Personal Liability of Managers for Corporate Income ‎Tax with a view to Comparative Law ‎

Document Type : Research Paper

Author

Assistant Professor of Law, the Institute for Management and Planning ‎Studies (IMPS), Tehran, Iran. ‎

Abstract

Abstract
According to Article 198 of the Direct Taxes Act, in commercial companies, company managers, collectively or individually, are jointly and severally responsible to the company for paying the company's income tax that has been final during their management. Based on the principle of the independence of the legal personality of the managers from the company, the debt of the company can only be claimed from the company itself, as a result, claiming the company's tax debt from the managers is against the aforementioned legal principle. On the other hand, according to the principle of personal tax responsibility, tax can only be claimed from the taxpayer, i.e. the company. Article 198 is written in such a way that the joint and several liability of directors is general, absolute, and as a result includes all members of the board of directors, including the signatory directors and others, as well as those who are faulty or not faulty of non-payment of taxes. Since the ruling on the personal responsibility of managers for company tax is against the principles governing corporate law, obligation law, and tax law, as well as restricting the individual rights of board members and the CEO of the company, the legal analysis of this issue in the framework of the concepts and principles of the legal system in related fields can reveal new angles about the basics of managers' responsibility for corporate taxes and appropriate legal policy in this matter. The issue that can be raised is whether the provision of Article 198 of the Act is justified from a legal point of view or not. Is it justifiable to impose personal responsibility on managers for company taxes, based on the principles of tax law, obligation law,
corporate law, and other related legal fields? What is the ideal legal system for the legal regulation of managers' responsibility for corporate taxes? The theoretical framework of the research is based on several principles and accepted in related legal fields, including the principle of independence of the legal personality of managers from the company, the principle of individuality of tax, the principle of individuality of responsibility, the principle of the ability to pay taxes, the principle of tax justice, the principle of ease of tax collection, The principle of guaranteeing public rights, the moral principle of responsibility, and other relevant principles, and a balance between these principles are organized. The sources of this research are derived from legal principles and principles in related fields, fundamental principles, and the subject of legal consensus, including justice and individual rights, relevant laws and regulations, as well as relevant and useful findings in comparative law. The research method in this article is comparative and the validation of Article 198 of the Act is analyzed, reasoned, and deduced based on the criteria derived from certain legal principles in related legal fields including tax law, corporate law, public law, and civil liability law. This article tries to prove the hypothesis with legal analysis that the imposition of such responsibility is unjustified and incompatible with the foundations, principles, and integrity of the legal system. Based on the research conducted in this article, the joint and several liability of managers for company tax, which is very strict against managers to facilitate tax collection and deal with any possibility of tax abuse, regardless of the manager's role, authority, and ability to not pay tax. The imposed tax is contrary to the desired legal and tax system and is a clear violation of individual rights and the extensive and unjustified use of public law tools. The main objection is that Article 198 sacrifices the role of fairness, justice, individual rights and freedoms, the moral aspects of the legal system, and the integrity of the legal system without providing the necessary justifications and bases for the expediency of providing tax revenue for the government. From the point of view of this research, the ideal legal system for defining the responsibility of managers for corporate taxes is the civil liability system, which uses legal and acceptable elements and takes into account effective factors such as the manager's obligation to pay the company tax, the manager's fault in paying the tax, The role and authority of the manager in paying taxes, the presence or absence of sufficient resources in the company to pay taxes and other responsibility factors, to establish a fair and efficient system.
 

Keywords

References

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Law Quarterly
Volume 53, Issue 2
August 2023
Pages 229-251

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