Washington International Law Journal


Ji Li


Though taxes are as certain as death, each year tens of thousands of people in the United States go to court to challenge their assessed tax liabilities, and many succeed. By contrast, very few Chinese taxpayers litigate against tax agencies, and most of those who sue eventually settle, despite low formal litigation costs. China’s nonlitigious culture does not fully explain the reluctance to sue, as courts in Taiwan adjudicate five times more lawsuits against tax agencies. Judicial bias favoring government officials, weak enforcement of judgments against the state, and agency retaliation help to explain the aversion to litigate disputes with tax agencies in China. However, once the reluctance to sue is explained, the small amount of cases that go to trial constitutes a more intriguing puzzle. Why would anyone in China insist on judicial resolution of disputes with powerful tax agencies, given the adverse conditions that have deterred hundreds of thousands of others from doing so? This article offers a number of theoretical explanations that take into account the political and institutional context for both administrative litigation and tax administration in China. People are more inclined to sue a tax agency when they have limited extractable resources, powerful allies in government, substantial interests in the dispute without alternative resolutions, or no expectation to interact with the agency in the future. These explanations are evaluated and substantiated with an empirical analysis of all tax-related administrative lawsuits that went to trial from 2009 to 2011 in Henan Province, one of the most populous provinces in China. These findings will contribute to the literature on Chinese tax administration, administrative litigation in China, and extant trial selection theories.

First Page