When the tax authorities infringe taxpayer’s legitimate rights in respect of national taxes, there are two methods by which appeals from taxpayers are reviewed and relief may be given. These are “administrative appeal” and “litigation.”
The administrative appeal system allows a taxpayer (and other interested parties) to protest against actions by the tax authorities, such as correction, determination and seizure, by filing a protest with an administrative agency and requesting the annulment or amendment of the action concerned. An administrative appeal is, first of all, filed with the administrative agency that has taken an action. This is called a "request for reinvestigation" and is the first stage of an administrative dispute.
If the taxpayer is not satisfied with the decision made by the administrative agency, he or she may file a "request for reconsideration." Generally, this request is filed with an administrative agency one level higher than the administrative agency that has taken the action pertaining to the original complaint. In the case of national taxes, the request for reconsideration is filed with National Tax Tribunal, established especially for this purpose as an independent body.
Thereafter, if the taxpayer is not satisfied with the decision made by the President of National Tax Tribunal, he or she may then bring the matter to a judicial court.
Administrative Appellate Law and Administrative Litigation Law are the general procedural laws governing administrative disputes. Because the number of actions on national taxes is enormous, they occur repeatedly, and these actions require specialist knowledge. Specific rules on national tax disputes are stipulated in General Law of National Taxes Procedure considering the above-mentioned particular characteristics of national taxes.
That is to say, while Administrative Appellate Law provides that, in principle, requests for reconsideration be filed with an administrative agency one level higher than the administrative agency that took the original action, General Law of National Taxes provides that taxpayers who are not satisfied with an action first submit a request for reinvestigation to the administrative agency that took the action. This is because it is appropriate to give the administrative agency that took the administrative action an opportunity to reinvestigate the case.
Moreover, as already stated, the rule is that a "request for reconsideration" be filed with Regional Tax Tribunal (a specialized institution independent of the relevant administrative agency) instead of the administrative agency one level higher than the agency that took the original action.
The relationship between the administrative appeal system and litigation is as follows. Although Administrative Litigation Law allows the plaintiff to initiate litigation immediately without filing a request for reinvestigation or reconsideration, General Law of National Taxes provides that litigation cannot, in principle, be brought to court unless a decision on an administrative appeal has been received from an administrative agency. This is the principle of 'petition after administrative appeal' (see Figure9). The above provision aims to avoid situations in which a substantial number of appeals for rescission are filed in court. It is intended that these cases be solved by utilizing expertise and experience at the level of the administrative agency and the tribunal, considering that cases of action on taxation repeatedly occur in large numbers. Further, it contributes to the unified operation of tax administration.