large gap between the tax law and the civil and commercial law, the exercise of the above-mentioned rights lacks specific operability." [2] From the survey on the implementation of the Tax Administration Law in Shandong Province, since the implementation of the newly revised Tax Administration Law, the national tax authorities in our province rarely use the right of subrogation and revocation granted by the Tax Administration Law to recover the tax arrears, even if the tax authorities claim the tax priority to protect the tax collection, in the actual operation, there has also been a collision with the judicial process. In the tax priority and tax preservation system, because the court and the tax authorities have not yet reached an agreement, has affected the tax authorities on the taxpayer-related property tax collection. The main problems are:

The "tax priority" stipulated in the 1. Collection and Administration Law cannot be effectively guaranteed.

(I) the provisions of our law on tax priority.

The so-called tax priority "means that when the tax authorities collect taxes and the realization of other claims conflict, the collection of taxes is in principle superior to the realization of other claims. Regarding tax priority, each country has different regulations. Some countries stipulate that taxation has absolute priority, that is, as long as taxpayers owe taxes, regardless of whether their property is secured or not, they must first ensure the collection of national taxes; some countries stipulate that taxation has relative priority, that is, taxation takes precedence over unsecured claims. For the relationship between taxation and secured claims, different situations are distinguished and different regulations are made." [3] Our provisions on tax priority fall into the latter category. Paragraph 1 of Article 45 of the Tax Administration Law: "Tax authorities collect taxes, and taxes take precedence over unsecured claims, unless otherwise provided by law; If the tax owed by the taxpayer occurs before the taxpayer sets up a mortgage or pledge with his property or the taxpayer's property is retained, the tax shall be executed before the mortgage, pledge and lien"; Paragraph 2: "Taxpayers owe taxes, at the same time, if the administrative organ decides to impose a fine or confiscate the illegal income, the tax shall take precedence over the fine or confiscation of the illegal income, and the tax authority shall make a regular announcement on the tax arrears of the taxpayer". Article 212 of the Criminal Law of our country stipulates: "If a person commits the crimes specified in Articles 201 to 205 of this section and is sentenced to a fine or confiscation of property, the tax authorities shall first recover the tax and the defrauded export tax refund before execution". This means that taxes also take precedence over fines and confiscation of property. These two provisions are combined to form a complete concept of tax priority, thus, the meaning of tax priority is that taxes take precedence over unsecured claims, over secured claims that occur after taxes, over fines, confiscation of illegal income (administrative penalties), and over fines and confiscation of property (criminal penalties). The purpose of the provisions of tax priority is to ensure the full realization of national taxes, but due to the convergence of the provisions of the Law of Administration and other laws and the lack of agreement between the judiciary and the tax authorities on the issue of tax priority, the tax priority cannot be guaranteed by judicial procedures in practice.

The main problems in the exercise of (II) tax priority.

1. The conflict between the bankruptcy law and the provisions of the Tax Administration Law on tax priority makes the protection of tax priority in bankruptcy proceedings fail, resulting in difficulties in the application of the law. As noted above, tax priority over unsecured claims and over secured claims that occur after a tax obligation is intended to be tax priority. However, according to the provisions of the Bankruptcy Law: "The right holder who has a security right in the specific property of the bankrupt shall have the right to priority payment of the specific property. If a creditor who has the rights specified in Article 109 of this Law fails to fully pay the right to priority payment, its outstanding claim shall be regarded as an ordinary claim; if the right to priority payment is waived, its claim shall be regarded as an ordinary claim." Secured claims, which are not distinguished here in the order in which taxes are incurred, are entitled to a priority right to payment. It shows that the tax priority lags behind the secured claim and can only be realized in the estate after deducting the secured claim. That is to say, a tax-defaulting enterprise is declared bankrupt, even if the third party's claim to the enterprise occurs after its tax arrears, but as long as the claim has been secured, it has a priority right to pay the particular property, in the bankruptcy proceedings, the priority of tax can not be effectively guaranteed. It can be seen that the contradictions and conflicts between the provisions of different laws on tax priority and secured claims make it impossible for tax authorities to link up with civil and commercial laws when claiming tax priority.

2. Tax authorities claim that tax priority lacks safeguards and procedural provisions. The law does not specify what measures the tax authorities can take to exercise the tax priority before paying the tax owed. "When the pledgee or lien owner is still in a state of possession and control over the property of the taxpayer who owes the tax, how should the tax authorities exercise the tax priority? In a civil case, how should the tax authorities exercise their tax priority when the property of the person who owes the tax is sealed up or seized by the people's court?" [4] At present, there is no legal basis to support the tax authorities to take administrative enforcement measures against the property of tax defaulters possessed and controlled by the pledgee and lien holder, and if they choose to sue in the people's court, they lack the corresponding procedural provisions and are difficult to operate. The absence of safeguards and procedural provisions has become a major obstacle to the effective exercise of tax priorities.

3, the people's court does not recognize the tax priority, so that the exercise of this right encountered judicial obstacles. The judicial department and the tax authorities have not reached an agreement on the issue of tax priority, which is another reason why tax priority encounters difficulties in practice. In November 2003, the State Taxation Bureau of a city in Shandong Province received news that a tax-owed enterprise under its jurisdiction had just received a payment for the goods. The tax bureau went to the bank to freeze the bank account of the enterprise. Unexpectedly, the payment for the goods of the enterprise had been preserved by the people's court due to a civil debt dispute. The tax authorities believed that according to the provisions of the Tax Collection and Administration Law, tax should take precedence over unsecured claims, the amount of money owed to the tax enterprise should be used to offset the tax. However, under such circumstances, the tax authorities could not find a legal basis and did not know how to claim tax priority to the judicial authorities, so they sent people to the people's court for consultation, believing that tax interests were supreme. Since the Tax Administration Law stipulates tax priority, the judicial authorities should also give priority to the tax interests of the state and lift the preservation measures to meet the exercise of tax priority. However, the people's court held that the "Collection and Management Law" was only a law followed by the tax authorities and could not be used to restrain the people's court, and did not agree to lift the preservation measures. This is also the confusion that tax authorities and their staff often encounter in practice.

The main problems in the exercise of the right of tax subrogation and revocation in 2..

The nature of (I) tax subrogation and revocation measures is not clear.

According to the provisions of the original "Collection and Management Law", taxpayers who owe taxes and take the means of transferring or concealing property, causing the tax authorities to be unable to recover the consequences of tax arrears, the tax authorities can pursue the legal responsibility of taxpayers in accordance with the law. In the actual law enforcement process, there are often taxpayers who have been in arrears for a long time, and do not actively exercise their due claims, and even transfer property without compensation, evading the repayment of unpaid taxes, which harms the tax interests of the country. [5] In order to ensure the smooth realization of tax claims, the newly amended Collection and Administration Law establishes corresponding preservation procedures, including the right of subrogation and the right of revocation. Paragraph 1 of Article 50 stipulates: "If a taxpayer who owes taxes fails to exercise the due creditor's rights, or waives the due creditor's rights, or transfers the property free of charge, or transfers the property at an obviously unreasonable low price, and the transferee knows the situation, causing damage to the national tax revenue, the tax authorities may exercise the right of subrogation and cancellation in accordance with the provisions of Articles 73 and 74 of the Contract Law." The right of subrogation and the right of revocation originally belong to the preservation measures of contractual debts stipulated in the contract law, "although the debt has the characteristic of relativity, it does not mean that the creditor's right does not produce any external effect. In special circumstances, in order to protect the interests of creditors, the law confirms that the creditor's right can produce the effect on third parties, that is, the external effect of the creditor's right. Such effect is concentrated in the preservation of the contract." [6] The so-called preservation of a contract means that "the law, in order to prevent the harm to the creditor's claim caused by the improper reduction of the debtor's property, allows the creditor to exercise the right of avoidance or subrogation against the acts of the debtor or a third party in order to protect its claim". [7] Introducing the effective debt preservation system in civil law into the Tax Administration Law, giving tax authorities the power to exercise the power of subrogation and revocation, can not only effectively protect the country's tax revenue, but also help prevent and stop various illegal acts of taxpayers who owe taxes, which is not only of great significance for safeguarding national interests and social public interests, but also marks the progress and development of China's tax legislation. [8] Although the Tax Administration Law revised in 2001 stipulates the system of tax subrogation and revocation right on the basis of debt preservation stipulated in the Contract Law, improves the tax preservation system and ensures the timely and full storage of national taxes, the legal nature of tax subrogation and revocation right has not been clearly defined. The Contract Law clearly stipulates that its application is the establishment, modification and termination of civil rights and obligations between equal subjects, and the two sides of the tax collection relationship in the administrative process of unequal status, the nature of this public law debt preservation can directly apply the provisions of contract law, in practice, the understanding is vague. This vague understanding has actually affected the exercise of tax subrogation and revocation rights.

The cognition of the way of exercising the right of subrogation and revocation of (II) tax authorities is confused.

The Law on Administration of Tax Collection stipulates that, if the conditions are met, the tax authorities may exercise the right of subrogation and revocation in accordance with the provisions of Articles 73 and 74 of the Contract Law. According to the relevant provisions of the contract law and the interpretation and (I) of the Supreme People's court on the application of the the People's Republic of China contract law, one party to the contract debt shall bring the right of subrogation or revocation to the people's court in the form of civil action. Whether the right of subrogation or revocation is established or not shall be examined and judged by the people's court according to law. It can be judged from this that if the tax authorities want to exercise the right of tax subrogation or revocation, they must also bring it to the people's court by way of litigation, and cannot privately claim the right of subrogation and revocation to the taxpayer or a third party. However, some authoritative works on the interpretation of the Tax Administration Law advocate that the tax authorities can directly exercise the right of subrogation and revocation to the taxpayer or a third party if they think that the conditions are met. Different views and understandings have caused confusion in the way of exercising the right of subrogation and revocation of tax authorities in practice.

The effect of the (III) tax authorities exercising the right of subrogation and revocation is not clear.

Although the Tax Administration Law provides for the right of tax subrogation and revocation, it does not specify the legal effect of the exercise of the right. For example, if the tax authority exercises the right of subrogation, should the third party repay the debt to the tax authority, or should the third party repay the taxpayer, and then the taxpayer should pay the tax to the tax authority; when the right of subrogation is exercised, whether the tax debt between the taxpayer and the tax authority disappears, and what is the effectiveness of the creditor-debt relationship between the taxpayer and the third party, these issues have not been clarified, resulting in a certain degree of confusion in tax law enforcement.

(IV) tax authorities have different views on whether the recovered property should be paid first after exercising the right of revocation.

This is a possible problem in the right of revocation. Taxpayers may have other creditors in the sense of civil law in addition to unpaid state taxes, so does the tax authority have priority in compensation for property recovered by the tax authority exercising the right of tax rescission? It is argued that the tax authority should not have priority in compensation under such circumstances; it is argued that the tax authority should have priority in compensation for the recovered property by exercising the right of rescission.

The above-mentioned problems on tax preservation measures make the tax authorities in the exercise of the right of subrogation or revocation through judicial procedures, resulting in many cohesive doubts, affecting the role of this system.

The main problems in the implementation of the 3. tax guarantee system.

The concept and application of (I) tax guarantee.

Tax guarantee refers to the act of providing guarantee for the tax payable and late fees by taxpayers or other natural persons, legal persons and economic organizations by means of guarantee, mortgage and pledge, with the consent or confirmation of the tax authorities. Tax guarantors include tax guarantors who provide tax guarantees to taxpayers by way of guarantee and other third parties who provide tax guarantees to taxpayers with property that is not set up or not fully set up security interests. It can be seen that there are two kinds of tax guarantee: the guarantee of the person and the guarantee of the goods. People's insurance is the tax guarantor, the property has a mortgage, pledge. Unlike a civil guarantee, a tax guarantee has no monetary security and no lien. According to the provisions of the Tax Administration Law and the Trial Measures for Tax Guarantee, the applicable situations of tax guarantee are mainly as follows: first, the tax authorities have the basis to believe that the taxpayers engaged in production and operation have evaded their tax obligations, and they have been ordered to pay the tax payable within a time limit before the prescribed tax period, if the taxpayer is found to have obvious signs of transferring or concealing his taxable goods, goods and other property or taxable income within the time limit, and the taxpayer is instructed to provide tax guarantee; second, the taxpayer who fails to pay the tax or late fee or his legal representative needs to leave the country; third, the taxpayer has a dispute with the tax authority over tax and fails to pay the tax, and needs to apply for administrative reconsideration; fourth, tax laws and administrative regulations provide for other circumstances that can provide tax guarantees.

Problems in the connection between (II) tax guarantee and civil and commercial guarantee

1. The legal basis for the implementation of tax guarantee is different in practice. The State Administration of Taxation promulgated and implemented the Measures for the Trial Implementation of Tax Payment Guarantee in 2005. In tax practice, there is a view that the "Trial Measures for Tax Guarantee" is a tax regulation promulgated by the General Administration for the tax system, and the provisions on guarantee in the guarantee law and the property law are applicable to the civil field. Therefore, the tax authorities only apply to the tax guarantee. The regulations of the General Administration, namely the "Trial Measures for Tax Guarantee", do not need to apply the guarantee law and the property law. Such a kind of cognition on the legal basis of tax guarantee affects the effective implementation of tax guarantee.

2, the circumstances applicable to the tax guarantee are not sure. As mentioned above, there are only four legal situations in which tax guarantees are applicable in our country, namely: the order guarantee before the adoption of the preservation measures stipulated in Article 37 of the Tax Collection and Administration Law, the guarantee before the tax debtor or his legal representative leaves the country Guarantee, guarantee before tax disputes apply for administrative reconsideration, and other circumstances in which tax guarantees can be provided under tax laws and administrative regulations. However, in the practice of tax law enforcement, some tax authorities are not sure about the application of tax guarantee. For example, if a taxpayer fails to pay taxes, the tax authorities have frozen his bank account in accordance with the law, and the taxpayer wishes to lift the freezing measures, so he proposes to the tax authorities to provide security for the property secured by his plant. Can the tax authorities accept such a guarantee application? In practice, there are different views that taxpayers with their own legal property as a guarantee, can play the same role as tax preservation, so it can be accepted; the point of view is that the taxpayer to provide security situation does not conform to the statutory situation, so it can not be accepted. The inaccurate grasp of the applicable circumstances of tax guarantee has formed a certain risk in the practice of tax guarantee.

3, China's current tax guarantee system on the change of tax guarantee does not make corresponding provisions. In our country's civil guarantee system, the provision of restoring or replenishing the value of the secured property when the value of the secured property is reduced. For example, article 193 of the Property Law provides that if the mortgagor's conduct is sufficient to reduce the value of the mortgaged property, the mortgagee has the right to require the mortgagor to cease his conduct. If the value of the mortgaged property decreases, the mortgagee shall have the right to demand the restoration of the value of the mortgaged property or to provide security corresponding to the reduced value. If the mortgagor does not restore the value of the mortgaged property or provide security, the mortgagee shall have the right to require the debtor to pay off the debt in advance. Such a provision is lacking in the tax guarantee. With the change of market economy and time, the guarantee ability of the tax guarantor as a guarantor is likely to be reduced or lost. If the taxpayer or a third party uses its property as the guarantee, the realized value of its property will often decrease as the market changes. In the above-mentioned circumstances, if the tax authorities fail to require the taxpayer to replace the guarantor in a timely manner, or to re-provide the full amount of property as security, it will be difficult to ensure the realization of the tax claim.

When this paper is about to be submitted, the State Administration of Taxation has drawn up a revised draft on the further revision of the Collection and Administration Law, and issued it to the provincial tax authorities across the country for comments, and the author is entrusted by the consultant unit to comment on the revised draft of the Collection and Administration Law. In this revised draft, the author noticed that the State Administration of Taxation has actually fully realized the problems in the connection between tax collection and civil and commercial laws, criminal laws, administrative penalties, administrative reconsideration laws, and administrative procedure laws, and tried to revise and improve them. We hope that our legislative proposals can be adopted, and we also hope that this revised draft can enter the legislative process as soon as possible, and promulgate and implement a new "Collection and Management Law" that is more smoothly and more practical with relevant laws as soon as possible.
(This article won the first prize of Jinan excellent paper)

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[1] Song Yushui, "An Analysis of the Model of Handling Civil Disputes Caused by Tax Administrative Acts", Law, No. 9, 2001.

[2] Wang Zhen, "Research on the Coordination of Tax Administration and Tax Justice", in Peking University Legal Information Network:http://article.chinalawinfo.com/article/user/ article_display.asp?ArticleID = 31106.

[3] Edited by the Economic Law Office of the Legislative Affairs Committee of the Standing Committee of the National People's Congress: "Interpretation of the the People's Republic of China Tax Collection and Administration Law", China Tax Publishing House, 2001 edition, p. 99.

[4] Wang Zhen, "Research on the Coordination of Tax Administration and Tax Justice", in Peking University Legal Information Network:http://article.chinalawinfo.com/article/user/ article_display.asp?ArticleID = 31106.

[5] See "Interpretation of the People's Republic of China Tax Collection and Administration Law", edited by the Economic Law Office of the Legislative Affairs Committee of the Standing Committee of the National People's Congress, China Tax Publishing House, 2001 edition, p. 106.

[6] Wang Liming and Cui Jianyuan, New Theory of Contract Law. General Provisions, China University of Political Science and Law Press, 1996 edition, p. 375.

[7] Ibid.

[8] See Interpretation of the the People's Republic of China Tax Collection and Administration Law, edited by the Economic Law Office of the Legislative Affairs Committee of the Standing Committee of the National People's Congress, China Tax Publishing House, 2001 edition, p. 107.