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TIME LIMIT FOR REFUND OF WRONGLY LEVIED TAXES TO BE ABOLISHED
An administrative error by the Taipei Revenue Service (TRS) led to incorrect information being en-tered in the house tax records for a piece of residential property in the city of Taipei owned by a family member of Lee and Li's managing partner, Dr. C.V. Chen. As a result, since 1992, house tax has been levied on the property at the commercial rate instead of the residential rate without any notification to the taxpayer, and almost double the correct amount of tax has been paid over a period of more than 10 years. When he discovered the anomaly in 2007, Dr. Chen affirmed to the TRS that the property had never been used for commercial purposes, and applied for a refund of the overpaid tax. The TRS acknowledged that the house tax was erroneously assessed due to its own internal administrative error, but it only agreed to refund the tax overpaid for the past five years (2002–2006), citing Article 28 of the Tax Collection Act (TCA).
The administrative error of the TRS resulted in the overpayment of tax in this case and the TRS uni-laterally altered the applicable tax rate without informing the taxpayer. In this situation, the taxpayer had no opportunity to file an appeal in a timely manner. While acknowledging its mistake, the TRS still requested that the citizen bear the adverse consequences of its mistake and refused to refund the overpaid tax in full. Dr. Chen believed that the TRS's conduct was a clear breach of Article 117 of the Administrative Procedures Act, which provides that an administrative agency should act ex officio to correct an erroneous administrative decision in accordance with the principle of lawful administration. Convinced that this could not be the only case of incorrect taxation due to a mistake on the part of the tax collection authorities, Dr. Chen insisted on pursuing administrative appeals and litigation against the TRS's decision to refuse to refund of the overpaid tax. The case is currently pending at the Supreme Administrative Court.
After being reported in the media, the case has attracted immediate public attention and discussion. It also prompted the Ministry of Finance to propose an amendment to Article 28 of the TCA, introducing a new Paragraph 2 to expressly provide that where a taxpayer overpays tax because the tax authorities incorrectly apply laws and regulations or mistakenly compute tax payable, or because of other errors attributable to a government agency, the tax collection authorities should, ex officio or on application by the taxpayer, conduct an investigation and refund the overpaid tax. Such a refund will not be subject to the five-year limit on applications for tax refunds under Article 28 of the TCA.
The proposed amendment, which has been dubbed the "C.V. Chen clause" by the media, was submitted to the Legislative Yuan by the Executive Yuan on 11 November 2008, and is expected to be passed by the Legislative Yuan and to take effect in the near future. It is believed that this amendment to the TCA will have a substantive and positive effect in furthering lawful administration by the tax collection authorities and in protecting taxpayers' interests.