Annex 4 Echr

7/30/2019 Annex 4 Echr

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The Relevance of the ECHR to

Taxation Matters

Robert Attard LL.D.

Annex IV

NOTE FOR PUBLISHER PRINT 2 SLIDES PER PAGE



Relevant Articles

• Article 1 of the First Protocol of the ECHR (Right toProperty).

• Article 3 ECHR (Protection from Inhuman & DegradingTreatment.

• Article 4 ECHR (Protection from Forced Labour).

• Article 5 ECHR (Right to Liberty and Security of Person).• Article 6 ECHR (Fair Hearing).

• Article 8 ECHR (Right to Private & Family Life).

• Article 11 ECHR (Freedom of Association).

• Article 13 ECHR (Right to an Effective Remedy).

• Article 14 (Protection from Discrimination).



Article 1 of the First Protocol of the

ECHR (Right to Property)

‘Every natural or legal person is entitled to the peacefulenjoyment of his possessions. No one shall be deprived of hispossessions except in the public interest and subject to theconditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any wayimpair the right of a State to enforce such laws as it deemsnecessary to control the use of property in accordance withthe general interest or to secure the payment of taxes or other

contributions or penalties.’




ECHR (Right to Property) (i)

• Taxation interferes with the right to property.

• However, the right to property is not absolute

right.

• The above does not mean that member statesare free to impose any tax regime they may

deem fit.




ECHR (Right to Property) (ii)

• The decisions of the European organs on human rights provide that, inorder to comply with the Convention’s standards of fundamental humanrights, taxation must:

(a) Be imposed according to law;

(b) Pursue a legitimate purpose;

(c) The means employed must not be disproportionate to the ends

involved’ ;(d) Serve a valid purpose in the public or general interest;

(e) Provisions adopted must be reasonable and proportionate means toachieve that end

• States are allowed a significant margin of appreciation in applying theprinciple of proportionality to their tax laws.

• Less than 4% of the challenges to tax laws were successful.• No absolute prohibition of retrospective tax legislation (NAPUK v. UK).



Article 1 – Leading Cases (i)

• Travers v. Italy (15117/1989),„… The interference in question should strike a „fair balance‟ between „the demands of the general interest of thecommunity and the requirements of the protection of theindividual‟s fundamental rights … there must be a reasonable

relationship of proportionality between the means employed and the aims sought to be realised‟. Consequently, „thefinancial liability arising out of the raising of tax or contributions may adversely affect the guarantee secured under this provision if it places an excessive burden on the

person or the entity concerned or fundamentally interfereswith his or its financial position‟



Article 1 - Leading Cases (ii)

• Kaira v. Finland,

“…It is in the first place for the national authorities to

decide what kind of taxes or contributions are to be

collected. Furthermore, the decisions in this area will

commonly involve the appreciation of political,

economic and social questions, which the

Convention leaves within the competence of the

Contracting States. The power of appreciation of the

Contracting States is therefore a wide one…”



Article 1 - Leading Cases (iii)

• In WASA Omsesidigt, Forsakringsbolaget Valands Pensionsstiftelse v.Sweden,

„… The Commission is of the opinion that in the field of taxation it is for thenational authorities to make the initial assessment of the aims and meansby which they are pursued. Accordingly, a margin of appreciation is left tothem and it must be wider in this area than it is in many others… attitudesas to the social and economic goals to be pursued by the State in its

revenue policy may vary considerably from place to place and time totime. A government may often have to strike a balance between the need to raise revenue and other objectives in its taxation policies. The national authorities are obviously in a better position than the Commission toassess those needs and requirements‟.

• Spacek sro v. Czech Republic, the Commission declared admissible achallenge to a law which had not been adequately published (lost on the

merits since regulations were adequately accessible and foreseeable).



Article 1 - Leading Cases (iv)

• Lemoine v. France (unpublished), a measure relatingto the enforcement of taxes was held to violate Art. 1

(probably on the grounds of lack of proportionality).

• Heinrich v. France, relating to Govt’s right of pre-

emption in respect of assets sold at a price which

was less than market value. ECtHR found a violation

because the pre-emption regime was discretionary,

scarcely foreseeable and procedurally unfair.



CASE OF INTERSPLAV v.

UKRAINE

Application no. 802/02

9 January 2007



Facts of the Case

• Intersplav a Ukrainian-Spanish Joint Venture was entitled tocertain VAT refunds.

• Intersplav’s operations in the Ukraine were export orientated(0 rated).

• Tax Administration regularly and systematically delayed

Intersplav’s entitlement to refunds.

• Intersplav’s cases in front of the Ukrainian administrativetribunals were successful but not directly enforceablebecause prior confirmation of the awarded amounts wasnecessary.

• Therefore, Intersplav did not obtain the refunds it was entitledto in terms of law.



Arguments of the Tax Payer

• State’s groundless refusals of entitlement toVAT refunds amounted to a breach of

taxpayer’s right to property.

• VAT was certain, liquidated and due andamounted to a ‘possession’ governed by its

right to property in terms of the ECHR.



Arguments of the Govt

• Entitlement to VAT refund was not a‘possession’ because it was still in dispute.

• Delays in paying VAT were justified to protectthe economic interests of the country.

• VAT refunding system was being abused of (especially by taxpayers in applicant’s type of business) therefore Govt’s reaction was a

justified counter-measure.• Govt acted within its margin of appreciation.



Court’s Decision

• Right to VAT Refund constituted a ‘possession’ for thepurposes of the ECHR.

• The prior judicial review of a claim was not required tovalidate eligibility for a refund.

• State’s margin of appreciation is not unlimited and subject to

ECHR’s right of review (Govt’s refusal to grant a refund on thebasis of abuse committed by 3rd parties was not justified).

• Systematic nature of failure to settle VAT resulted in anexcessive burden.

• Interference in applicant’s possession was disproportionate.

• Court found for taxpayer and awarded taxpayer EUR25Kpecuniary damages.



CASE OF BURDEN and BURDEN v. THE

UNITED KINGDOM


12 December 2006



Facts of the Case

• Plaintiffs were two unmarried elderly sisters.

• Lived together all their lives, shared a house (FMV

875K) for 30 years.

• Presumably, one of the sisters was to inherit the

other sister.

• Each sister’s share above Inheritance Tax exemption

threshold (300K).

• In similar situations civil partners exempt from tax.



Taxpayer’s arguments

• Argued that Inheritance Tax violated right toproperty and that inheritance tax was

discriminatory.

• They could not benefit from an exemptionavailable to same-sex couples in analogous

situations because siblings did not fall to be

considered as a ‘civil partnership’.



Government’s Arguments

• No restriction on ability to dispose, no violationof right to property.

• Siblings were a couple by accident of natureno true analogy with civil partnership.

• Difference in tax treatment pursued alegitimate aim and the Government had a widemargin of appreciation in determining what

was a legitimate aim.



Decision of the Court (I)

• 3 out of 7 judges registered dissentingopinions.

• It is for the national authorities to assess the

aims and means of the taxes they impose(Lindsay).

• States enjoy wide margin of appreciation in

this field.



Decision of the Court (II)

• “…the national authorities are in principle better placed than the international judge to appreciate

what is in the public interest on social or economic

grounds. The Court will generally respect the

legislature‟s policy choice in this field unless it is„manifestly without reasonable foundation‟”

• UK cannot be said to have exceeded any acceptable

margin of appreciation.



CASE OF BIMER S.A. v.

MOLDOVA


10/07/07



Facts of the Case

• In 1998 Bimer S.A obtained a licence to operate a duty freeshop.

• In May 2002, following an amendment to the Customs Codeduty free products could only be sold in international airportsand on international flights, and that other duty free outlets

had to be closed. Thus, Bimer lost its licence.• In June 2002 Bimer S.A. together with other companies

similarly affected, lodged a court action against this order withthe Court of Appeal, which ruled in favour of the applicant.Ultimately, on 11 September 2002 the Supreme Court of

Justice quashed the judgment of the Court of Appeal anddismissed the applicant’s action.



Legal Issues (i)

• Relying on Article 1 of Protocol 1 (protection of property), the applicant argued that the

closure of its duty free shop violated its right to

property.• It was undisputed that the right to operate the

shop amounted to a ‘possession’ for the

purposes of the Convention.



Legal Issues (ii)

• The Court held that there had been ainterference in Bimer’s right to property and

that such interference was incompatible with

the Convention.• The Court held unanimously that there had

been a violation of Article 1 of Protocol No. 1

and awarded Bimer S.A. EUR 520,000 in

respect of pecuniary damage.



Article 3 ECHR (Protection from Inhuman &

Degrading Treatment)

„No one shall be subjected to torture or to

inhuman or degrading treatment or

punishment.‟ • Is this article relevant to taxation?



CASE OF KOZINETS v.

UKRAINE


6/12/07



Facts of the Case

• Kozinets was the director of a company which was subject to a tax audit in1996.

• In April 1998 the applicant was summoned to Kharkiv State Tax PoliceInspectorate to collect documents which had previously been seized for the purposes of the inspection.

• Kozinets took a tape recorder with him (he suspected corruption) and triedto record his conversation with the Tax Inspector.

• He alleged that the Head of the Tax Police Inspectorate broke his taperecorder (by throwing it on the floor and stepping on it) and that the TaxInspector had beaten him up.

• Medical examinations reported that the applicant had suffered frombruising and concussion, however it was too late to establish when suchinjuries had occurred because applicant had failed to produce evidencebeyond reasonable doubt (in terms of criminal law) that the bodily harmhe had suffered had been inflicted at the Tax Inspectorate.



Legal Issues

• Criminal proceedings were instituted against the Tax Inspector proceedings butwere discontinued in August 2002.

• The applicant complained that he had been tortured by a tax police officer,contrary to Article 3 of the Convention. He further complained under Article 6 of theConvention that the investigation undertaken by the domestic authorities into theseevents had been insufficient. The applicant also complained under Article 13 of theConvention of a lack of effective remedies in respect of the above violations.

• The Court held, by six votes to one, that there had been no violation of Article 3

(prohibition of inhuman or degrading treatment) concerning the ill-treatment but,unanimously, that there had been a violation of Article 3 (lack of effectiveinvestigation) concerning the investigation. It further held unanimously that therewas no need to examine the complaint under Article 13 (right to an effectiveremedy).

• Mr Kozinets was awarded EUR 2,000 in respect of non-pecuniary damage andEUR 237,88 for costs and expenses.

Article 4 ECHR (Protection from




Forced Labour)

„ (1) No one shall be held in slavery or servitude.(2) No one shall be required to perform forced or compulsory labour.

(3) For the purpose of this Article the term "forced or compulsory labour" shall not include:

(a) any work required to be done in the ordinary course of detentionimposed according to the provisions of Article 5 of this Convention or during conditioned release from such detention;

(b) any service of a military character or, in case of conscientious objectorsin countries where they are recognised, service exacted instead of compulsory military service;

(c) any service exacted in case of an emergency or calamity threatening the life or well-being of the community;

(d) any work or service which forms part of normal civil obligations.‟





Forced Labour)

The compatibility of Article 4 of the Convention with forcedlabour was discussed in Companies W, X, Y & Z v. Austriaand Adriano Borghini v. Italy . Both cases dealt with theobligation of persons to withhold tax on payments and in bothcases the existence of compulsory tax collecting was justified

by the civic obligations argument contemplated in Art. 4.Baker opines that the civic obligations defence may not holdground in cases where third parties, as opposed to taxpayers,are required ‘to expend significant effort and incur significantexpenditure in supplying information in connection with aninvestigation’.

Article 5 ECHR (Right to Liberty and



Article 5 ECHR (Right to Liberty and

Security of Person)‘(1) Everyone has the right to liberty and security of person. No one shall be deprived of his

liberty save in the following cases and in accordance with a procedure prescribed by law:(a) the lawful detention of a person after conviction by a competent court;

(b) the lawful arrest or detention of a person for non-compliance with the lawful order of acourt or in order to secure the fulfilment of any obligation prescribed by law;

(c) the lawful arrest or detention of a person effected for the purpose of bringing him beforethe competent legal authorities on reasonable suspicion of having committed an offence or when it is reasonably considered necessary to prevent his committing an offence or fleeingafter having done so;

(2) Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him.

(3) Everyone arrested or detained in accordance with the provisions of paragraph (1)(c) of this Article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial.Release may be conditioned by guarantees to appear for trial.

(4) Everyone who is deprived of his liberty by arrest or detention shall be entitled to takeproceedings by which the lawfulness of his detention shall be decided speedily by a court

and his release ordered if the detention is not lawful.(5) Everyone who has been the victim of arrest or detention in contravention of the provisions of

this Article shall have an enforceable right to compensation.’



Case of Mooren v. Germany


13/12/07



Facts of the Case

• Mooren was suspected of tax evasion (around EUR200k) anda District Court ordered his pre-trial detention.

• The District Court noted that the applicant, who had availedhimself of the right to remain silent, was strongly suspected of tax evasion on the basis of the business records that hadbeen seized when his home was searched. The District Court

held that Mooren had to be placed in pre-trial detentionbecause there was a risk that the applicant, if released, mightdestroy the missing documents or conceal further businesstransactions and accounts.

• Mooren was released from detention after 4 months of complicated judicial proceedings.



Legal Issues (i)

• Mooren complained that, in the proceedings for review of his pre-trial detention, the Court of Appeal,by remitting his case back to the court of firstinstance instead of quashing the detention order which it had found not to comply with domestic law,

had unlawfully deprived him of his liberty and hadunduly delayed the judicial review proceedings.

• Furthermore, he claimed that his defence counselhad been refused access to the investigation files.He relied, in particular, on Article 5 (right to liberty) of

the Convention.



Legal Issues (ii)

• The Court held by five votes to two that there hadbeen no violation of Article 5 § 1 (right to liberty andsecurity).

• The Court held unanimously that there had been twoviolations of Article 5 § 4 on account of the lack of

speedy review of the lawfulness of the applicant’sdetention and the refusal to grant access to the casefiles in those review proceedings.

• The applicant was awarded 1,500 euros (EUR) inrespect of non-pecuniary damage and EUR 5,150 for

costs and expenses.



Article 6 ECHR (Fair Hearing)

(1) In the determination of his civil rights and obligations or of any criminal charge against him, everyone is

entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunalestablished by law. Judgment shall be pronounced publicly but the press and public may be excluded fromall or part of the trial in the interests of morals, public order or national security in a democratic society,where the interests of juveniles or the protection of the private life of the parties so require, or to the extentstrictly necessary in the opinion of the court in special circumstances where publicity would prejudice theinterests of justice.

(2) Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.

(3) Everyone charged with a criminal offence has the following minimum rights:

(a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him;

(b) to have adequate time and facilities for the preparation of his defence;

(c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficientmeans to pay for legal assistance, to be given it free when the interests of justice so require;

(d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him;

(e) to have the free assistance of an interpreter if he cannot understand or speak the language used incourt.



Article 6 ECHR (Fair Hearing) (i)

• The right to a fair hearing comprises the right to have accessto a tribunal, the right to justice within a reasonable time, theright to be heard by an independent and impartial tribunal, theright to silence and the right to legal aid.

• In the much-criticized decision in Ferrazini as subsequentlyconfirmed in February 2004 in Jussila v. Finland it was held

that,„The Court considers that tax matters still form part of thehard-core of public authority prerogatives, with the public nature of the relationship between the taxpayer and theauthority remaining predominant…It considers that tax disputes fall outside the scope of civil rights andobligations, despite the pecuniary effect which they necessarily produce for the taxpayer.‟



Article 6 ECHR (Fair Hearing) (ii)

• ECnHR and ECtHR have consistently held that ordinary taxproceedings do not relate to determination of civil rights andobligations (AX & BX v. Germany, X v. Germany, X. v.Belgium ad Bendenoun v. France)

• Not all disputes involving taxation issues are taxation disputes

which are outside the scope of Article 6.• Classification is key - When a dispute is of either in respect of

a criminal charge or is of a civil nature, all the safeguards of Art.6 apply but when a dispute is of a ‘fiscal nature’ ‘the publiclaw character of the obligation concerned predominates.



Article 6 ECHR (Fair Hearing) (iii)

• What is a dispute over a criminal charge?• The ‘Engel criteria’ are used to establish whether a

case involves a criminal charge.

• The ‘Engel criteria’ involve the following 3 tests:

(i) the legal classification of the offence in domestic

law;

(ii) the nature of the offence; and

(iii) the degree of severity of the possible penalty.

Important decisions – Disputes of a



Important decisions Disputes of a

Criminal Law Nature (i)• Bendenoun v. France – the ECtHR held that an action relating to fiscal

penalties involved the determination of a criminal charge .• JJ v. the Netherlands – ECtHR held that an issue over a 100% fiscal

penalty involved a criminal charge for the purposes of Art. 6.

• In HWK v. Switzerland, Lechaczinski v. France, Covexin SA v. France theapplicability of Art.6 to disputes over additional taxes was taken for granted.

• Case Of Stork v. Germany - the ECtHR held that an action relating to acontribution involved the determination of a criminal charge.

• King v. UK (13881/02): considerable tax penalty proceedings which lastedover 13 years was in breach of Art. 6 (reasonable time requirement)because the large portion of the delay was attributable to the UKauthorities.

Important decisions – Disputes of a



Important decisions Disputes of a

Civil Law Nature (i)

• In Schouten & Meldrum v. the NetherlandsECtHR held that disputes relating to socialsecurity contributions were mainly of a privatelaw and not public law character. Therefore,

such disputes involve a determination of a civilright.

• K v. Sweden/S v. Austria – civil claim for thereturn of goods seized by tax authorities falls

within the scope of Art. 6.



CASE OF LILJA v. SWEDEN


23/01/07

F t f th C



Facts of the Case

• Applicant was a director and shareholder of around 20companies and was charged on suspicion of aggravated taxfraud and keeping false books.

• Criminal proceedings were taken against applicant and taxproceedings were instituted separately.

• Criminal proceedings lasted for 8 years.

• Tax proceedings were instituted separately and lasted 5 years(proceedings included proceedings over a tax surcharge).

• Applicant was acquitted of criminal charges but he lost his taxdispute and was ordered to pay substantial tax surcharges.

L l i



Legal issues

• Length of the proceedings had been incompatiblewith the ‘reasonable time’ requirement in Article 6(fair hearing).

• Court held that, despite applicant’s application toextend submission time-bars in the tax proceedings,there had been a violation of applicant’s right to

justice within a reasonable time.

• Court held that the 5 year term of the taxproceedings and the 7 year term of the criminal

proceedings were both unreasonable.



CASE OF JUHA NUUTINEN v.

FINLAND


24 April 2007

Merits in Brief (i)



Merits in Brief (i)

• Mr. Nuutinen was qua shadow director of a companyaccused of two counts of aggravated tax fraud and

two counts of tax fraud (produced false invoices and

entered false data in the books and records of the

company).• He was eventually, at the Appellate stage, found

guilty of aiding and abetting the offences he had

been charged with as principal offender and guilty of

an offence which he had not been charged in theindictment.

Merits in Brief (ii)



Merits in Brief (ii)

• Nuutinen argued that his right to a fair hearinghad been infringed because he had not been

granted an opportunity to defend himself-he

was convicted of offences different from those

with which he had been originally charged.

Decision of the Court



Decision of the Court

• It was a pure criminal charge therefore the Court did not enter into Ferrazzini issues (FHR do not apply to taxation disputes).

• In criminal matters accused must be provided with full,detailed information concerning the charges and the legalcharacterisation of a charge is a prerequisite.

• The factual situation set out in the indictment changed in the

proceedings and accused’s right to defend himself wasimpaired.

• Court concluded that applicant’s rights to be informed in detailof the nature and cause of the accusations against him andhis right to have adequate time and facilities for his defencewere infringed.



Case of Paykar Yev Haghtanak

Ltd v. Armenia.


20/12/07

Facts of the Case



Facts of the Case

• Applicant had a dispute with the TaxInspectorate over a tax assessment (which

included a surcharge).

• Applicant lost its case but when it tried to

appeal to the national court of last instance, its

appeal was returned on the grounds that

applicant (which was bankrupt) had not paid a

court fee.

Legal Issues (i)



Legal Issues (i)

• The applicant company complained that it hadbeen unlawfully denied access to the Court of

Cassation and that Article 6 (fair hearing) had

been infringed.

• The point at the issue was whether Art. 6

applied to the case in point (in view of the

judgement in Ferrazzini)

Legal Issues (ii)



Legal Issues (ii)

• The issue revolved around a matter of classification.

• Art. 6 does not apply (in terms of Ferrazzini) to

pure tax disputes but still applies to disputes

over a criminal charge.

• So the crux of the issue is whether the case in

point amounted to ‘a criminal charge’ for the

purposes of Article 6.

Legal Issues (iv)



Legal Issues (iv)

• Court held that the surcharges attached to theassessment in dispute were both deterrentand punitive. Furthermore, penalties weresubstantial (up to 43%).

• Consequently the case in point was a caseover a criminal charge-Art. 6 applied.

• The Court found that applicant had beendenied access to Court in violation of Art. 6.

Article 8 ECHR (Right to Private &



Family Life) (i)

• Topical in tax investigations.• Investigation techniques are legitimate provided they arecarried out:

(a) According to law;

(b) Necessary in a democratic society;

(c) In the interests of the economic well-being of the country ,for the prevention of disorder or crime.

• Requirement (b) above suggests that if the State hasalternative means available for the purposes of conducting itsinvestigation than it should resort to such alternative methods

rather than risk interfere with a person’s right to privacy.

Article 8 ECHR – Leading Cases (i)



Article 8 ECHR – Leading Cases (i)

• Funke, Mialhe and Cremieux v. France,searches of premises and seizure of docs did

not contemplate sufficient safeguards

therefore violated Art. 8.

• J.Z v. France, measures authorising fiscal

authorities to resort to telephone tapping was

not sufficiently clear and consequently

measures violated Art.8.

Article 8 ECHR – Leading Cases (ii)



Article 8 ECHR Leading Cases (ii)

• Volokhy v. Ukraine (23543/02): ECtHR hekdthat powers of secret surveillance in thecourse of criminal investigations are tolerableonly in so far as strictly necessary, in

accordance with the law, and in pursuit of alegitimate aim. Surveillance rules must beforeseeable and proportional. ECtHR held thatthere had been a breach because relevant

rules were unclear and there were sufficientsafeguards against abuse..

Article 9 ECHR – Freedom of



Thought, Conscience & Religion‘ (1) Everyone has the right to freedom of thought,

conscience and religion; this right includes freedomto change his religion or belief and freedom, either alone or in community with others and in public or private, to manifest his religion or belief, in worship,teaching, practice and observance.

(2) Freedom to manifest one’s religion or beliefs shallbe subject only to such limitations as are prescribedby law and are necessary in a democratic society inthe interests of public safety, for the protection of

public order, health or morals, or for the protection of the rights and freedoms of others.’

Article 9 ECHR – Relevant Cases



Article 9 ECHR Relevant Cases

• Association Sivananda de Yoga Vedanta v. France:freedom of religion is not tantamount to freedomfrom taxation. A religious association cannot expectto be exempt from de tax de quo.

• Gottesmann v Switzerland: a church tax imposed onpersons who did not belong to the church did notviolate ECHR on the grounds that taxpayers weregranted the right to opt out.

• Kustannus Oy Vapaa Ajattelija AB & Others v.

Finland: A legal person does have freedom of religion.

Article 11 ECHR (Freedom of

A i ti )



Association)(1) Everyone has the right to freedom of peaceful assembly and

to freedom of association with others, including the right toform and to join trade unions for the protection of his interests.

(2) No restrictions shall be placed on the exercise of these rightsother than such as are prescribed by law and are necessaryin a democratic society in the interests of national security or

public safety, for the prevention of disorder or crime, for theprotection of health or morals or for the protection of the rightsand freedoms of others. This Article shall not prevent theimposition of lawful restrictions on the exercise of these rightsby members of the Armed Forces, of the Police or of theadministration of the State.

Article 13 ECHR (Right to an

Eff ti R d )



Effective Remedy)

‘Everyone whose rights and freedoms as set

forth in this Convention are violated shall have

an effective remedy before a national authority

notwithstanding that the violation has been

committed by persons acting in an official

capacity.’



CASE OF RIENER v. BULGARIA


23 May 2006

Facts of the Case



Facts of the Case

• Applicant was a dual national(Austria/Bulgaria).

• Director of Austrian Company.

• Registered as a trader in Bulgaria.• Her company owed Bulgarian authorities

1,000K in unpaid taxes.

• Banned from leaving the country until she

settled tax (‘Tax hostage’).

Arguments of the Taxpayer



gu e ts o t e a paye

• Argued that her right to freedom of movementhad been infringed.

• Argued that right to effective remedies – no

effective means of redress, (disproportionate,

arbitrary and repressive measures) and right

to respect to family life had been infringed.

Arguments of the Government



g

• Measures against applicant lawful andnecessary in a democratic society.

• Principle of proportionality had been respected

there was no security for payment available in

Bulgaria (assets of the company were situated

in Austria).

Decision of the Court (I)



( )

• Decision by 6 votes to 1 violation of right tofreedom of movement – automatic nature of travel ban and exclusion of the possibility of reassessment violated the principle of

proportionality.• Law relating to travel ban did not adequately

provide for sufficient procedural safeguardsagainst arbitrariness.

Decision of the Court (II)



( )

• “In sum, having regard to the automatic natureof the travel ban, the authorities failure to givedue consideration to the principle of proportionality, the lack of clarity in the

relevant law and practice with regard to someof the relevant issues and the fact that the prohibition against the applicant leaving Bulgaria was maintained over a lengthy

period, the Court considers that it wasdisproportionate to the aim pursued.”

Decision of the Court (III)



( )

• Court found that there had been a violation of applicant’s right to effective redress because

the domestic appeals procedure did not grant

appropriate relief.

• Domestic appeals procedure did not

contemplate the striking of a fair balance

between the public interest and the applicant’s

rights.

Volokhy v. Ukraine (23543/02)



y ( )

• Case discussed supra.• ECtHr also found a violation of Art. 13. Applicants

could not challenge the interception order since the

authorities were not obliged to inform them about

having imposed such a measure. The secrecy of themeasure rendered it difficult for the person to seek

any remedy, of his own accord, while surveillance

was in progress.

Article 14 (Protection from

Discrimination)



Discrimination)

The enjoyment of the rights and freedoms setforth in this Convention shall be secured

without discrimination on any ground such as

sex, race, colour, language, religion, political

or other opinion, national or social origin,association with a national minority, property,

birth or other status.

Article 14 (Protection from

Discrimination) (i)



Discrimination) (i)• The ECtHR enunciated, in a non-tax case (the

Belgian Linguistic case), that Art. 14 does not havean independent existence.

• The principle was subsequently confirmed in a taxcase Gudmundsson v. Iceland.

• There can never be a violation of Art. 14 in isolation.• There can be a violation of Art.14 considered

together with another Article of the Convention.

• Discrimination can only be established vis-à-vispersons in a comparable position.

Article 14 – Leading Cases (i)



• In Musa v. Austria , a case which dealt with an auction tax calculated on the basisof the whole best bid and not on the share of property acquired, the Commissionremarked that,

„Article 14 safeguards individuals placed in analogous situations fromdiscrimination (Eur. Court HR, Van der Mussele v. Belgium judgment of 23November 1983, Series A no. 70, p.22 para. 46). A difference in treatment isdiscriminatory for the purpose of Article 14 if it has no objective and reasonable

justification, that is if it does not pursue a legitimate aim or if there is no reasonable

relationship of proportionality between the means employed and the aims sought to be realised (Eur. Vourt HR, Petrovic v. Austria judgment of 27 March 1998,

para. 30, to be published in Reports 1998). Moreover the Contracting stares enjoy a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment…‟

• Thus, an Irish tax which distinguished between domestic and foreign adoptees wasnot held to be discriminatory (X. v. Ireland), employees and self-employed person

were not held to be in a comparable situation (X. v. Austria).

Article 14 – Leading Cases (ii)



• Galeotti Ottieri della Ciaia v. Italy, ECtHR held thatan Italian Inheritance tax which fell heavily on large

estates (as opposed to smaller ones) was not

discriminatory and that the diverse tax treatment fell

within the State’s margin of appreciation.

• Schmidt v. Germany, ECtHR declared a levy (for

failing to pay service in the fire brigade) which was

payable effectively only men to be discriminatory.

Article 14 – Leading Cases (iii)



• Macgregor v. UK, ECthR found a that an incapacitated

spouse allowance which was provided only to men (with anincapacitated spouse) was discriminatory.

• Lindsay v. UK, UK tax system of aggregating income of husband and wife (but not co-habitees) was not held to bediscriminatory against co-habitees on the grounds that the

provisions were within the State’s margin of appreciation.• Darby v. Sweden, A Swedish tax law which proscribed non-

residents from benefiting from a tax allowance was held to bediscriminatory. ECtHR held that residents and non-residentsare in a comparable position.

Sources



• The European Convention on Human Rights.• The ECHR Case Law database - www.echr.coe.int

• Baker, Philip, Taxation & The European Convention

on Human Rights

• Jacobs & White, European Convention on HumanRights

• Attard, Robert, An Introduction to Income Tax

Theory.

http://www.echr.coe.int/

http://www.echr.coe.int/

Documents

Annex 4 Echr