EHRM, 17-06-2025, nr. 38785/18

The Court notes that in his constitutional complaint the applicant relied on Article 1 of Protocol No. 1 to the Convention and complained about:

That complaint reflected the alleged breach that has been raised before the Court (see Radomilja and Others v. Croatia [GC], nos. 37685/10 and 22768/12, § 117, 20 March 2018). The Government's non-exhaustion objection must therefore be dismissed.

The Court further reiterates that a violation of the Convention may concern important questions of principle and thus cause significant disadvantage even where no pecuniary interests are affected (see Bartolo v. Malta (dec.), no. 40761/19, § 22, 7 September 2021, and the references cited therein). In the present case, in addition to and apart from the pecuniary interests at stake, the Court observes that the fact that the domestic authorities instituted enforcement and minor offence proceedings against the applicant for failing to make tax payments on time, while at the same time failing to fulfil their own obligations to him in due time, was a matter of principle, having regard to the applicant's professional activities and his obligations as a tax payer (compare also Konstantin Stefanov v. Bulgaria, no. 35399/05, § 46, 27 October 2015). The Court therefore rejects the Government's objection that the applicant had suffered no significant disadvantage.

The Court notes that this complaint is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.

The Court observes that it is not in dispute between the parties that collecting the applicant's tax debt by way of enforcement constituted an interference with his property rights as guaranteed by Article 1 of Protocol No. 1. Such an interference is to be examined from the standpoint of the rule in the second paragraph of Article 1 of Protocol No. 1, under which the States have the right to enforce such laws as they deem necessary to secure the payment of taxes (see Bežanić and Baškarad v. Croatia, nos. 16140/15 and 13322/16, § 60, 19 May 2022, with further references cited therein).

The Court will thus determine whether the interference was lawful and compatible with the proportionality principle inherent in that provision, having regard to the wide margin of appreciation enjoyed by States in the tax sphere (see Gasus Dosier- und Fördertechnik GmbH v. the Netherlands, 23 February 1995, § 65, Series A no. 306-B, and ‘Bulves’ AD v. Bulgaria, no. 3991/03, §§ 62-63, 22 January 2009).

As regards the lawfulness of the interference, the Court reiterates that it is primarily for the national authorities, notably the courts, to interpret and apply domestic law (see, among many other authorities, Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no. 38433/09, § 140, ECHR 2012), and that in the tax sphere the States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test (see Maroslavac v. Croatia, no. 64806/16, § 38, 13 February 2024; Bežanić and Baškarad, cited above, § 64, and OAO Neftyanaya Kompaniya Yukos v. Russia, no. 14902/04, § 559, 20 September 2011).

In order to assess the applicant's grievance, the Court turns to the relevant domestic legal framework. It notes that section 115(1) and (2) of the 2008 General Tax Act (in force at the time) allowed the tax authorities and tax debtors to set off claims they had against each other arising from a tax relationship (see paragraph 20 above).

In 2012 section 115(3) was introduced, governing the offsetting of taxpayers' enforceable claims against the State against their tax debts (see paragraph 21 above). Subordinate legislation passed in February 2013 to implement section 115(3) of the General Tax Act listed the enforceable claims which could be set off against tax debts. Claims which had been established by final decisions of the domestic courts and which were payable from the State budget were expressly included in the list. Almost identical provisions of subordinate legislation passed to implement the current General Tax Act (Pravilnik o provedbi Općeg poreznog zakona, Official Gazette nos. 45/2019 et al.) are still in force (see paragraphs 24 and 25 above).

It is true that the tax authorities, the administrative courts and the Constitutional Court in the applicant's case, and the High Administrative Court in the judgments referred to by the Government (see paragraph 26 above), could have provided reasons as to the existence and the interpretation of that subordinate legislation, and as to how their conclusion that section 115(3) of the General Tax Act should be read as referring only to claims arising from a tax relationship tallied with the specific subordinate legislation in question.

However, while recognising that it is not its role to interpret and define the precise meaning of national law, a task that clearly falls within the realm of the national courts (see Nejdet Şahin and Perihan Şahin v. Turkey [GC], no. 13279/05, § 50, 20 October 2011), the Court sees no reason to question the domestic authorities' conclusion that it was not possible under domestic law for the applicant to offset (and thereby extinguish) his tax debt against his enforceable claims against the State which did not arise from a tax relationship. That conclusion appears neither arbitrary nor manifestly unreasonable.

The Court is further satisfied that collecting the applicant's tax debt by way of enforcement pursued an aim that was in the general interest — that is to say to secure the payment of taxes, as envisaged by legislation, in an area where the State has a wide margin of appreciation (see OAO Neftyanaya Kompaniya Yukos, cited above, § 606).

As to whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the applicant's fundamental rights, the Court observes that the applicant's grievance relates to the fact that he had enforcement proceedings instituted against him and was fined for the minor offence of failing to pay taxes within the statutory time-limits (see paragraphs 6, 8 and 9 above), while at the same the State had failed to timely pay its own debts to him, in part for more than one year and in several instances even for more than two years (see paragraph 11 above).

In that connection the Court notes that, while the State's failure to promptly meet its obligations is relevant to the overall context, it does not necessarily justify non-compliance with tax obligations or require automatic offsetting absent a clear legal basis.

The Court further notes that the applicant received the amounts owed to him by the State on the basis of several domestic court decisions between December 2014 and December 2015. Accordingly, while there were delays in payment, the State ultimately discharged its obligations to the applicant during that period (see paragraph 13 above).

The Court is mindful of the issues faced by lawyers where there are delays in the payment of fees for services provided as officially appointed counsel in domestic proceedings. In reply to the Government's specific argument (see paragraph 29 above), it reiterates that a person who has obtained an enforcement title against the State cannot be required to resort to enforcement proceedings in order to have it executed (see Cocchiarella v. Italy [GC], no. 64886/01, § 89, ECHR 2006-V, and Čikanović v. Croatia, no. 27630/07, § 52, 5 February 2015). Furthermore, a State's failure to comply with a judgment issued in an applicant's favour may lead to a violation of Article 6 of the Convention and Article 1 of Protocol No. 1 (see, for instance, Metaxas v. Greece, no. 8415/02, §§ 30-31, 27 May 2004, and Petrushko v. Russia, no. 36494/02, §§ 25 and 28, 24 February 2005, where the Court found a violation of Article 1 of Protocol No. 1 on account of the respective States' failure to comply with judgments in the applicants' favour for one year and five months in the former case and some two years in the latter).

It is important to note, however, that the applicant did not complain before the Court about the State's failure to pay him the sums ordered by the domestic courts. Instead, he brought his case before the Court because the domestic authorities had refused to extinguish his tax debt by offsetting it with the enforceable claims he had against the State. The Court must therefore confine its assessment to whether such offsetting was legally required and whether its refusal placed a disproportionate burden on the applicant.

In those circumstances, reiterating its finding as to the lawfulness of the domestic decisions that it was not possible under the domestic law to offset the applicant's tax debt against his enforceable claims against the State, the Court considers that the issue of whether the applicant's failure to pay taxes within the statutory time-limits should be punished by a fine and his tax debt be collected by way of enforcement comes within the margin of appreciation of the State, which is a wide one (see paragraph 47 above).

The Court also observes that, in addition to the statutory default interest of EUR 240 imposed on the applicant (see paragraph 29 above), he also had to pay court fees of EUR 328 for the administrative court proceedings, and a minor offence fine of EUR 920 (see paragraph 8 above). In the Court's view there is nothing to indicate, nor has it been suggested by the applicant, that the levying of those sums, which in total amounted to EUR 1,488, fundamentally undermined the applicant's financial situation, or his professional activities.

Accordingly, having regard to the broad margin of appreciation accorded to the States in the field of taxation, the Court concludes that the refusal to offset the applicant's tax debt against his enforceable claims, arising from a legal relationship unrelated to taxation, was lawful. Furthermore, the Court is satisfied that this measure did not place a disproportionate individual burden on the applicant.

There has accordingly been no violation of Article 1 of Protocol No. 1 to the Convention in the present case.