A Review and Improvement of the Tax Priority System in Bankruptcy Liquidation Proceedings

Abstract

This paper analyzes the tax priority system in bankruptcy liquidation proceedings from both theoretical and empirical perspectives, exploring its theoretical foundations and practical issues while proposing corresponding improvements. First, the paper examines the connotation of the tax priority system, the nature of tax legal relationships, and the specific manifestations of this system in bankruptcy liquidation proceedings, revealing the influences of the tax power theory, the debt relationship theory, and the dualistic theory on tax priority. Subsequently, through empirical research, the paper reviews real-world challenges concerning the order of repayment between tax claims and secured claims, whether tax delinquency fees, tax penalties, and tax advances should enjoy priority, and other related issues. Furthermore, the paper dissects the legal conflicts between the "Tax Collection and Administration Law" and the "Enterprise Bankruptcy Law" in terms of legal application. Based on this analysis, the paper proposes several recommendations for improving the tax priority system in bankruptcy liquidation proceedings. Specifically, it advocates for the clarification of principles such as balancing interests, prioritizing compensatory claims over punitive claims, and the ability-to-pay principle in tax-related bankruptcy liquidation. Additionally, it calls for the coordination of the "Enterprise Bankruptcy Law" and the "Tax Collection and Administration Law" and a reasonable limitation on the scope of tax priority to balance state tax interests with the rights of other creditors, optimize the functioning of bankruptcy proceedings, and promote the high-quality development of the market economy.