Case No 5 Yang Suqin, Wang Youshen’s application for state compensation

1. Background

Wang Shoucheng was the deceased husband of the claimant Yang Suqin, and the father of Wang Youshen, another claimant in this case. He reached a verbal agreement with a supply and marketing cooperative in Liaozhong county, Liaoning province, to run the salvage station of the cooperative in the summer of 1992. The oral agreement defined the business scope, operation mode, tax obligations and profit distribution. The cooperative provided the business license and a bank account, and Wang Shoucheng was to pay, and did pay, 3 percent of sales value as tax. On April 3, 1993, the people’s procuratorate of Liaozhong county (hereafter referred to as Liaozhong Procuratorate) detained Wang Shoucheng on suspicion of tax evasion. On April 17, he was released on bail pending trial. By then, his freedom had been restricted for 15 days. Later, Wang’s behavior was characterized as unlicensed business operation tax evasion by a third-party taxation consultant.

Liaozhong Procuratorate instituted a prosecution to the local people’s court on March 3, 1994. On June 6, the court returned it to the procuratorate due to “unclear facts and insufficient evidence”. The procuratorate decided to withdraw the case because it found that Wang was not an independent taxpayer and the party obliged to make tax payment was the cooperative rather than Wang.

Wang applied to Liaozhong Procuratorate to claim back the paid tax, but the procuratorate rejected the application by claiming that the tax had been given to tax authorities and was unavailable. Wang died of illness on July 13, 2007. Wang’s wife and legitimate successor Yang Suqin then applied to the procuratorate for compensation. The procuratorate returned only 7,500 yuan of the 168,681 yuan ($25,674) that should have been returned to Wang, leaving 161,181 yuan outstanding.

2. Ruling

The Liaozhong Procuratorate decided to return 47,500 yuan of the tax paid by Wang Shoucheng and pay a compensation of 2,439.75 yuan for Wang’s loss of working time. Yang Suqin refused to accept the decision and applied for reconsideration to the Shenyang People’s Procuratorate, but the procuratorate did not make a decision within the legal time limit. Yang appealed to the Compensation Committee of the Shenyang Intermediate People’s Court. The court ruled that the Liaozhong Procuratorate should pay compensation of 2,439.75 yuan for Wang’s loss of working time, return the tax 47,500 yuan to him, with interest, and pay 1,000 yuan to him for mental distress.

Then Yang Suqin appealed again to the Liaoning Provincial Higher People’s Court, which rejected her appeal. The Compensation Committee of the Supreme People’s Court finally heard the case and directed Liaozhong Procuratorate to pay a compensation of 2,439.75 yuan for Wang’s loss of working time, 1,000 yuan for mental distress, and return the balance of 161,181 yuan to him.

3. Significance

The case is about seizure or retention of compensation in a criminal offence. Liaozhong Procuratorate froze Wang’s money, which he had misguidedly paid as tax, during the investigation of the case and did not return the money after withdrawal of the case. Its behavior violated Article 18 of the State Compensation Law, in that it infringed upon property rights by withholding compensation in a criminal charge proceeding. The final decision embodies the State Compensation Law’s protection of legal property rights and its governance function in regulating public power.