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TREATMENT OF TAX DATA DISCOVERED AFTER IRREVO-CABLE OUTCOME OF ADMIN-ISTRATIVE REMEDIES
In its recent judgment in a year 2000 case, the Taipei High Administrative Court stated that if a tax collection authority discovers new evidence relating to a corporate income tax case that has previously been concluded by an irrevocable assessment, then the authority should seek a re-trial; it may not make a new disposition with respect to the same taxation facts.
In the case in question, the taxpayer filed its final corporate income tax return for the 1996 tax year without presenting books of account or other documentary evidence of its income, and the National Tax Administration (NTA) therefore assessed its income on the basis of the profit levels of other firms in the same industry, in accordance with Article 83 Paragraph 1 of the Income Tax Law. The taxpayer did not accept this, and embarked on the administrative remedy process, which ended with an irrevocable judg-ment against it. Subsequently, the NTA reas-sessed the taxpayer's taxable income for 1996 on the basis of a income statement obtained by the Investigation Bureau, Ministry of Justice, and demanded additional tax and a penalty.
In its judgment, the court stated that because the previous case concerning the entity's corporate income tax liability for the year in question had already been irrevocably concluded, and the subject matter in both cases was the illegality in that year's tax declaration, an additional tax de-mand and a further penalty imposed by NTA went against the principle of res judicata.
What is debatable in this judgment is that Article 21 Paragraph 2 of the Tax Collection Law pro-vides that if during the tax assessment period a further tax liability is discovered, the additional tax payable should be collected in accordance with the law, and/or a penalty imposed; but if such liability is not discovered during the tax assessment period, no further tax demand or penalty may be subsequently imposed. The point at issue in the initial case was whether it was unlawful or inappropriate for the tax collec-tion authority to assess tax on the basis of the profit levels of other firms in the same industry when the taxpayer failed to present accounting records; while the key issue in the subsequent case was whether a tax collection authority, on discovering accounting records of the taxpayer, may, within the tax assessment period, impose a further tax demand and penalty on the basis of the information so obtained. If the NTA appeals, it will be worth noting what view the Supreme Administrative Court will take as to the issue of res judicata.