Paulo Cordeiro de Sousa*
The Rule of Law is based on certain principles, of which the principle of legality is paramount. In Macau, the principle of legality is not expressly established in the Basic Law, as is usual in modern constitutions, but it clearly follows from the Basic Law’s general principles and from its provisions setting forth the fundamental rights and duties of the Macau residents.
What is the principle of legality? Generally speaking, in criminal law the principle of legality means that a person cannot be convicted for an action that was not a crime at the time it occurred, even is the action is criminalised by a future law, i.e. the criminal law cannot be applied retroactively. The commonly used Latin expression is “nullum crimen sine lege” or “nullum crimen, nulla poena sine lege.” In tax law, the principle of legality means that a person should not be required to pay tax if the event was not taxable at the time it occurred – “nullum tributum sine lege,” or “nullum tributum sine praevia lege.” This principle also means that a taxable event cannot be subjected to higher taxation by subsequent laws. In addition, it follows from this principle that the law should be clear, ascertainable and non-retrospective, so that a taxpayer may be able to accurately estimate the amount of tax he will be required to pay regarding a certain taxable event.
The transfer of real estate in Macau is subject to the payment of Stamp Duty (SD). In the case of onerous transfers, it is usual for the parties to, firstly, execute a promissory agreement, and only afterwards the transfer deed. Pursuant to the Stamp Duty Regulations (SDR), the payment of SD shall be made within 30 days following execution of the promissory agreement. If the parties do not execute a promissory agreement, i.e. if they go directly to the transfer deed, or in the case of gratuitous transfers (donations), the SD payment shall be made within the same delay after execution of the transfer deed. According to the SDR, the taxable base for assessing the tax payable is the higher of the following values: (i) the tax value of the property registered with the tax administration or (ii) the transfer value declared by the parties.
Article 59 of the SDR sets forth that, whenever the Head of the Macau Tax Department considers that the real value of the property is lower than its registered tax value, the payment of SD will be deemed provisional and the property may be subject to appraisal for the purpose of additional SD assessment. In my opinion, this provision clearly violates the principle of legality and should therefore be considered unconstitutional (against the Basic Law), because it confers upon the Head of the Tax Department the power to, at his own discretion, alter the taxable base of a certain transaction or certain donation after the operation has occurred. A subsequent change of the taxable base amount is exactly the same as the subsequent change of the tax rate applicable to the taxable base. It is an obligation of the authorities to keep updated, registered data on the properties so that, as mentioned, the taxpayer may clearly ascertain the amount of tax they will be required to pay with respect to an envisaged operation. In order to improve legal certainty, if it is not possible to maintain updated registers, wouldn’t it be better to create a procedure whereby the taxpayers would be required to declare and pay, in definitive terms, the tax related to a certain operation prior to the operation taking place, instead of giving a discretionary power to the Head of the Tax Department to change the assumptions under which the operation has been imagined by the parties?
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