Post-WTO China Tax Law System Reform and the Rule of Law: Progress and Prospects

A close examination of China\u27s accession commitments reveals that effective economic reform and trade liberalization call for substantiations from a matching legal infrastructure reform. For example, taxpayers\u27 rights protection should be viewed in terms of broader political and civil rights reform. Indeed, a number of the values featured in the WTO principles and the rule of law framework encourage China\u27s further integration into both the global trade network and the international human rights regime. This is particularly evident in the Chinese tax law context. WTO principles and the rule of law requirements must be introduced and evaluated together in tax law reform proposals. WTO principles of transparency, uniform and impartial administration, judicial review match the instrumentalist\u27s rule of law elements of consistency, generality, predictability, enforceability, stability and congruence, and the substantive rule of law framework\u27s requirements of democracy, limited government, accountable administrative decision-making, and judicial independence. China\u27s accession to the WTO requires reform not only of China\u27s substantive laws, but also of its institutional arrangements, to which the Chinese government has given inadequate consideration. Without real institutional reforms creating an independent and functional administrative framework or judiciary, any substantive economic reforms are likely to fall in nascent or vague - the tremendous economic success will be held back when ill-designed incentives are spoiled or exploited. The transparency requirement scattered in various provisions of the WTO Accession Agreement is an elevated burden for China. The uniform and impartial administration principle demands the removal of subtle trading barriers such as local protectionist practices. More importantly, independent judicial review of administrative actions challenges the status quo of slow judicial reform in China - requiring that China\u27s courts meet WTO standards of independence, impartiality and non-arbitrary enforcement of judgments. China\u27s tax law system is administrative in nature but this characterization is complicated by legislative and judicial functions in the tax law. In this sense, the tax law reform benefits from as well as is circumvented by the post-WTO legal reform. The accession to WTO bounds China calling for transparency, consistency, simplicity and certainty in terms of tax legislations at both national and local levels. The hierarchical tax administration structure should not impede enforcement of tax laws. Uniform and impartial administration of tax regulations at various local levels should be improved to a level acceptable to guarantee wellgrounded tax administrative decisions and facilitate tax judicature independence. Given the growing awareness of taxpayers\u27 rights, tax authorities should not dwell at the stereotype monitor position proclaiming obligation to pay tax, rather, a workable system of protections should be established and honored. Moreover, the tax treatment of the nonprofits sector as the third sector of the society should be formulated and enforced. China\u27s tax reform cannot be expected to fit any pre-designed, transplanted model. The project here is to build a versatile tax system, which takes opportunities to streamline, track, and propel economic development