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Cite as: [2007] ECHR 839
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THIRD SECTION
PARTIAL DECISION
AS TO THE ADMISSIBILITY OF
Application no.
42402/04
by KJELD OHLAND-ANDERSEN AB I KONKURS
against Sweden
The European Court of Human Rights (Third Section), sitting on 4 October 2007 as a Chamber composed of:
Mr B.M. Zupančič,
President,
Mr C. Bîrsan,
Mr L.
Loucaides,
Mrs E. Fura-Sandström,
Mr E. Myjer,
Mr David
Thór Björgvinsson,
Mrs I. Berro-Lefèvre,
judges,
and Mr S. Naismith, Deputy Section Registrar,
Having regard to the above application lodged on 23 November 2004,
Having deliberated, decides as follows:
THE FACTS
The applicant is a Swedish limited company, Kjeld Ohland-Andersen AB i konkurs. It is represented before the Court by Mr B. Leidhammar, a lawyer practising in Stockholm.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
On 17 January 1996 the Tax Authority (skattemyndigheten) of the County of Norrbotten commenced a tax audit (revisionspromemoria) of the applicant covering its book-keeping and business transactions from 1 January 1993 to 31 December 1995.
On 28 February 1997 it sent a preliminary consideration to the applicant, called a “basis for discussion” (diskussionsunderlag), in which it stated that it was minded to revise the assessment of arrears (eftertaxering) of the applicant's tax returns regarding income tax, employer's contributions and value-added tax for the years 1993 to 1995 and to impose tax surcharges on it. Based on information from the tax audit, the Tax Authority found that the applicant's book-keeping had been deficient in that not all sales and purchases had been registered and that a number of verifications for its transactions were missing. In this respect, the Tax Authority noted that the applicant's business mainly consisted of selling/buying cars, caravans, snowmobiles and trailers which were capital goods of some value. Moreover, the applicant had made deductions for costs for training of staff as well as for costs for substitutes during training which, according to the Tax Authority, had not taken place and thus did not reflect real costs. Consequently, the deductions should be refused and employer's contributions calculated on these amounts.
The applicant replied to the preliminary consideration, opposing any changes to its tax returns as it insisted that they were correct.
On 28 April 1997 the audit report was finalised by the Tax Authority and sent for comments to the applicant. It essentially confirmed the findings set out in the preliminary consideration.
The applicant maintained that its tax returns were correct and, on 5 June 1997, its owner met with representatives of the Tax Authority to explain the company's arguments.
On 1 July 1997 the Tax Authority decided not to grant the deductions for costs for training courses and for substitutes during training, thereby increasing the employer's contributions to be paid by the applicant for the expenditure years 1992-1994. It further decided to impose tax surcharges amounting, in total for all three years, to SEK 315,326 (approximately EUR 33,800), i.e. 20% of the additional taxes levied.
Moreover, on 12 June 1998, the Tax Authority decided, in accordance with its findings in the tax audit, to alter the applicant's tax returns for the relevant years in so far as they concerned income tax, employer's contributions (besides what had been covered in its decision of 1 July 1997) and value-added tax. It also imposed tax surcharges on the additional taxes amounting to, in total for the three years, approximately SEK 1,233,000 (approximately EUR 132,000) as it found no grounds on which to remit a part or all of them.
The applicant appealed against the Tax Authority's decisions, disputing its findings and insisting that there were no grounds for changing its tax returns or imposing tax surcharges.
On 25 June 1998 the applicant was declared bankrupt. However, its owner was allowed to continue the proceedings on its behalf.
On 31 August 1998 the Tax Authority made the obligatory re-assessment of its decision of 1 July 1997 but decided not to change it. Following this, it forwarded this part of the appeal to the County Administrative Court (länsrätten) of the County of Norrbotten.
On 2 May 2000 the Tax Authority made its obligatory re-assessment of its decision of 12 June 1998 but decided not to change this either and then sent the appeal on to the County Administrative Court.
The applicant and the Tax Authority made further submissions before the County Administrative Court, where the appeals had been joined together with an appeal by the applicant's owner which was also related (but not an issue in the present case before the Court). The applicant invoked, inter alia, Article 6 of the Convention, claiming that it would violate the presumption of innocence to impose the tax surcharges and that, in any event, the tax surcharges were completely disproportionate to the alleged offence.
Upon the request of the applicant and its owner, on 19 and 20 September 2000 an oral hearing was held before the County Administrative Court, where eight witnesses were heard at the request of the applicant and one at the request of the Tax Authority. Moreover, the quality of the book-keeping and a large number of transactions were gone through and discussed.
On 5 October 2000 the County Administrative Court gave judgment. It first found that the applicant's book-keeping had been so seriously flawed that the Tax Authority had been justified in making an assessment of arrears of the applicant's tax returns for the relevant years. It then rejected the applicant's appeal, except in so far as concerned a part of the employer's contributions for the year 1994, which were removed. Moreover, the court remitted the tax surcharges in so far as they related to the deductions for costs for training and for substitutes during training since it found that the matter involved difficult tax questions. The court further lowered another part of the tax surcharges as it considered that the Tax Authority had applied the wrong percentage when calculating the tax surcharges for income tax and value-added tax. In the court's opinion the percentages should be 10% and 5% instead of 20% and 10%. As for the remaining part of the tax surcharges, the court found that the applicant had provided the Tax Authority with incorrect information, for which reason it was justified to impose tax surcharges. Moreover, it considered that the imposition of the tax surcharges was in accordance with Article 6 of the Convention and that there were no grounds on which to remit them.
Both the applicant and the Tax Authority appealed against the judgment to the Administrative Court of Appeal (kammarrätten) in Sundsvall.
On 27 February 2001 and on 13 June 2001 the County Administrative Court gave judgment in several other cases (which are not the subject matter of the present application before the Court) concerning various taxes, fees and charges for the applicant and its owner. These judgments were also appealed against to the Administrative Court of Appeal.
On 21 October 2002, after having held an oral hearing, the Administrative Court of Appeal gave judgment on the issue concerning the employer's contributions related to the deductions for costs for training and for substitutes during training and the tax surcharges connected to them. It found that the applicant had had certain costs for the training and for substitutes but not to the extent claimed by it. As the applicant's book-keeping was so deficient, the court made a discretionary assessment according to which 25% of the deductions for the costs were allowed. Moreover, it considered that the matter did not involve a difficult tax question and that there were no other grounds not to impose tax surcharges. Thus, it decided to impose tax surcharges amounting to 20% of the 75% of the deductions of the costs which had not been allowed (the total sum of the tax surcharges being approximately EUR 25,300).
On 3 December 2003 the Administrative Court of Appeal gave judgment on the remaining issues relating to the applicant and its owner. It granted a part of the applicant's appeal by lowering somewhat the basis for the value-added tax and for the employer's contributions for the years 1994 and 1995. The tax surcharges on these sums were lowered accordingly. However, the court also granted, partially, the Tax Authority's appeal in that it increased the part of the tax surcharges which had been lowered by the County Administrative Court since it considered that the correct percentage to be used was 10% and 20% (not 5% and 10% as the lower court had found). As for the remaining part of the tax surcharges, the court agreed with the lower court that the applicant had provided the Tax Authority with incorrect information for which reason it was justified to impose tax surcharges and that there were no grounds on which to remit them.
The applicant appealed against both judgments to the Supreme Administrative Court (Regeringsrätten), which refused leave to appeal on 24 May 2004 and 28 June 2004, respectively.
B. Relevant domestic law and practice
Taxpayers submit yearly tax returns to the local tax authorities. To ensure that timely, sufficient and correct information is provided, the tax authorities may, under certain circumstances, impose special charges on the taxpayer in the form of tax surcharges.
The rules on tax surcharges relevant to the present case were laid down in the Taxation Act (Taxeringslagen, 1990:324). According to Chapter 5, section 1 of the Act, a tax surcharge is imposed on the taxpayer if he or she, in a tax return or in any other written statement, has submitted information of relevance to the tax assessment which is found to be incorrect. It is not only express statements that may lead to the imposition of a surcharge; concealment, in whole or in part, of relevant facts may also be regarded as incorrect information. However, incorrect claims are not penalised; if the taxpayer has given a clear account of the factual circumstances but has made an incorrect evaluation of the legal consequences thereof, no surcharge is imposed. The burden of proving that the information is incorrect lies with the tax authority.
In certain circumstances, a tax surcharge will be remitted. Thus, Chapter 5, section 6, of the Act states that taxpayers will not have to pay a surcharge if their failure to submit correct information or to file a tax return is considered excusable owing to their age, illness, lack of experience or comparable circumstances. The surcharge should also be remitted where the failure appears excusable by reason of the nature of the information in question or other special circumstances, or where it would be manifestly unreasonable to impose a surcharge.
Chapter 5, section 7, of the Act stipulates that, if the facts of the case so require, the tax authorities must have regard to the provisions on remission, even in the absence of a specific claim to that effect by the taxpayer. In principle, however, it is up to the taxpayer to show due cause for the remission of a surcharge.
COMPLAINTS
The applicant complained that its rights under Article 6 § 2 of the Convention, or in the alternative Article 1 of Protocol No. 1 to the Convention, had been violated in that the Tax Authority revised its assessment of arrears for the years 1993 to 1995 and imposed tax surcharges on it, without showing that it had failed to submit the necessary information, intentionally or by neglect, in its tax returns. It further claimed, under Article 6 § 1 of the Convention, that the length of the proceedings had been excessive, the proceedings for the three tax assessment years lasting approximately seven years and three months. Lastly, the applicant alleged that it had been deprived of an effective remedy, as guaranteed by Article 13 of the Convention, since its case had not been not finalised within a reasonable time.
THE LAW
“Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.”
A). Under this heading, the applicant first alleged that the Tax Authority and the national courts had failed to carry out a nuanced and not too restrictive assessment of whether grounds for remission of the tax surcharges existed.
The Court reiterates that, although tax surcharges cannot be said to belong to criminal law under the Swedish legal system, it has found in several judgments concerning Sweden (see, in particular, Janosevic v. Sweden, no. 34619/97, 23 July 2002, §§ 64-71, ECHR 2002-VII, and Västberga Taxi Aktiebolag and Vulic v. Sweden, no. 36985/97, 23 July 2002, §§ 75-82) that the imposition of such measures involves the determination of a “criminal charge” within the meaning of Article 6 of the Convention. However, in the two above-mentioned judgments, the Court considered that the presumptions applied in Swedish law with regard to tax surcharges had been confined within reasonable limits and that the presumption of innocence contained in Article 6 § 2 of the Convention therefore had not been breached (ibid., §§ 96-104 and §§ 108-116, respectively). This conclusion was reached having particular regard to the fact that the relevant rules on tax surcharges provided certain means of defence based on subjective elements, and that an efficient system of taxation was important to the State's financial interests.
In the present case, the Court observes that the Tax Authority, the County Administrative Court and the Administrative Court of Appeal all examined the applicant's objections to the imposition of the tax surcharges and that the lower court remitted a part of them as it considered that it related to a difficult tax question. The fact that the appellate court did not agree with this assessment of the lower court does not mean that they did not make a nuanced evaluation of the matter. On the contrary, the Court considers that it reflects the attention given to the matter by the national courts. Moreover, the County Administrative Court examined the applicant's objection that the imposition of the tax surcharges violated its rights under Article 6 § 2 of the Convention. However, it rejected the objection, finding that, although Article 6 was applicable, the imposition of tax surcharges did not violate the presumption of innocence since the courts had made an assessment of whether there were any grounds for remission. The Court further notes that in so far as the applicant's objections were rejected, this was because the national courts found that the applicant had provided the Tax Authority with incorrect and incomplete information in its tax returns, which had forced the Tax Authority to carry out a tax audit and make discretionary assessments of the applicant's income during the relevant taxation years. Furthermore, they did consider the grounds for remission of the tax surcharges but found none applicable to the situation before them, with the exception, as stated above, concerning the County Administrative Court.
In the Court's view, the above demonstrates that the tax surcharges were not imposed automatically but after a proper examination of the matter and to the extent that the applicant was considered to have been responsible for the incorrect and incomplete information.
Furthermore, the Court observes that, unlike the applications of Janosevic and VästbergaTaxi Aktiebolag and Vulic, the applicant has not alleged that the present case involved any enforcement measures to ensure the payment of the tax surcharges.
In these circumstances, and having regard to the Court's case-law referred to above, as well as the fact that the national courts made an individual assessment of the applicant's case, the Court finds no appearance of a violation of the applicant's right to be presumed innocent.
It follows that this complaint must be rejected as being manifestly ill-founded, pursuant to Article 35 §§ 3 and 4 of the Convention.
B). Under the same provision, the applicant also complained that the presumption of innocence had been violated when the Tax Authority made a revised assessment of arrears for the years 1993 -1995. It claimed that the revised assessment of arrears should be considered as falling under Article 6 of the Convention because it was so closely connected to the question of the imposition of tax surcharges. In the applicant's view, the Tax Authority and the national courts had failed to carry out a nuanced and careful examination of whether it would be reasonable to impose such a revision on the company.
As concerns this complaint, the Court will first examine whether the revised assessment of arrears should be regarded as a “criminal charge” for the purposes of Article 6 of the Convention. In this respect, the Court observes the following.
According to the relevant domestic law, the Tax Authority can carry out a revised assessment of arrears when it finds that a taxpayer has submitted incorrect information in his or her tax return which has led to an erroneous decision. However, such an assessment cannot be made if it would be clearly unreasonable or if more than five years have elapsed since the taxation year. The measure is not imposed by Swedish criminal law but is an administrative measure designed to ensure an efficient and uniform system of taxation. Since the system is based on information supplied by the taxpayer, the Tax Authority must be given a reasonable time to process and verify that information and, if it is found to be incorrect, to carry out a re-assessment of the tax decision. The measure is thus of a purely fiscal nature and would not automatically entail extra charges or fees.
In these circumstances, the Court finds that, having regard to the legal classification of the matter under national law, its nature and the applicant's failure to provide correct and complete information to the Tax Authority, the revised assessment of arrears cannot be considered to have constituted a “criminal charge” against the applicant for the purposes of Article 6 of the Convention. It is thus inapplicable under its criminal head (see, Fischler v. Sweden (dec.), no. 38884/02, 25 January 2005, unreported). Moreover, the Court has consistently held that, generally, tax disputes fall outside the scope of “civil rights and obligations” under Article 6, despite the pecuniary effects which they necessarily produce for the taxpayer (see, Ferrazzini v. Italy, [GC], no. 44759/98, §29, ECHR 2001-VII).
It follows that this complaint is incompatible ratione materiae with the Convention and must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
The Court notes that the revised assessments of arrears and the tax surcharges were imposed on the applicant by the Tax Authority and the administrative courts with reference to, and in accordance with, the applicable legislation in force at the relevant time. Thus, the Court is satisfied that the domestic decisions had an adequate legal basis for the purposes of Article 1 of Protocol No. 1 to the Convention.
The Court further observes that all instances found that the applicant had submitted incomplete and incorrect information to the Tax Authority, which had made it impossible for that Authority to calculate the applicant's taxes correctly without making an investigation of its own into the matter. The tax audit had therefore been necessary in order to establish all pertinent and underlying circumstances relevant to the tax assessments. In this regard, the Court reiterates that the reasons for making a revised assessment of arrears and imposing tax surcharges had been set out in detail already in the Tax Authority's preliminary consideration which had been communicated to the applicant in February 1997. This had then been followed by thorough and well-reasoned judgments by the national courts. Moreover, as stated above, the Court considers that the Tax Authority and the national courts made a proper and fair examination of the matter before them, being aware of the consequences for the applicant and limiting them in proportion to the applicant's responsibilities.
Thus, having regard to the State's need to secure an effective system of taxation to ensure its financial interests (see, among others, Västberga Taxi Aktiebolag and Vulic v. Sweden, cited above, § 115), and its wide margin of appreciation in striking a fair balance between community and individual interests, the Court considers that the taxes levied through the revised assessments of arrears and the tax surcharges imposed on the applicant cannot be considered arbitrary or disproportionate to the aims pursued.
It follows that this complaint must also be rejected as being manifestly ill-founded, pursuant to Article 35 §§ 3 and 4 of the Convention.
“In the determination of his civil rights and any criminal charge against him, everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal.”
The Court considers that it cannot, on the basis of the case file, determine the admissibility of this complaint and that it is therefore necessary, in accordance with Rule 54 § 2 (b) of the Rules of Court, to give notice of this part of the application to the respondent Government.
“Everyone whose rights and freedoms as set forth in [the] 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.”
The Court considers that it cannot, on the basis of the case file, determine the admissibility of this complaint and that it is therefore necessary, in accordance with Rule 54 § 2 (b) of the Rules of Court, to give notice of this part of the application to the respondent Government.
For these reasons, the Court unanimously
Decides to adjourn the examination of the applicant's complaints concerning the length of the proceedings and its right to an effective remedy;
Declares the remainder of the application inadmissible.
Stanley
Naismith Boštjan M. Zupančič
Deputy
Registrar President