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Unit 2: Principle of Taxation Law
2.1 Meaning and Nature of Taxation Law
Taxation law is the body of statutes, regulations, and decided cases governing the levy, assessment, collection, and recovery of taxes, and the taxpayer’s remedies. Its nature: public law, statutory in origin, administrative in operation, and adjudicative at its dispute edge. The taxpayer is not a party to a bargain; the taxpayer is a subject of a statute — but a statute that itself grants rights.
2.2 Principles of Taxation Law
- Legality — no tax without legislation (Article 115’s principle: no tax except by law).
- Ability to pay — equity’s legal echo.
- Certainty and prospectivity — a tax law speaks from its commencement; retroactive taxation is exceptional and must be express.
- Equality before the tax law — Article 18’s equal protection extends to taxpayers.
- Strict construction — charging provisions are read strictly; ambiguity in the taxpayer’s favour (the contra fiscum tendency), while relief provisions are read as written.
- Due process — notice, hearing, reasons, appeal (the administrative-law guarantees, LAW5605).
- No discrimination without classification’s reason — classifications among taxpayers must bear a rational nexus to the tax’s purpose.
2.3 Tax Justice System and Nature
Tax justice operates on three planes:
- Vertical equity — the better-off pay more (progressivity; Article 25(1)’s proviso).
- Horizontal equity — equals pay equally (same income, same tax).
- Procedural justice — fair assessment, honest administration, effective remedies; the taxpayer is heard before being charged, and again after.
2.4 Rules of Construction of Taxation Law
- Read the charging section strictly: the subject must fall within the letter (the landmark attitude of the courts in tax matters).
- The substance-and-form tension: is the transaction what it appears (form) or what it achieves (substance)? Anti-avoidance doctrines look to substance.
- Interpretation provisions of the tax statutes and the general interpretation framework govern meaning.
- No equity in favour of either side: a tax cannot be imposed by analogy, and an exemption must be claimed within its terms.
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