Tax administrative penalties, processing and other administrative actions have an extremely significant adverse impact on taxpayers, and in the administrative procedures, although taxpayers can make representations and defense, but after all, it is only the submission of written materials, and the hearing department lacks a direct channel of communication with taxpayers. However, once a tax decision is made, it is bound to have a serious impact on taxpayers. At present, according to the "Implementation Measures for Hearing Procedures for Tax Administrative Penalties (for Trial Implementation)", only larger tax penalties can apply for a hearing, in addition to other penalties such as confiscation of unlawful income, cessation of the right to export tax refunds and other penalties, as well as major tax processing decisions, there is no provision for a hearing. After the promulgation of the newly revised Administrative Penalty Law, there has been an increasing number of disputes related to hearings. This article combines two cases in which the court supported the taxpayer's application for a hearing as an example, analyzes the problems of tax hearings, and puts forward three suggestions for the reader's reference.

I. Case

(I) Major Tax Administrative Processing Decision Revoked by the Court for Failure to Hold a Hearing

(1) Brief description of the case

From 2010 to 2012, Company A signed a purchase and sales contract with Company B (Hong Kong), agreeing that Company A would provide goods to Company B across the years, and Company A obtained export tax rebates of more than RMB 25 million. 2014, the local inspection bureau served Company A with a Tax Treatment Decision, which determined that Company A constituted a "real agent, fake import and sales", and recovered the refunded export tax. In 2014, the local inspection bureau served Company A with the "Tax Treatment Decision", which determined that Company A constituted a "real agent, fake import and sale", and recovered the refunded export tax rebate. In 2015, the inspection bureau issued the "Reminder Enforcement Notice" to Company A, and Company A still failed to pay the tax, and the inspection bureau then forcibly withheld the corresponding tax, and Company A was not convinced of the "Tax Treatment Decision" and applied for reconsideration to the local SAT, and the reconsideration upheld the original decision. Company A considered that the failure of the Inspection Bureau to notify Company A of its right to a hearing when serving the Decision on Tax Treatment constituted a procedural violation, so it filed an administrative lawsuit with the People's Court.

(2) Court decisions

The court of first instance held that the principle of due process is a fundamental principle of administrative law and a basic requirement for administrative organs to implement administrative acts. According to the principle of due process, when making administrative decisions affecting the rights and interests of the relative, the administrative organ shall fulfill the obligation to inform the relative beforehand and fully guarantee the relative's right of statement and defense. In this case, the defendant Inspection Bureau made the appealed tax processing decision to recover the export tax refund that Company A had declared and actually obtained, which had a significant impact on the rights and interests of Company A. The defendant Inspection Bureau made the appealed tax processing decision to recover the export tax refund that Company A had declared and actually obtained. Before the Defendant Inspection Bureau made the processing decision, it did not hold a hearing due to the significant impact on the interests, and did not fully protect the Plaintiff Yitai's right to make statements and pleadings, which violated the principle of due process, and the procedure was unlawful, so it should be withdrawn. Defendant IRS administrative reconsideration decision is a factual error, should also be revoked.

The Audit Bureau and the IRS appealed against the judgment of the Court of First Instance.

The Court of Second Instance held that at the time of the case, the Measures for Hearing Major Tax Cases had not yet come into effect, so there was no direct legal provision for a hearing procedure. In view of the fact that the amount of tax refund amounted to more than 20 million dollars, which was a huge amount, according to the principle of due process in administrative law enforcement, Company A should be guaranteed the rights of procedural participation and statement and defense in the process of making the decision. However, Company A consulted and communicated with Company A many times before the processing decision was made, and it should be concluded that although no formal hearing was organized in this case, Company A's relevant substantive statement and defense rights should be considered to have been safeguarded. The court of second instance held that the procedure of this inspection bureau to make the administrative treatment under appeal was lawful, and that the first instance judgment was wrong in the factual finding and application of the law, and should be revoked.

Company A did not accept the judgment of the second instance and applied to the Provincial Higher People's Court for a retrial.

The court held that before an administrative organ makes a decision on administrative treatment that is unfavorable to the administrative relative, it should, in accordance with the requirements of the principle of due process, inform the relative in advance and listen to the relative's statements and pleadings, so as to fully safeguard the legitimate rights and interests of the administrative relative. In this case, the Respondent Inspection Bureau made the appealed tax processing decision, which decided to recover the export tax rebate declared and actually obtained by Company A, the applicant for reexamination, and the processing decision obviously had a significant adverse impact on the rights and interests of Company A. The Respondent Inspection Bureau made the above decision in accordance with the principle of due process, in order to fully protect the legitimate rights and interests of the administrative relative. In the process of making the above processing decision, the Inspection Bureau should, in accordance with the requirements of the principle of due process, inform Company A in accordance with the law, and fully guarantee Company A's right of statement and defense. However, the evidence submitted by the Inspection Bureau within the statutory period of the original trial showed that before making the processing decision, it did not hold a hearing due to the significant impact on the interests of the company, nor did it fully guarantee the plaintiff's right of representation and defense, so the procedure was obviously illegal, so it revoked the tax processing decision made by the Inspection Bureau and the reconsideration and affirmation of the decision made by the State Administration of Taxation.

(II) Suspension of the right to export tax rebates without a hearing recognized by the court as illegal

(1) Brief description of the case

Company B is a foreign trade enterprise with the qualification of import and export business. at the end of 2015, company B signed a contract with company C through an intermediary, and agreed that company B would handle the export tax rebate business for company C, and the plaintiff would collect a fixed commission for each dollar of goods exported. During the period, the business were contacted by the intermediary, and there was no actual contact between Company B and Company C. In 2016, the Inspection Bureau issued a Notice of Tax Inspection to Company B, and examined the tax-related situation of Company B during the period of January 1, 2014, to May 27, 2016.In 2017, the Major Tax Cases Hearing Committee of the Tax Bureau made a Hearing Opinion after the hearing of the case, and in the "Opinions and Claims of the Subject of Inspection" section, documented the plaintiff's defense, and did not hold a hearing procedure before that. The former Municipal State Taxation Bureau made a proposal based on the Hearing Opinion, and made a request to the Provincial State Taxation Bureau on the matter of stopping the Plaintiff from applying for the export tax rebate within two years, which was agreed by the Provincial Bureau.On February 21, 2017, the Inspection Bureau made a notice of tax administrative penalty matters and informed Company B of its right to make statements, make pleadings, and apply for a hearing.On February 23, the Plaintiff submitted a statement of its pleadings and filed a request for a hearing, and law enforcement officers Said it has been stated that defense need not be heard again. On March 9 of the same year, the Inspection Bureau made a decision on tax penalties, and on August 23, the former Municipal State Tax Inspection Bureau served the plaintiff with the "Decision on Tax Penalties". Company B of the penalty decision, v. Court.

(2) Court decisions

The court of first instance held that as for the hearing procedure, Article 42(1) of the Administrative Penalty Law stipulates that before the administrative organ makes a decision on administrative penalties such as ordering the suspension of production and business, revocation of permits or licenses, or imposing larger fines, it shall inform the party concerned of its right to request a hearing. Although this provision does not explicitly include "stopping the qualification for export tax refund (exemption)" in the scope of the right to be informed of the hearing, the "etc." in the article is an incomplete enumeration (it should be noted that this provision has been corrected in the newly amended Administrative Penalty Law), and shall Including and expressly enumerated "ordered to suspend production and business, revocation of permits or licenses, larger amount of fines" similar to other administrative penalties on the rights and interests of the administrative counterparts have a greater impact. In this case, for the plaintiff such as foreign trade enterprises, stop its declaration of export tax rebate (exemption) qualification for two years will undoubtedly have a significant impact on the company's ability to operate, from the perspective of safeguarding the legitimate rights and interests of administrative counterparts, and safeguarding the legitimacy and reasonableness of administrative penalties, the plaintiff should be given the right to apply for a hearing. In addition, the State Administration of Taxation Decree No. 34, "Measures for the Hearing of Major Tax Cases", stipulates in Article 14, Paragraph 2, that if the party concerned requests for a hearing, the Inspection Bureau shall organize a hearing. Paragraph 1 of Article 15 stipulates that when the inspection bureau submits a case to the hearing committee for hearing, it shall submit the tax audit report, hearing materials and other case materials. From this, it can be seen that before a major tax case is submitted to the hearing committee for hearing, the tax inspection department shall inform the relative of the right to apply for a hearing, and submit the hearing materials to the hearing committee. In this case, the administrative penalty decision was made after collective discussion by the major tax case hearing committee, but the former municipal tax inspection department did not inform the plaintiff of his right to a hearing before submitting the case to the major tax case hearing committee for consideration, but only informed him orally when he was informed of the penalty beforehand, and the former municipal tax inspection department did not organize a hearing after the plaintiff had submitted his written application for a hearing, which was in violation of the statutory procedure, and the decision was ruled illegal, but the decision was not revoked. It was not revoked the administrative penalty decision.

Company B appealed against the judgment of the first instance, and the court of second instance held that the judgment of the first instance was not improper and should be upheld according to law.

II. Our point: Prior Hearing for Various Administrative Penalties, Major Tax Treatments and Other Administrative Acts Conforms to the Requirements of Tax Laws

(I) Suspension of export tax rebate right, confiscation of property and illegal income are administrative penalties, which shall be subject to hearing in accordance with the Law on Administrative Penalties.

Article 63 of the Administrative Penalty Law stipulates: "The administrative organ shall inform the party concerned of the right to request a hearing when it decides to impose the following administrative penalties; if the party concerned requests for a hearing, the administrative organ shall organize a hearing: (a) a larger fine; (b) confiscation of a larger amount of unlawful income, confiscation of a larger amount of unlawful property; (c) lowering of qualification level, revocation of licenses ; (iv) ordering the suspension of production, ordering the closure, restricting the practice of the profession; (v) other heavier administrative penalties; (vi) other circumstances prescribed by laws, regulations and rules." It basically encompasses all forms of administrative penalties.

The provisions of Article 4 of the Rules for the Exercise of Discretion in Tax Administrative Penalties (State Administration of Taxation Announcement No. 78 of 2016) state that "the types of tax administrative penalties include (i) fines; (ii) confiscation of unlawful proceeds and confiscation of unlawful property; (iii) cessation of the right to export tax refunds; and (iv) other administrative penalties provided for in the laws, regulations and rules. " and Article 14 of the Rules for Administrative Review of Taxation (Decree No. 21 of the State Administration of Taxation), the types of administrative penalties for taxation include: "(1) fines; (2) confiscation of unlawful income, confiscation of unlawful property; (3) cessation of the right to export tax refunds; and other administrative penalties provided for in laws, regulations and rules." All of them stipulate that the suspension of the right to export tax rebates, the confiscation of illegal income, and the confiscation of illegal property are administrative penalties.

However, Article 3 of the Measures for the Implementation of the Procedures for Hearing Administrative Punishments in Taxation (for Trial Implementation) (Guo Shui Fa [1996] No. 190) stipulates, "Before a tax authority imposes an administrative punishment on a citizen of a fine of more than 2,000 yuan (inclusive of this amount) or on a legal person or other organization of a fine of more than 10,000 yuan (inclusive of this amount), the tax authority shall inform the party concerned of his or her right to request a hearing. " It can be seen that the Measures for the Implementation of Hearing Procedures for Tax Administrative Penalties (for Trial Implementation) only provides for fine-type penalties. At the same time, the Measures are not only time-honored, but also of a lower order, and no longer comply with the provisions of the current Administrative Penalty Law.

Stopping the right to export tax rebate will lead to serious damage to the taxpayer's business, and confiscation of property and illegal income will seriously hinder the normal operation of the taxpayer, and all of the above measures will have a significant impact on the taxpayer, so according to the provisions of Paragraph 5 of Article 63 of the Administrative Penalty Law, the tax authorities shall inform the taxpayer of the right to apply for a hearing in advance, and organize a hearing based on the taxpayer's request. This view has been recognized in some judicial practices.

(II) According to the principles of judicial adjudication and due process, tax hearings should also be held for major tax processing decisions.

Paragraph 4 of Article 8 of the Tax Administration Law stipulates that: "Taxpayers and withholding agents shall enjoy the right to make statements and to defend themselves against decisions made by the tax authorities; and they shall enjoy the right to apply for administrative reconsideration, to bring an administrative lawsuit, and to request for compensation from the State in accordance with the law." This article is regarded as a general provision of the principle of due process in the tax law, and together with Article 42 of the Tax Administration Law and Article 9 of the Measures for the Trial of Major Tax Cases, it builds up the principle of due process in China's tax law. The core essence of the principle of due process is that the tax authorities shall hear the statement and defense of the relative when making administrative decisions, and when the case is important and complex, and the general hearing procedure can not fully guarantee the relative's right of statement and defense, the hearing procedure shall be adopted. Therefore, when the tax authorities make a decision on tax treatment, they shall guarantee the taxpayer's right of statement and defense, and if the decision has a significant impact, they shall inform the taxpayer of his/her right to apply for a hearing.

The first case court above endorsed the above viewpoint, pointing out that the principle of due process is the basic principle of administrative law, and is also the basic requirement for the implementation of administrative acts by administrative organs, and that all administrative organs should abide by the principle of due process in the process of administrative law enforcement of taxation. The tax authorities shall refer to the judicial case in the process of law enforcement, and shall safeguard the legitimate rights and interests of taxpayers, guarantee the legitimacy and reasonableness of administrative penalties, and give taxpayers the right to apply for a hearing in the case of a decision that has a significant impact on taxpayers.

(III) Reducing the credit rating of taxpayers and other measures that have the effect of class penalties shall be subject to a tax hearing.

At present, the State Administration of Taxation (SAT) reduces the credit rating of taxpayers and includes taxpayers in the tax blacklist as measures of classification management, and does not include the scope of administrative penalties. However, according to Article 32 of the Measures for Tax Credit Management (for Trial Implementation) (SAT Announcement No. 40 of 2014), taxpayers with a credit rating of D will be subject to measures such as restrictions on invoice collection, inclusion in the key monitoring objects, non-applicability of minimum standards within the range of stipulated penalties for violations, and multi-departmental joint disciplinary measures, which will have an impact on taxpayers similar to that of the effect of administrative penalties, and the The impact is far more than the hearing conditions of "10,000 yuan fine" stipulated in the Measures for the Implementation of Hearing Procedures for Tax Administrative Penalties (for Trial Implementation). According to the jurisprudential logic of "lightness to lightness", the tax hearing procedure should be applied to the measures with greater impact and more obvious penalty effect, therefore, the tax authorities should notify taxpayers of their right to apply for a hearing by lowering the taxpayer's credit rating and including the taxpayer in the tax blacklist.

(IV) Summary

For stopping the right of export tax rebate, confiscation of property and illegal income, although the Measures for the Implementation of Hearing Procedures for Tax Administrative Penalties (for Trial Implementation) does not stipulate them, the Rules for Tax Administrative Review and Rules for the Exercise of Discretion in Tax Administrative Penalties recognize that they belong to the category of administrative penalties, so the taxpayers can apply for a hearing in accordance with the provisions of Article 63 of the Administrative Penalties Law; and from the point of view of the principle of due process, the taxpayers should be informed of their right to apply for a hearing for major tax processing decisions. From the perspective of the principle of due process, holding hearings on major tax processing decisions is the subject of safeguarding the legitimate rights and interests of taxpayers, and the existing judgments also support this viewpoint; as for administrative penalties such as lowering the taxpayers' credit ratings by the tax authorities, according to the jurisprudential requirement of citing the lesser in order to make clear the more important, the taxpayers should be given the right to apply for a hearing as well.

III. Recommendation: Pay attention to the opinions of the hearing application and introduce professional assistance

(I) Hearing procedures have a significant impact on the outcome and should be emphasized

The hearing procedure is usually presided over by the personnel of the hearing section of the tax authority, with the inspectors and taxpayers presenting their opinions respectively, and the hearing department combining the hearing situation and materials to decide whether to issue a penalty decision or submit it to the major hearing committee. The hearing procedure is an important system for taxpayers to express their opinions and provide evidence before the administrative authorities make important decisions on taxpayers, the purpose of which is to bring the two sides of tax collection into confrontation and to carry out the spirit of separation of inspection and hearing. For taxpayers, under the auspices of the hearing section, submitting relevant evidence to the tax authorities and stating the enterprise's opinion on the inspection conclusion, compared with only submitting the inspection conclusion and the basis by the inspection section personnel, the hearing procedure can guarantee that the taxpayers can obtain a more fair and objective decision, which is of great significance to the taxpayers.

(II) Breaking through the difficulty of applying for hearing, the application opinion is the key

Although supported by the above cases, in practice, taxpayers apply for hearing procedures for tax measures other than fine-type administrative penalties, it is difficult to obtain the support of the tax authorities, so how to successfully apply for a hearing is the key to the favorable aspects of the case. Unlike the case of fine-type administrative penalties, the taxpayer not only needs to submit the hearing application in writing for administrative measures such as processing decisions and stopping the right to export tax rebates, but also needs to reason why the above administrative measures should be subject to the hearing procedure and actively communicate with the tax authorities in order to enhance the success rate of the hearing application.

(III) The hearing procedure requires high professional ability, and it is recommended to introduce tax lawyers to assist the hearing.

The hearing procedure is a highly professional work, the hearing applicant not only needs to pay attention to the entity level, the tax authorities to check the process and the hearing process of the procedural issues that exist in the hearing is also the focus of the hearing. At the substantive level, since the law does not require the tax authorities to submit evidence several working days in advance, the hearing applicant may face the situation of "on-the-spot" response to the evidence, which requires the hearing applicant to have a very good understanding of the business involved in the case, and at the same time, need to have a very strong ability to question the evidence and statement. At the same time, the hearing applicant needs to memorize the hearing process of the views of the parties, after the end of the hearing on the hearing transcripts need to be supplemented and amended. Therefore, in practice, the relative through will choose to entrust 1-2 hearing agent to ensure the effective implementation of the hearing process.