Editor's Note: In practice, it has been controversial as to whether tax administrative penalties need to take the subjective state of the parties into account. There is a view that as long as the perpetrator has committed a tax offence and caused the result of tax administrative offence, then no matter whether his subjective state is intentional or negligent, he should be administratively punished; there is also a view that subjective fault is one of the constituent elements for the qualification of tax offence, and the perpetrator should not be administratively punished if he is not subjectively at fault. For the latter, the tax authorities should bear the burden of proof on the subjective elements of the parties, if they fail to prove or insufficient evidence, or will bear unfavourable results. In this paper, we will briefly analyse whether the subjective state of the parties should be taken into account in the administrative tax penalty.

I. In practice, it is controversial whether administrative tax penalties need to take into account the subjective state of the parties concerned

In practice, there is still controversy as to whether the subjective state of the party concerned needs to be taken into account in tax administrative penalty cases. There is a view that as long as the administrative relative engaged in administrative offences and caused the result of the act, regardless of whether its subjective element is intentional or negligent, it must be held responsible for the corresponding legal responsibility, such as in the administrative judgement of Xining City Intermediate People's Court of Qinghai Province [（2023）Qing 01 line end No.176）], the court held that: the administrative penalty for tax evasion in tax law is an objective attribution of responsibility, and does not emphasise the taxpayer's As long as the taxpayer possesses the tax evasion means stipulated in the tax law, resulting in the non-payment or underpayment of the tax due, regardless of whether there is subjective intent, it can be regarded as tax evasion.

There are also views that the administrative relative of the administrative offence of whether to pursue legal responsibility should be considered subjective elements, if its subjective intent does not exist, then the tax authorities can not make the corresponding administrative penalties, such as Zhejiang Provincial Higher People's Court Administrative Judgement [(2020) zhejiang line re 44 ], the court held that: for the determination of the subjective intent of the perpetrator, usually should be from the perpetrator's specific behaviour for the comprehensive analysis. In view of the fact that in administrative litigation, the administrative organ b ears the burden of proof for the legality of the administrative act. Therefore, the tax authorities shall investigate and determine the subjective intention of the parties not paying or underpaying the tax payable for the determination and handling of tax evasion offences and bear the burden of proof in administrative litigation proceedings in this regard. As in the Administrative Ruling of Fushun Intermediate People's Court of Liaoning Province [(2021) Liao 04 line end 243], the court held that the determination of tax evasion should be based on the subjective intention and objective behaviour of the appellant to fail to pay or underpay the tax. ...... Also, as in the Decision of the State Administration of Taxation, No. 1 Inspection Bureau of the Qitaihe Municipal Taxation Bureau, Not to Impose Administrative Tax Penalties Decision (Qitaihe City Taxation Bureau No. 1 Not Penalty [2023] No. 4), the tax authorities believe that: in view of the above tax offences have not been found to have the taxpayer subjective intent to pay the unpaid tax evidence ...... now decided not to impose administrative penalties.

II. Administrative tax penalties take into account the subjective state of the parties concerned and comply with the principles of legality and reasonableness.

(i) Inclusion of the subjective state of the person concerned in the consideration of administrative tax penalties is in accordance with the principle of legality.

Article 33, paragraph 2, of the Administrative Penalties Law provides that no administrative penalty shall be imposed if the person concerned has sufficient evidence to prove that he or she is not subjectively at fault. Where laws and administrative regulations provide otherwise, they shall apply accordingly. It can be concluded that: in the absence of special provisions of laws and administrative regulations, the party claims that it has no subjective fault, the party to prove that the party can prove that it has no subjective fault, the administrative organ shall not be subject to administrative penalties; secondly, the laws and administrative regulations shall be subject to administrative penalties for the constitutive elements of the behaviour of the party's subjective fault, the administrative organ, in the administrative penalties imposed shall take the subjective state of the parties into consideration. Although tax-related laws and administrative regulations usually do not contain expressions such as "intentional" or "negligence" that explicitly stipulate the subjective fault of the parties concerned, this does not mean that the administrative penalties for taxation do not need to take into account the subjective state of the parties concerned.

Taking tax evasion as an example, article 63, paragraph 1, of the Law on the Administration of Tax Collection stipulates that a taxpayer who forges, alters, conceals or destroys account books and vouchers without authorisation, or who overstates expenditures, or omits or understates income, or who, having been notified by the tax authorities to make a declaration, refuses to make a declaration or makes a false declaration, and who fails to pay or underpays the tax payable is guilty of tax evasion. The above provisions do not specify the subjective state of the parties concerned, but the words "falsification, alteration, concealment, unauthorised destruction of account books", "refusal to make declaration" and "making false tax declaration" have already included the subjective state of the parties concerned. The subjective state of the person concerned has been included. Moreover, as to the subjective state of "over-listing expenditure or not listing or under-listing income in the books of account", the State Administration of Taxation has made it clear in the Approval of Review Opinions on Tax Evasion Cases of Beijing Julingyan Plastics Company Limited (General Letter of Taxation [2016] No. 274) that subjective intent is required to constitute the act. In addition, the Reply of the General Office of the State Administration of Taxation on the Qualification of Tax-Related Behaviour of Hohhot Changlong Food Company Limited (Guo Shui Ban Han [2007] No. 513), the Reply of the State Administration of Taxation on the Issues Relating to Whether Corrective Declarations of Replacement of Taxes During the Period of Tax Inspection Affects the Characterisation of Tax Evasion (General Taxation Letter [2013] No. 196), the Reply of the General Office of the State Administration of Taxation on the Relevant Work of the Further Notice on Further Improving the Work of Investigation and Handling of Tax Violation Cases (Tax General Fa [2017] No. 30) have all mentioned the subjective elements required to constitute tax evasion.

In addition, for the recipient of a false invoice obtained in good faith, the ‘Notice of the State Administration of Taxation on the Handling of False Value-Added Tax Special Invoices Obtained in Good Faith by Taxpayers’ (Guo Shui Han [2000] No. 187) stipulates that if the following four conditions are met: there is a genuine transaction between the purchaser and the seller; the seller uses a special invoice from the province (autonomous region, municipality directly under the Central Government, or separately listed city) where the seller is located; the special invoice indicates all the content of the seller's name, seal, the quantity of goods, amount and tax amount, etc., all of which are consistent with the actual situation, and there is no evidence to show that the purchaser knew that the special invoice provided by the seller was obtained by illegal means, then the recipient will not be considered to have committed tax evasion. However, if there is evidence to show that the purchaser knew that the special invoice was obtained by illegal means before the input tax was deducted or the export tax refund was obtained, the purchaser will be treated as having committed tax evasion. This provision also explains to some extent that the subjective elements required for the perpetrator to constitute tax evasion, and the tax authorities should bear the burden of proof in this regard.

(ii) Characterisation of administrative tax penalties on the basis of the subjective state of the person concerned is in accordance with the principle of reasonableness.

On 25 November 2024, the Shanghai Municipal Taxation Bureau of the State Administration of Taxation and other tax authorities issued the "East China Regional Tax Administrative Penalty Discretionary Benchmarks", which divides the discretionary steps according to the facts, nature, circumstances and degree of social harm of the tax violations, with the aim of making the administrative penalties comparable to the above factors, fully reflecting the principle of reasonableness. If a party commits a tax offence, the degree of social harm arising from its subjective intent or negligence is different, but the tax administrative penalties are the same in different subjective states, on the one hand, it is difficult to play the role of discipline and education for a party who commits a tax offence subjectively and intentionally; on the other hand, it is not appropriate to punish a party who commits a tax offence subjectively out of negligence or through no fault of his/her own. On the other hand, for the parties who committed the offence out of negligence or without fault, the penalty is not appropriate. Taking false invoicing as an example, Article 21 of the Measures for the Administration of Invoices stipulates the circumstances of false invoicing: issuing invoices for others, for oneself, letting others issue invoices for oneself or introducing others that do not correspond to the actual business situation. For the issuing party, there may be cases of subjective false invoicing for the purpose of profit-making, and there are also cases of issuing invoices for others without their knowledge, which, according to the above provisions, may fall into the category of "false invoicing", which is "issuing invoices for others that do not conform to the actual business operation". ", in the invoice amount or number of copies of the same circumstances of the same penalties and may be transferred to the judicial organs, which is subjectively unaware of the issuer does not seem to be fair. Moreover, in the case of "letting others issue invoices for themselves that do not conform to the actual business situation", does "letting others" mean that the invoicing party should be aware of the false invoicing for the invoiced party and the invoiced party "letting" it issue invoices? "to issue, if the subjective elements of the parties are not analysed, it is not appropriate to directly qualify the invoices as fraudulent invoices.

III. Tax authorities shall bear the burden of proof in respect of administrative tax penalties that should take into account the subjective state of affairs

According to the relevant provisions of the Administrative Procedure Law and the Provisions of the Supreme People's Court on Several Issues Concerning Evidence in Administrative Proceedings, the administrative organ shall bear the burden of proof in respect of the specific administrative act it has committed. That is to say, if the subjective element is regarded as one of the constituent elements of the tax offence, then the tax authority shall provide all the evidence for the tax administrative penalty, including the evidence proving that the party concerned has subjective fault, which is not in conflict with the Administrative Penalty Law, which stipulates that "if the party concerned has sufficient evidence to prove that there is no subjective fault, it shall not be subjected to any administrative penalty". " is also not in conflict, If the tax authorities for the subjective elements of the perpetrator did not prove or insufficient evidence, may bear the consequences of unfavourable evidence, such as Beijing Junteng Real Estate Investment Company Limited and the State Administration of Taxation Beijing Municipal Bureau of Taxation and other first-instance administrative judgement [(2019) Beijing 0102 Xingchu No. 644], the court held that: the defendant, the Fourth Inspection Bureau, made a sued-for The court held that the defendant Fourth Inspection Bureau made the appealed decision that the plaintiff's behaviour of not declaring tax on the investment income in 2007 belonged to tax evasion, but it did not specify what kind of tax evasion was stipulated in Article 63(1) of the Law on Administration of Taxation Levy and did not put forward any evidence to prove that the plaintiff had the subjective intention of tax evasion, and that there was insufficient evidence and the determination of the facts was unclear, and the decision should be withdrawn according to the law.

IV. Conclusion

Although tax-related laws and administrative regulations usually do not contain expressions such as "intentional" or "negligence" that explicitly stipulate the subjective fault of the parties concerned, this does not mean that administrative tax penalties do not need to take into account the subjective state of the parties concerned. On the one hand, some tax laws and administrative regulations include the subjective elements of the parties in the description of the behaviour, and it is in line with the principle of legality that the subjective state of the parties is included in the consideration of the administrative tax penalty. On the other hand, the degree of social harm arising from the subjective existence of intent or negligence of the party concerned is also different; if the party concerned is not subjectively at fault, it may be contrary to the principle of reasonableness if it is still subject to the same administrative penalty as if it is subjectively at fault. For tax administrative penalties that should take into account the subjective elements of the parties, according to the Administrative Penalty Law, the Administrative Procedure Law and the Provisions of the Supreme People's Court on Several Issues Concerning Evidence in Administrative Litigations, the tax authorities shall bear the burden of proof, and if they fail to provide evidence or have insufficient evidence, they will bear unfavourable consequences. For the party concerned, if there are objections to the administrative penalty, it should make a statement of defence on the facts, circumstances, etc., and can also adduce evidence around the subjective state, in order to strive for exemption from administrative penalty and safeguard their legitimate rights and interests.