Tax Law Design and Drafting (volume 1; International Monetary Fund: 1996; Victor Thuronyi, ed.) Chapter 2, Legal Framework for Taxation - 1 - 2 Legal Framework for Taxation Frans Vanistendael Taxation without representation is tyranny. —James Otis Modern fiscal systems emerged in Western Europe and North America during the half century that followed the American and French Revolutions. Although modern income and turnover taxes did not yet exist, by the middle of the nineteenth century the basic legal framework for raising these taxes had been established and with it the foundation for the spectacular increase in tax revenue that would occur almost a century later during and after World War I. In general, the basic legal framework calls for taxation according to the rule of law. The fundamentals of this framework are that (1) a tax can be levied only if a statute lawfully enacted so provides, (2) a tax must be applied impartially, and (3) revenue raised by a tax can be used only for lawful public purposes, not for the prince's private ends . The rule of law contemplates that these principles will be enforced by independent courts. The role of the courts is often referred to in this chapter. In some developing and transition countries, however, the judicial system does not, for various reasons, effectively fulfill its role. This is a substantial impediment to the rule of law in tax matters. A discussion of the ramifications, although important, is beyond the scope of this chapter. In addition to these very general principles, the power to make tax laws is subject to several types of legal limitations. Their sources include (1) constitutional or other basic legal principles underlying an organized society, (2) international agreements, (3) interpretation of the tax laws by the courts, (4) the general framework of civil law and public law, and (5) the political structure of the country as a centralized or a federal state. Tax laws must be drafted in the context of this legal framework, as it applies in the particular country in question. This chapter reviews the principles underlying this Note: Victor Thuronyi contributed to the writing of this chapter.
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