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Comparative Tax Jurisprudence: Germany and Japan

Takeshi Iizuka
Copyright Date: 1993
Published by: NYU Press
Pages: 284
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  • Book Info
    Comparative Tax Jurisprudence
    Book Description:

    This book is a comparative study of the tax systems of Germany and Japan. It is a considerably expanded version of Iizuka's previous monograph, Veritable Bookkeeping Records, which was important enough a contribution to comparative tax studies that it was serialized and published in twenty-six parts over three years ('79-'82) in the Japan Society of Accounting's journal, Accounting. The present volume includes a good deal of new, revised and updated material not included in the first monograph. Here Iizuka boldly puts forward counterarguments to the opinions of several hundred Japanese, European and North American scholars. One of his chief messages is that Japan needs to look to Germany, to the United States and to other EC nations for guidance in developing fairer accounting principles.

    eISBN: 978-0-8147-3777-4
    Subjects: Law

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-x)
  4. Part One

    • 1 The Essence of the Concept of the Principles of Regular Accounting
      (pp. 3-12)

      It was in Prussia, in the eighteenth century, that the concept of “orderly books” was introduced into law for the first time in history. The concept of “regular accounting principles,” however, came on stage in the form of a law for the first time as Article 38 of the German Commercial Code of 1897. It is over eighty years since the concept, which established the standard for a merchant’s responsibility to keep accounts, appeared in history clad in today’s attire. At this stage, however, it is necessary for us to ascertain the true character of this concept.

      The reason is...

    • 2 The Principles of Regular Accounting Viewed as Moral Obligations of a Positive Law
      (pp. 13-28)

      In regard to the concept of the principles of regular accounting as moral obligations in positive laws, Dr. H. W. Kruse of Würzburg University wrote: “This principle was first codified in the empire by 162 IIAO1919/1931. However, it had already been considered valid for centuries.”¹ This description, however, is not correct. The reason is that in Article 606 of the Prussian General Common Law of 1794 the following provision can be found: “This occurs specifically wherever the merchant has committed errors in bookkeeping, which are to his advantage.”

      In other words, the principle of “truthfulness” regarding accounting records,...

    • 3 The Principle of “Timeliness”
      (pp. 29-35)

      No one will deny the fact that the Corporate Accounting Principles and its explanatory notes have misplaced the principle of “timeliness” somewhere. Why have the scholars of Japan not advocated the establishment of the principle of “timeliness” in accounting records? For instance, the latter part of Paragraph 1 of Article 146 ofAO(Tax Code) prescribes the following: “Cash receipts and disbursements must be recorded daily.” This provision, in particular, was the outcome of the extensive revision undertaken in 1977, in which provisions were rearranged and the language of various provisions was modified. Before this revision, Paragraph 7 of Article...

    • 4 The Principle of “Materiality” and Its Criticism
      (pp. 36-48)

      In Chapter 3, “System of the Principles of Regular Accounting,” under the heading “Materiality,” Ulrich Leffson writes as follows: “From the idea of accountability, to give information to those entitled to it as a basis for their decisions, one can derive the principle that is established as the principle of ‘materiality’ in American balance sheet discussions and is best called ‘Prinzip der Wesentlichkeit’ in German.”¹

      In explaining this matter, he quotes from an article by S. M. Woolsey, “Objective Base for Making Materiality Decisions,” in the bulletinThe Accountant, which is issued by the Institute of Chartered Accountants in England...

  5. Part Two

    • 5 Erroneous Theories of Dr. Kotaro Tanaka
      (pp. 51-56)

      Referring to the concept of “the principles of regular bookkeeping” for the first time inLogic of the Laws Concerning Balance Sheet, Dr. Tanaka writes that the German law prescribes that the adjustment of books of account should follow regular accounting principles, namely, “the principles of regular bookkeeping” (Article 38 of the German Commercial Code and Article 129 of the German Stock Law).¹ It is extremely unclear what the phrase “the principles of regular bookkeeping” means. After all, legislators should acknowledge that there has been a principle for practical business that has generally been practiced by businessmen, and aside from...

    • 6 Critical Review of the Opinions of Respectable Japanese Scholars: Part I
      (pp. 57-72)

      In the Zen sect in Japan, there is a legend of an idea of reason that has been handed down from generation to generation: “When a disciple’s opinion exceeds that of his master, he is worthy of being recognized for the first time as a full-fledged man.” This legend means that when a disciple’s opinion excels that of his master, he is worthy of being sanctioned for the first time as an independent man. I believe that we who are out of office and are free professionals grow by receiving our debt in learning from the direct and indirect guidances...

    • 7 Critical Review of the Opinions of Respectable Japanese Scholars: Part II
      (pp. 73-86)

      Under the heading “The Principles of Regular Bookkeeping,” Tajima takes the stand that these principles are the ones that have been expressed thus: “Corporate Accounting should make correct books of account regarding all the transactions made in accordance with the principles of regular bookkeeping.” He quotes, just as it is, the very wording of the provisions from Paragraph 2, General Principle 1 of Corporate Accounting Principles.¹

      I think, however, that Tajima’s explanation does not constitute an explanation of this matter logically, because there is a term in his explanation that has to be explained. At the same time, there is...

    • 8 Fair Accounting Practice in the Commercial Code of Japan
      (pp. 87-102)

      The 1974 revision of the Commercial Code of Japan adopted for the first time in history the term “fair accounting practice” (Article 32 [2] of the Commercial Code in Japan). Viewed from the context of the law, it was a concept that made its appearance abruptly, a term that cannot be found in books previously published by accounting scholars in Japan. I assume that its appearance came about because the members of the Commercial Code section of the Legislative Council of the Ministry of Justice had taken the articles at the beginning of Chapter 5, “Books of Account,” into consideration...

  6. Part Three

    • 9 Calculation Regulations in the Federal Republic of Germany: Part I
      (pp. 105-121)

      As I said earlier, Dr. Kotaro Tanaka, a prominent scholar representing Japanese academic circles on the subject of commercial laws, made a fatal error in grasping the concept of the “principles of regular bookkeeping” prescribed by Article 38 of the GermanCommercial Code. This has led to irrevocable damage in the subsequent development of accounting theories and the accounting system in Japan. The Imperial Tax Code(RAO)was drawn up by Enno Becker and enacted on December 13, 1919. With the enactment of this particular law, the Federal Republic of Germany had, for the first time, itemized and detailed regulations...

    • 10 Calculation Regulations in the Federal Republic of Germany: Part II
      (pp. 122-133)

      Paragraph 3 of Article 146 of the current Tax Code(AO), which constitutes the nucleus of the calculation regulations of the tax laws of the Federal Republic of Germany, stipulates: “The entries and other required records are to be made in a living language. If any language other than German is used, tax officials may require translations. If abbreviations, numerals, letters, or symbols are used, then the meaning must be unambiguously indicated for each.”

      I have already touched on the point that this term “a living language,” which means “ordinary language,” had already appeared in Article 32 of the German...

    • 11 Calculation Regulations in the Federal Republic of Germany: Part III
      (pp. 134-151)

      Considering the order of my arguments, I should now introduce the full text of the revision of the German Commercial Code that has been made a positive law. In the course of drafting the provisions of the revised law, which appeared inPaper 7/261 of the German Bundestag, 7th Sessionand was made public by the German National Assembly, several modifications and additions were made. I wrote earlier, for example, that “in Article 41, the revised draft resulted only in the deletion of the term ‘an inventory of property,’” the reason for which was simply that the revised draft stated...

    • 12 The Formation of an Especially Close Connection between Civil Law and the Tax Laws
      (pp. 152-179)

      The reader may remember my earlier remarks about Gerd Spangemacher. I pointed out that Mr. Spangemacher, the presiding judge of the Federal Finance Court in the Federal Republic of Germany, wrote inGeneral Theory of Law(5th ed., 1978) that he had high praise for Enno Becker for his historical achievements in drafting and completing the Imperial Tax Code(RAO), and that it was Enno Becker in 1918¹ who had created an especially close connection between Civil Law (Citizens’ Law) and Tax Law in Germany. I stated that the pivotal provisions of this close connection were Paragraph 1 of Article...

    • 13 The Calculation Regulations in the United States and England
      (pp. 180-194)

      The Companies Act of 1948 in England had a total of 462 articles, along with 8 tables. Since the enactment of the Companies Act of 1862, among many companies acts that became indicative of an entire era, the Companies Act of 1948 had the most numerous provisions. As a result of the Companies Act of 1976, Articles 127, 147, 148, 331, and so forth—the provisions regarding calculation—were all abolished and lost their validity.

      There are only forty-five articles in the Companies Act of 1976, in addition to “Schedules” 1 through 3. The full text is divided into two...

  7. Part Four

    • 14 The Problems of the Fourth EC Guideline and the Seventh EC Guideline
      (pp. 197-227)

      I have repeatedly referred to the threefold structure of the concept of the principles of regular bookkeeping, but I have not yet touched on several problems with the principles of regular bookkeeping that are the result of changing times. The first of these is a problem in regard to the Fourth EC Guideline and the Seventh EC Guideline. A second one relates to the Union Européenne des Experts Comptables, Economiques et Financiers (U.E.C.). The third is the problem of the “declaration of completeness” in auditing. The fourth relates to the principles of regular bookkeeping when using electronic data processing. As...

    • 15 Problems Relating to Union Européene des Experts Comptables, Economiques et Financiers (U.E.C.)
      (pp. 228-239)

      A special issue, dated April 3, 1980, ofThe Accountant, the journal for professional accountants in the United Kingdom, is entitled “Annual Review 1979–80.” The issue carries an article entitled “Foreign Affairs—International Harmonization” by Derrick Owles, a visiting fellow at the City University Business School. He writes: “The development of standards, national and international, is a comparatively recent activity in the accounting world. Before the 1939–45 war, there was nothing done even on a national scale, and it was only in the aftermath of the war that national standards were developed, but with no idea of any...

    • 16 The Problem of the “Declaration of Completeness”
      (pp. 240-249)

      It may be due to poor scholarship on my part, but I have been unable to locate any Japanese accounting dictionary or book that scientifically treats the problem of the “declaration of completeness,” which is deeply rooted in the auditing practices of the Federal Republic of Germany. Even before Kotaro Tanaka’sLogic of the Laws Concerning Balance Sheet, the field of accounting in Japan should have been absorbing the outstanding accounting practices of the Federal Republic of Germany.

      I do not understand why the problem of the “declaration of completeness” has been overlooked, or set at naught, so far in...

    • 17 Principles of Regular Bookkeeping and Electronic Data Processing
      (pp. 250-260)

      I do not know whether there are some legal accounting standards in Japan in regard to this subject. Iamaware of the statement by the director of the Civil Affairs Bureau of the Ministry of Justice, dated November 18, 1974, regarding “the preservation of books of account and other important business documents via microfilm” and of a referential opinion regarding “the microcopying of books of account and others,” which was made public on August 20, 1974, by the Electronic Computer Accounting Committee of Japan’s Association of Certified Public Accountants. Both documents are concerned with the preservation, and so forth,...

  8. References
    (pp. 261-270)
  9. Index
    (pp. 271-274)
  10. Back Matter
    (pp. 275-275)