| Propelled by technological innovation and information revolution, human society has entered into a period of rapid development. The freedom of contract provides infinite possibility for market entities to arrange transactions in the form they like. However, the tax law, which must be strict, stable and foreseeable for taxpayers, will inevitably lag behind social development, thus leaving loopholes in the tax law. Because of the absence of applicable tax rules, tax treatment of innovative transactions has to be determined by tax authorities at their discretion on a case by case basis, rather than according to the tax law, so as to ensure equitable taxation. However, this is not an effective solution to the problem taxation of innovative transactions and can lead to inconsistency and inequity of tax burden. In most cases it is very difficult, even though not impossible, for the legislature to make strict tax rules governing a particular newly-created innovative transaction. It should be a good choice for the legislature to prescribe the tax treatment of innovative transactions in the form of standards, rather than rules, at this time. According to such standards, the tax authorities are allowed to determine the tax treatment of innovative transactions at their discretion on a case by case basis. The precedents thus developed will provide the necessary experiences for the legislature to institute strict rules on the taxation of innovative transactions when such an arrangement or structure is accepted widely in the market. However, it should be noted that, considering limitations by such factors as legislative techniques, professional capacity and the complexity of society, the evolution of a norm on taxation of innovative transaction from a standard to a strict rule is a very long process against the background of rapid social change. |
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