AS TO THE ADMISSIBILITY OF
Application no. 77792/01
by Madeleine MAYER
The European Court of Human Rights (Third Section), sitting on 16 March 2006 as a Chamber composed of:
Mr B.M. Zupančič, President,
Mr J. Hedigan,
Mr C. Bîrsan,
Mrs M. Tsatsa-Nikolovska,
Mrs R. Jaeger,
Mr E. Myjer,
Mr David Thór Björgvinsson, judges,
and Mr V. Berger, Section Registrar,
Having regard to the above application lodged on 30 October 2001,
Having deliberated, decides as follows:
The applicant, Ms Madeleine Mayer, is a German national who was born in 1952 and lives in Bruckberg. She was represented before the Court by Mr C. Lenz, a lawyer practising in Stuttgart.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
1. Background to the case
The applicant is mentally disabled since her birth. A curator has been appointed in 1993 to take care of the administration of her property.
Following the death of the applicant’s parents in 1991 and 1993 respectively, the tax authorities found out that her parents had not declared certain assets in the property tax returns concerning themselves and the applicant. Thereupon, the Uffenheim Tax Office reassessed the property tax payable by the applicant, being their heiress, for the years 1985 to 1993 and fixed the default interest due pursuant to section 233a of the Taxation Code (Abgabenordnung, see ‘Relevant domestic law’ below). The decision became final.
On 22 June 1995 the Federal Constitutional Court
rendered a leading decision concerning section 10 no. 1 of the Property
Tax Act (Vermögensteuergesetz), which fixed the rates of property tax
It declared that the said section, in all its versions since 1983, was incompatible with the principle of equality before the law laid down in Article 3 § 1 of the Basic Law. However, in order to secure budgetary planning and an equal tax assessment for past periods of time, it decided that the provisions of the Property Tax Act continued to apply until 31 December 1996. The legislator was obliged to adopt a new regulation until then at the latest.
2. Proceedings concerning interest payable on evaded property tax
On 6 October 1997 the Uffenheim Tax Office ordered the applicant in her position as heiress to pay 14,561 Deutschmarks (DEM) in interest on the property tax evaded by her late parents between 1985 and 1993. It based its decision on section 235 of the Taxation Code (see ‘Relevant domestic law’ below). The default interest already paid pursuant to section 233a of the Taxation Code for an overlapping period of time was deducted from the amount of interest charged (section 235 § 4 of the said Code).
On 10 December 1998 the Uffenheim Tax Office dismissed the applicant’s objections against this decision.
On 17 February 2000 the Nuremberg Tax Court fixed the tax payable by the applicant at DEM 14,436 and dismissed the remainder of the applicant’s action. It found that pursuant to section 235 of the Taxation Code the applicant was liable to pay interest on property tax evaded by her deceased parents between 1985 and 1992. It found that at least one of the applicant’s parents had committed a tax evasion with in the meaning of section 370 of the Taxation Code (see ‘Relevant domestic law’ below) within that period. As regards the property tax return for 1993, the court found that there was no proof of an intentional evasion of property tax. The declaration was returned by the applicant’s curator, who had not intentionally made wrong statements and the applicant, being mentally disabled, did not participate in filing these submissions.
The Nuremberg Tax Court further argued that interest
on evaded property tax could still be fixed despite the fact that the
Federal Constitutional Court, in its decision dated 22 June 1995, considered
section 10 no. 1 of the Property Tax Act to be unconstitutional.
As the Federal Constitutional Court had ordered that the impugned section nevertheless continued to apply until 31 December 1996, the tax authorities could still fix property tax and order interest to be paid if such tax was evaded before that date.
The Nuremberg Tax Court also found that ordering a heir to pay interest following the death of the testator who was guilty of tax evasion did not violate Article 6 § 2 of the Convention. The heir was the beneficiary of this tax evasion because the testator’s property, including the profits made on the offence, had passed to him or her. It argued that charging interest on evaded taxes pursuant to section 235 of the Taxation Code could not be considered as a criminal sanction. The said section was merely aimed at absorbing profits obtained by the belated payment of the taxes evaded. Interest rate advantages were absorbed for the total period of time in which the amount of tax evaded was not yet paid. This was a longer period of time than the relevant period for which default interest had to be paid according to section 233a of the Taxation Code. However, the interest already fixed pursuant to section 233a of the Taxation Code was deducted from the amount of interest due under section 235 of the said Code (section 235 § 4).
According to the Tax Court, the present case was also distinguishable from the case of A.P., M.P. and T.P. v. Switzerland, in which this Court rendered judgment on 29 August 1997 (Reports of Judgments and Decisions 1997-V). That case concerned a fine, that is, unlike the interest in the present case, a criminal sanction imposed on the heir for a tax evasion committed by the testator.
On 1 August 2001 the Federal Tax Court dismissed the applicant’s appeal on points of law as ill-founded. It endorsed the reasoning of the Tax Court concerning the implications of the Federal Constitutional Court’s decision dated 22 June 1995. It further agreed with the Tax Court’s view that interest on evaded property tax was not a criminal sanction. This was illustrated, in particular, by the fact that the rate of interest payable on evaded tax pursuant to section 235 of the Taxation Code and the rate of interest payable pursuant to section 233a of the Taxation Code was the same. Consequently, Articles 6 and 7 § 1 of the Convention were not applicable to interest payable on evaded property tax.
On 2 May 2002 the Federal Constitutional Court, without giving further reasons, refused to admit the applicant’s constitutional complaint.
B. Relevant domestic law
The rules on interest payable on tax claims are laid down in sections 233-239 of the Taxation Code.
Pursuant to section 233a § 1 of the Taxation Code, in its version in force at the relevant time, default interest is payable on supplementary claims of, inter alia, property tax. The period for calculation of the interest due starts 15 months after the end of the year in which the tax arose and ends with the date on which the tax assessment takes effect (section 233a § 2).
Section 235 § 1 of the Taxation Code provides that interest is payable on taxes intentionally evaded by the person to whose benefit the tax has been evaded. The time limit for calculation of the interest payable starts already when the tax evasion takes effect and ends only with the payment of the evaded taxes (section 235 §§ 2 and 3). Section 235 § 4 provides that interest already fixed pursuant to section 233a for an overlapping period of time is to be deducted from the interest payable.
According to section 238 of the Taxation Code the rate of interest due pursuant to, inter alia, sections 233a and 235 is 0.5 per cent of the amount of supplementary taxes charged per month.
Section 370 of the Taxation Code provides that tax evasion, when committed intentionally, is a criminal offence which is punishable with up to five years’ imprisonment or a fine.
1. The applicant complained under Article 6 § 2 of the Convention that the German authorities, as confirmed by the courts, had ordered her to pay interest on property tax evaded by her late parents. As was found by the Court notably in the case of A.P., M.P. and T.P. v. Switzerland (judgment of 29 August 1997, Reports of Judgments and Decisions 1997-V, p. 1489, § 48), imposing criminal sanctions on the living in respect of an act purportedly committed by a deceased person was incompatible with fundamental rules of criminal justice and contravened the presumption of innocence.
2. Invoking Article 7 § 1 of the Convention the applicant claimed that she had been ordered to pay interest because of an evasion of property tax. However, the relevant provisions of the Property Tax Act had been declared unconstitutional before this criminal sanction had been fixed. By this finding of unconstitutionality, evasion of property tax had ceased to be a criminal offence. The Federal Constitutional Court’s order that the relevant provisions of the Property Tax Act should nevertheless be applied for a certain time in the future contravened the principle of legality as far as criminal sanctions, such as the payment order in her case, were concerned.
A. Complaint under Article 6 § 2 of the Convention
The applicant argued that the payment order pursuant to section 235 of the Taxation Code was a criminal sanction. She was charged more than DEM 14,000, that is, a considerable amount of money. It depended on the finding of a tax evasion, that is, a crime, whether or not this payment could be claimed. Other than the default interest payable pursuant to section 233a of the Taxation Code, the interest payable pursuant to section 235 of the Taxation Code was aimed at punishing for a criminal offence. Even though the tax rates for default interest and for interest payable on evaded taxes was the same, the total sum of interest payable pursuant to section 235 of the said Code was higher and therefore constituted a sanction.
The applicant submitted that ordering her to pay interest on property tax evaded by her late parents, that is, imposing a criminal sanction on her for acts purportedly committed by deceased persons, violated Article 6 § 2 of the Convention, which provides:
“Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.”
The Court recalls that, in order for Article 6
to be applicable,
the applicant must have been “charged with a criminal offence” in the proceedings before the tax authorities and courts. It reiterates that the concept of “criminal charge” within the meaning of Article 6 is an autonomous one. In determining whether an act qualifies as a “criminal offence”, the Court has regard to three criteria. Firstly, as a starting point,
it is necessary to know whether the provisions defining the offence charged belong, according to the legal system of the respondent State, to the sphere of criminal law. Secondly, the nature of the conduct, considered also in relation to the nature of the corresponding penalty, has to be taken into account. Thirdly, regard must be had to the degree of severity of the penalty which the person concerned risked incurring (see, in general, Engel and Others v. the Netherlands, judgment of 8 June 1976, Series A no. 22, pp. 34-35, § 82, and, in the context of tax-related proceedings, Bendenoun v. France, judgment of 24 February 1994, Series A no. 284, p. 20, § 47; A.P., M.P. and T.P. v. Switzerland, judgment of 29 August 1997, Reports of Judgments and Decisions 1997-V, p. 1488, § 39; Janosevic v. Sweden, no. 34619/97, § 65, ECHR 2002-VII; H.M. v. Germany, no. 62512/00, 9 June 2005).
As regards the legal classification of the provisions
allowing for the applicant to be charged interest on property tax evaded
by her parents,
the Court notes that the payment was not imposed under criminal-law provisions, but based on a provision laid down in tax law, namely section 235 of the Taxation Code. It was for the tax offices and tax courts to fix the amount of interest payable pursuant to that section. It is true that interest could merely be charged according to the said provision if the authorities and courts were convinced that there had been a tax evasion, that is, a criminal offence within the meaning of Section 370 of the Taxation Code. The latter provision belongs to the sphere of criminal law. However, interest could be fixed according to section 235 without a criminal trial against the offender and without his being sentenced to pay a fine or being imprisoned. Thus, the Court finds that this is not sufficient to remove the provisions on tax reassessment, including the fixing of interest payable, as such from the special branch of tax law and to qualify them as belonging to criminal law.
It is therefore necessary to examine the impugned act in the light of the second and third criteria laid down in the Engel case. It is the Court’s established case-law that these two criteria are alternative and not necessarily cumulative. For Article 6 to be held applicable, it suffices that the offence in question is by its nature to be regarded as “criminal” from the point of view of the Convention, or that the offence made the person liable to a sanction which, by its nature and degree of severity, belongs in general to the “criminal” sphere (see, inter alia, Janosevic, cited above, §§ 66-67; Ezeh and Connors v. the United Kingdom [GC], nos. 39665/98 and 40086/98, § 86, ECHR 2003-X).
As to the nature of the conduct in question,
the Court observes that the tax authorities and courts found that the
applicant’s parents had intentionally failed to declare certain assets
in the property tax returns concerning them and the applicant. At least
one of the applicant’s parents had therefore committed a tax evasion
within the meaning of section 370 of the Taxation Code. It was because
of that finding that the applicant, in her position as her parents’
heiress, not only had to pay the default interest of six per cent
per annum pursuant to section 233a of the Taxation Code, but the same percentage of interest for a longer period back in time pursuant to section 235 of the Taxation Code.
The Court concedes that the obligation to pay this surplus amount of interest therefore depended on the finding that there had been a criminal offence committed by the applicant’s parents. However, this conclusion merely resulted in an order for payment of interest for a longer period of time, namely for the total period of time in which the amount of tax evaded was paid belatedly. The obligation to pay additional interest was merely aimed at absorbing all interest profits a person made (or could have made) because of the fact that he or she failed to pay taxes due to his or her true income immediately. This additional profit increased the value of the inherited fortune. The Court further notes that the interest rate payable for the additional interest on evaded taxes was the same as for the default interest (see section 238 of the Taxation Code). Moreover, default interest already paid pursuant to section 233a for an overlapping period of time was to be deducted from the interest payable pursuant to section 235 (see its § 4).
In these circumstances, the Court finds that the additional interest charged can be considered as a mere pecuniary compensation for the losses of the treasury caused by the taxpayer due to incorrect information in the tax return. This distinguishes it from tax surcharges, which, for their deterrent and punitive nature, have been found to involve a “criminal charge” within the meaning of Article 6 for example in the Bendenoun and Janosevic cases (cited above; see also Mieg de Boofzheim v. France, no. 52938/99, ECHR 2002-X; as opposed to Morel v. France (dec.), no. 54559/00, ECHR 2003-IX).
Turning to the assessment of the degree of severity of the penalty which the applicant risked incurring, the Court notes that the applicant was ordered to pay another DEM 14,436 (approximately 7,381 euros), which cannot be considered an inconsiderable amount of money. However, the amount of interest payable results from an interest rate of six per cent per annum, which cannot be considered as excessive, or even as severe, compared to bank interest rates. Besides, it has to be borne in mind also in this respect that the applicant was merely ordered to pay a, though standardised, amount of interest for a period of time she made or could have made profits with money owed to the State.
Having weighed the various aspects of the case,
the Court perceives
a clear predominance of those which do not have a criminal connotation. Consequently, the applicant was not “charged with a criminal offence” within the meaning of Article 6 of the Convention in the proceedings before the tax courts.
As regards the applicability of Article 6 § 1 under its “civil” head, the Court recalls that tax matters 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 has therefore consistently held that, generally, tax disputes fall outside the scope of “civil rights and obligations”, despite the pecuniary effects which they necessarily produce for the taxpayer (see Ferrazzini v. Italy [GC], no. 44759/98, § 29, ECHR 2001-VII; Mieg de Boofzheim v. France, cited above; Remy and Others v. Germany (dec.), no. 70826/01, 16 September 2004).
It follows that Article 6 is not applicable to the proceedings in question. This part of the application must therefore be rejected as incompatible ratione materiae with the provisions of the Convention in accordance with Article 35 §§ 3 and 4 of the Convention.
B. Complaint under Article 7 § 1 of the Convention
In the applicant’s view, charging her interest on evaded property tax even though the relevant provisions of the Property Tax Act had already been found to be unconstitutional at the relevant time contravened Article 7 § 1 of the Convention, which, in so far as relevant, reads:
“No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed.”
The Court recalls that, in order for an applicant to avail him- or herself of the protection of Article 7, the proceedings in question have to entail a finding of guilt of a “criminal offence”. In determining whether an offence is to be considered as “criminal” within the meaning of Article 7, the Court applies the same three criteria as those laid down in its case-law, cited above, concerning Article 6 of the Convention (see, inter alia, Brown v. the United Kingdom (dec.), no. 38644/97, 24 November 1998).
The Court refers to its above finding that in the proceedings before the tax courts, in which the applicant was ordered to pay interest on property tax evaded by her late parents, she was not “charged with a criminal offence” within the meaning of Article 6. Consequently, Article 7 § 1 is equally not applicable to the proceedings in question.
It follows that this part of the application must also be rejected as incompatible ratione materiae with the Convention, pursuant to its Article 35 §§ 3 and 4.
For these reasons, the Court by a majority
Declares the application inadmissible.
Vincent Berger Boštjan
MAYER v. GERMANY DECISION
MAYER v. GERMANY DECISION