Tax Matters | The Tax Enforcement Code – Is it really in force?

Paulo Cordeiro de Sousa*

The enforcement of tax debts, as well as the enforcement of other debts of public entities, should take place under the terms of the tax enforcement procedure as is generally set forth in the tax and administrative laws in Macau. Up until December 20, 1999,  Macau Handover Day, the Tax Enforcement Code was in force. The Tax Enforcement Code (TEC) was approved by Decree No. 38.088 on December 12, 1950 and established a procedure applicable to the enforcement of said debts. However, the Reunification Law (Law No. 1/1999), which was effective as of December 20, 1999, revoked the TEC since it was Portuguese legislation applicable to Macau and approved by Portuguese sovereign bodies. It just so happens Macau SAR authorities have not passed any new legislation to replace the TEC to this day. This means that since December 20, 1999 there has been a legislative gap (an absence of legal provisions) regarding the enforcement of tax debts and other public debts by Macanese public entities, signifying that there is currently no legislation in force that is applicable to the enforcement of said debts. However, Macanese authorities have continued to apply the provisions of the TEC as if it were still in force, and this is not a desirable situation. Given the absence of any legislation, it is understandable that the courts had to find creative solutions to overcome the issue from a practical standpoint. In fact, the courts have already issued a number of decisions, arguing that although the TEC had been revoked by the Reunification Law, its provisions may still be enforced provided they do not conflict with the Basic Law of Macau and/or current legislation in force in Macau.

In my opinion, there are grounds to disagree with the courts’ position. Pursuant to the Reunification Law, the provisions contained in the legislation that was in force in Macau prior to the Handover may be treated as still being in force, provided that the legislation has not been replaced by new legislation and that it does not conflict with the Basic Law. However, this only applies to the legislation identified in Annex II of the Reunification Law, and this does not include the TEC. Therefore, any other legislation – as is the case with the TEC – has been expressly revoked by Article 4(4) of the Reunification Law. On the other hand, the practical outcome of the courts’ position may result in an undesirable inconsistency in the Macanese legal system: if one accepts that the provisions of the TEC may still be deemed to be in force, despite being expressly revoked by the Reunification Law, why should this not apply to other revoked legislation?

Furthermore, in a decision dated January 2018, the Court of Second Instance ruled that the statute of limitation applicable to tax debts is the one provided for in the TEC, which is 20 years. Previous court decisions accepted this – since the revocation of the TEC and the Civil Code, which entered into force November 1, 1999 – providing a new general statute of a limitation of 15 years. The latter should apply to tax debts, at least as of the date of the TEC revocation. The latter should apply to tax debts, at least as of the date of the TEC revocation. However, this judicial decision opposed the previous case law and applied revoked legislation instead of allowing the existing valid legislation to cover the matter. In my view, this was a decision “contra legem,” against the law, and this ruling hindered taxpayers’ rights, in particular, by establishing that tax debts may be enforced for 20 years instead of the 15 year period established in existing laws. Therefore, it is of the utmost importance that the competent authorities pass new legislation to close the gap that the TEC revocation has created in the Macanese legal system to prevent similar situations from arising.