Taxation abuse against Tai Ji Men is an infringement of freedom of association

The bonus system, an incitement to fabricate tax evasion cases


By Willy Fautré, Human Rights Without Frontiers


HRWF (22.10.2021) – Taxation abuse in Taiwan has become a human rights issue as it infringes the right of association recognized by the constitution. The most emblematic example of this egregious violation is the Tai Ji Men case, which has been dragging on for 25 years.


In April 1997, Dr Hong Tao-tze, the founder and spiritual master of Tai Ji Men, was indicted by Prosecutor Hou Kuan-jen for alleged tax evasion concerning manual donations for the years from 1991 to 1996 by dizi to their shifu. This practice had been forever recognized as non-taxable and donations had always been tax exempt in the case of Tai Ji Men. The nature of the relationship between Tai Ji Men’s shifu and his dizi has remained unchanged since the inception of the Tai Ji Men Qigong Academy 55 years ago; however, illegal taxes and heavy penalites were imposed on Tai Ji Men for the six years based on the unlawful indictment. It took Dr Hong ten years to be declared not-guilty of tax evasion and all the defendants were acquitted on final appeal in July 2007. Since the court has ruled that no tax is owed, the tax bills should be revoked according to the law.


On the one hand, Prosecutor Hou, who was the driving force of arbitrary prosecution, lost his face and on the other hand officials of the National Taxation Bureau (NTB) and the Administrative Enforcement Agency (AEA) lost financial advantages for losing the case at the Supreme Court. However, artificially and illegally, the two state institutions maintained their prosecution against Tai Ji Men for an allegedly unpaid tax on dizi’s donations to their shifu dating back to 1992, despite the fact that, in July 2007, the Supreme Court ruled that the donations were gifts, which were tax-exempt income and nontaxable. In addition, the Supreme Administrative Court of Taiwan concluded that its previous final judgment for 1992 tax bill had failed to take into account new facts and evidence, and that the 1992 tax decision is unjustifed. The consequence of this administrative abuse was that in late August 2020, Taiwan’s Administrative Enforcement Agency and National Taxation Bureau arbitrarily seized and auctioned the land intended for a self-cultivation center for Tai Ji Men dizi


At a webinar co-organized on 1 October by CESNUR and Human Rights Without Frontiers, Mei-Jiuan Huang, a former tax officer, denounced the mechanisms arbitrarily used and abused by the NTB hierarchy to protect the bonuses they can get from successful prosecutions but also to fabricate alleged fraud cases for financial benefits.


Excerpts from Mei-Jiuan Huang’s testimony


“The set of guidelines for tax collection bonuses is merely an administrative rule, not a law or decree. When a government agency creates a rule and sends it to the Ministry of Finance for approval, it will be sent to the Executive Yuan, which will publicize it and make it official, once it has been authorized by the Ministry of Finance. Everyone, including high-ranking officials, wants to advance in their careers and earn more money. The officials are concerned about their job performance because it affects their future. Their subordinates follow their lead because they care about their job success. A bonus is awarded based on job performance, and the amount of bonuses awarded is not even close to what tax officers obtain from bonuses for collecting tax penalties.


Legislator Shing-Yu Chu proposed to abolish the bonuses for auditing taxes in 2003, some guidelines for tax collection bonuses were changed in 2005. Chang Sheng-ford, the then chief of National Taxation Bureau of Taipei, once said, ‘A tax officer’s salary is not enough to maintain integrity.’ Of course, some people would want to get tax collection bonuses and allow tax officers to get the bonuses. I think this bonus system should be abolished completely.”


A tax collection bonus based on performance?


A tax collector must perform various administrative tasks in addition to tax auditing. Every year, his or her performance will be assessed. If the job performance evaluation is included, he or she will receive a bonus based on job performance after the evaluation. Tax officers are reviewing cases, and if they do so well, they will receive high performance evaluations, which will result in significant bonuses for collecting tax penalties.


In addition, the bonus system can be used by all employees in the taxation bureau. Workers at the service counter, for example, are evaluated depending on the number of people they serve and the number of consumer complaints they receive each year. Anti-corruption officers are responsible for monitoring and investigating corruption cases.


Everyone can share the bonuses, including drivers, IT employees, and individuals in all administrative areas; therefore, the amount each person receives is not big. However, the total figure is huge due to the vast number of people that split the bonuses. As a result, we still have to set aside a significant sum for the annual bonuses, which are largely meaningless and have not improved the quality of service. They should be completely removed.”


Is there a link between the bonuses and the over-collection of taxes?


”Every year, the tax authority will assess a staff member’s auditing performance. If a staff member manages a thousand businesses, for example, a projected annual tax revenue has already been established for that staff member. The budget for bonuses is set based on the previous year’s budget, and it is then increased by 10% or 20% the next year. If the economy is sluggish, tax revenue will suffer as a result.


If the tax income collected for this year does not meet the expected amount, the staff member’s performance score will be low, and the staff member will not receive a tax collection bonus.


As a result, individuals in high positions will encourage their employees to collect more taxes in order to improve their performance score. So, didn’t I just say that if a tax officer didn’t obtain enough tax money in his area, he’d approach some large corporations for help? He’ll ask those huge corporations to pay more in December, and they’ll seek refunds in January the next year, claiming that they made a mistake the year before.


This way, the previous year’s budget will be met, and the tax refund granted the next year will have no effect on the prior year’s number. This technique has resulted in what is known as tax over-collection, which is linked to the bonus system.


Tax officers must work hard to discover more people and firms on whom they may impose higher taxes in order to meet their performance targets and be included on the so-called list of awardees, from which they can be recognized and paid with bonuses, so it’s all connected.”



The Tai Ji Men case and the tax collection manipulation


“The National Taxation Bureau collaborated with Hou Kuan-jen and the Investigation Bureau’s Field Office on this case, which was initiated by Hou Kuan-jen and the Field Office. A bonus was given to someone who reported the Tai Ji Men case to the Field Office. I’ve worked on a case that was sent from the Field Office, and my initial plan was to investigate the case by sending a letter to the appropriate agency. My unit leader, on the other hand, chastised me, telling me that there was no need to examine a case sent from the Field Office and that I could simply issue a tax bill based on the data transferred from the Field Office.


They don’t want us to investigate because they’re scared we’ll deal with the violator in private if we do, so we’re not authorized to. Many tax authorities will not review cases sent by the Field Office and will issue tax bills directly based on the information they provide. That’s why Shih Yueh-sheng, the tax collector, didn’t look into it. It was because it had been customary for a long time. The Investigation Bureau’s Field Office is quite powerful, and it has a so-called anti-corruption unit. The anti-corruption unit is the most feared by tax officers since it can track people by following them. It’s terrifying because no one wants to be watched, bugged, or followed at any time, thus no one will examine a case sent from the Field Office.


However, I believe that the Field Office is in charge. If it chooses to target a specific individual, that individual will be in big trouble. There must be a puppeteer behind the scenes when a tax official handles a case like this. I’m guessing they don’t anticipate to be discovered. It is possible that tax officers are incentivized by bonuses and job performance credits.


Taxpayers’ rights, in my opinion, have never been recognized in Taiwan because the taxation practice is the legacy of the authoritarian past. Tax officers, on the whole, have a more authoritarian mindset than their counterparts in other government departments. Many tax authorities would regard people who are referred to as “wealthy” or “business owners” as dishonest businesspeople or “unruly” individuals.


When the Tai Ji Men case first started, I overheard a colleague argue that because it was wealthy, we should make it pay taxes. This was not proper, I thought at the time. It is not reasonable to expect someone who is wealthy to pay unjustified taxes. Many tax officers, however, have that mindset. This, I believe, is due to the fact that many people are not awakened even after the martial law is lifted since they have been governed for a long period by an authoritarian system. We were unaware of taxpayers’ rights until the call for the protection of taxpayers’ rights a few years ago.


I believe this is an area that we must work diligently to improve since too many individuals are terrified of taxc vvv officials due to their numerous techniques. For example, a tax officer may advise you to pay more unwarranted taxes this month in order to meet his target, and then file a refund the following month claiming a mistake. This is solely for the purpose of improving his job performance score! This isn’t right. People and company owners are burdened by this. We have seen far too many examples of this in the tax authorities, so I believe the public needs to wake up; otherwise, taxpayer rights will never be protected.”




Such unethical practices are a real threat to the well-being and sometimes the survival of non-profit organizations and private companies.


More and more taxpayers denounce the system of bonuses and testified about their dramatic experience at the webinar organized by CESNUR and Human Rights Without Frontiers.


The tax agents get promotions and bonuses for issuing illegal tax notices, despite being ordered by the Executive Yuan, Legislative Yuan, Control Yuan and Supreme Court to dismiss illegal tax bills, as the Tai Ji Men case shows even after 25 years of legal battles and protests.


Pocketing bonuses powerfully encourages greedy bureaucrats to violate the law and has always been a major motivation in ignoring the indications of courts of law.


The violators are not punished, nor have they apologized for their wrongdoings.


Human Rights Without Frontiers recommends

  • a reform in the Taiwanese judicial system, especially the administrative litigation system;
  • the annulment of the bonus system as it creates incentives that can lead to undue fiscal and judicial harassment;
  • sanctions against those in state administrations and the judiciary who are found to be negligent or to have abused their power.