The applicants, Pierre and Marie-Louise Mieg de Boofzheim, are French nationals who were born in 1925 and live at Saint Martin de la Place. They were represented before the Court by Mr Prioux, of the Saumur Bar.
On 9 March 1993 the applicants received notice that their personal tax affairs for the years 1990, 1991 and 1992 were to be investigated. The investigation concerned the terms on which a flat in Neuilly-sur-Seine had been transferred and losses incurred on the Chateau de Boumois, in which the applicants lived.
Mrs Mieg de Boofzheim is the manager of the SCI de Boumois, the company that owns the chateau, and holds a majority shareholding in it. The Revenue served assessments to additional tax on the company on 4 October 1993 and on the applicants on 14 October 1993. All the assessments were contested by the applicants. However, they were confirmed by the Revenue on 7 December 1993 and 17 February 1994.
On 31 May 1994 the Revenue served demands for the additional tax that had been imposed on the applicants, together with interest for late payment and a 40% surcharge because the applicants had acted in bad faith in declaring the losses on the chateau and been late in filing the capital-gains tax return on the sale of the flat. The sums demanded came to a total of 17,948 French francs (FRF) for 1990 and FRF 452,687 for 1991.
On 21 June 1994 the applicants lodged an appeal. They argued that the Revenue had miscalculated the period for which they had owned the flat in Neuilly for the purposes of assessing their liability to capital gains tax on its sale in 1991. They had in fact purchased the property in 1954 and were thus entitled to the exemption from capital gains tax which, by law, was granted to owners who had retained title for more than 32 years. They also sought to be allowed to deduct certain expenditure on furnishings and staff from the SCI de Boumois’ taxable income, on the ground that it had been incurred in order to attract visitors to the chateau and because the chateau’s upkeep necessitated the services of a full-time housekeeper.
In the absence of a reply from the Revenue within the statutory six-month time-limit, the applicants applied to the Nantes Administrative Court for an order cancelling the income-tax surcharge and related penalties.
In a decision of 19 June 1995, the Director of Revenue granted relief from the capital-gains-tax surcharge, interest for late payment and related penalties for the year 1991 in the amount of FRF 250,401 on the principal sum due and FRF 130,208 on the interest and penalties.
In a decision of 22 May 1996, the Revenue granted relief from the surcharges that had initially been imposed for bad faith in respect of the remaining contested tax assessments (on income from land for the years 1990 and 1991) in the sum of FRF 4,459 for 1990 and FRF 16,661 for 1991.
By a decision of 17 February 1997 the applicants were granted additional relief of FRF 325 in tax and FRF 38 francs in penalties, in order to rectify an arithmetical error in the calculation for 1991.
In a letter of 20 July 1998, the clerk to the Administrative Court informed the applicants that, owing to a large number of pending cases, it was not possible to say when their case was likely to be heard.
Following a hearing on 21 March 2000 the Nantes Administrative Court delivered a judgment on 3 May 2000 in which it held that it was unnecessary to give a ruling in respect of the applicants’ claims up to FRF 402,092. It dismissed the applicants’ remaining claims (namely for FRF 60,303 in disputed taxes and FRF 8,240 in interest for late payment).
Relying on Article 6 § 1 of the Convention, the applicants complained of the length of the proceedings.
The applicants complained of a violation of Article 6 § 1 of the Convention, the relevant provisions of which read as follows:
“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal ...
As their main submission, the Government objected that the complaint was incompatible ratione materiae with the provisions of the Convention. They argued that the litigation, which was of a purely fiscal nature, did not relate to civil rights and obligations or to a criminal charge against the applicants.
It submitted, firstly, that the criminal charge no longer subsisted. It was true that a taxpayer acting in bad faith could on occasion be required by Article 1729 § 1 of the General Tax Code to pay a tax surcharge with the criminal connotation which that entailed (Bendenoun v. France, judgment of 24 February 1994, Series A no. 284, p. 20, § 47). However, in the present case, although the Revenue had initially imposed a 40% surcharge, that had been abandoned by its decision of 22 May 1996 to grant relief. The fact that that decision was taken after the appeal to the Administrative Court had been registered could not change the nature of the dispute that ultimately came before that court. In the absence of a partial withdrawal of the appeal, the Administrative Court had had no alternative but to rule that it was unnecessary to decide the part of the appeal relating to the tax surcharges in their entirety, as they were no longer in issue. The Administrative Court had thus ended up deciding a dispute that was purely fiscal, the claim being restricted to the contested taxes and interest for late payment and the only issue being whether the applicants had a fiscal obligation to the State, a question confined to the sphere of public law.
Secondly, the Government pointed out that the Court had expressly ruled that litigation over tax could not be regarded as being related to civil rights and obligations (Ferrazzini v. Italy, [GC], no. 44759/98, 12 July 2001).
The applicants said that, owing to the stance taken by the Revenue, the litigation had initially been presented as entailing a quasi-criminal penalty, as the Revenue had insisted on a 40% surcharge until they instituted proceedings in the Administrative Court. The fact that relief was later granted did not alter the nature of the litigation that was initially before the court. Whether or not litigation was quasi-criminal depended on the position when the proceedings were commenced, not on the final outcome of the proceedings.
The Court reiterates that the French system of tax surcharges where the taxpayer has not acted in good faith made the “charge” in issue a “criminal” one within the meaning of Article 6 § 1, which is therefore applicable (Bendenoun judgment cited above, p. 20-21, §§ 46-47).
The Court is also of the view that mere interest for late payment, with the implication it entails that the taxpayer was acting in good faith, is not, in principle, of the same nature as a tax surcharge and does not constitute a “criminal charge”, within the meaning of Article 6 § 1.
The Court also reiterates that the prominent place held in a democratic society by the right to a fair trial favours a “substantive”, rather than a “formal”, conception of the “charge” referred to by Article 6 and impels the Court to look behind the appearances and examine the realities of the procedure in question (Deweer v. Belgium, judgment of 27 February 1980, Series A no. 35, p. 23, § 44; Adolf v. Austria, judgment of 26 March 1982, Series A no. 49, p. 15, § 30)
In the present case, the Court must examine whether the cancellation, while the proceedings were under way, of the penalties imposed for bad faith rendered the provisions of Article 6 inapplicable. On this point, while it finds that the question of penalties for bad faith was one of the features of the revised tax assessments in the instant case, that was not true of all the related proceedings. In the Court’s opinion, the proceedings taken as a whole did not have a “criminal connotation”, as the relief granted as early as 1995 (the most substantial part being that granted on 19 June 1995, almost six months after the appeal to the Administrative Court was lodged) recognised that the applicants had acted in good faith and meant that the criminal limb of Article 6 § 1 of the Convention ceased to be applicable.
Consequently, since the litigation was not criminal, it is the Ferrazzini decision cited by the Government which is applicable in the present case. In that case, the Court said: “[T]ax matters still form part of the hard core of public-authority prerogatives, with the public nature of the relationship between the taxpayer and the community remaining predominant... It considers that tax disputes fall outside the scope of civil rights and obligations, despite the pecuniary effects which they necessarily produce for the taxpayer” (ibid. § 29).
In the light of the foregoing, the Court finds that the Government’s objection must be upheld and that Article 6 § 1 of the Convention is not applicable in the present case.
It follows that the application must be rejected as being incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 §§ 3 and 4.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
S. Dollé A.B. Baka,
MIEG DE BOOFZHEIM v. FRANCE DECISION
MIEG DE BOOFZHEIM v. FRANCE DECISION