Limitations on the Legal Interpretation of Japanese Tax Laws

Abstract

Japanese legal interpretation of tax statutes and administrative ordinances thereunder has some unique legal characteristics when compared with the interpretative methodologies of other countries. In this article, some of these traditional and new methodologies are analyzed with reference to the main Japanese academic views in this field. The following is a list of possible legal sources for tax law interpretation: (1) the Constitution, (2) tax statutes themselves, in which tax wordings that are also used under statutes of other legal fields should follow the legal interpretation in those other fields, (3) judicial decisions and legal doctrines derived from judicial decisions including decisions in non-tax cases, (4) administrative interpretative circulars, although these have limited binding power only within administrations, (5) determinations of the National Tax Tribunal, for national tax matters, and (6) academic/theoretical doctrines and principles, as academic observations of tax laws sometimes influence legal interpretation. In this article, there are methodologies for the interpretation of some subject, like interpretation of constitutional validity, constitutional interpretation or statutory interpretation, difference between the two institutions, relevance to the Korean legal system. Japanese methodology for tax law interpretation follows basic methodologies for the legal interpretation of other laws. However, to control tax avoidance and abusive tax shelter issues, certain levels of discussion of substance over form are accepted by the courts, although there is an unclear line of limitation for the application of such judicial doctrine in tax practice.