The Constitutional Court confirms the doubts of the Senate: the prohibition to decrease the amount of tax penalty only once in three years or in a year does not comply with the Constitution
7 April, 2008
On April 3, the Constitutional Court passed the decision in the case No.2007-23-01 “On compliance of the words “not more frequently than once in three years” of the first part of Article 331 of the law “On taxes and duties” (in the wording of the law of April 13, 2000) with Article 1 of the Constitution of the Republic of Latvia”.
In accordance with the disputed regulation - the words “not more frequently than once in three years of the first part of Article 331 of the law “On taxes and duties” (in the wording of the law of April 13, 2000)” – in cases when a tax payer has appealed a decision of the State Revenue Service on violation of the tax laws, the penalty may be decreased but not more than in the amount of 70 per cent and not more frequently than once in three years. The disputed regulation in 2004 was replaced by a new one which stated that the penalty may be decreased not more often that once a year.
An application on compliance of the disputed regulation with the Constitution was filed by the Department of Administrative Cases of the Supreme Court Senate considering that application of the standard causes violation of the principle of commensurability and along with it also the principle of justice in cases when the applied fine is incommensurable to the committed offence. In practice there are often cases when a tax payer is not to be regarded as a fraudulent tax nonpayer, but he has allowed negligence, for example, by entering two days in advance the pretax in the tax return, which according to the law would have to be entered in the tax return only in the following month. The applicant indicated that although the disputed standard is invalid for several years already, it is still applied as the courts still review the administrative acts issued in 2003 and 2004.
The Constitutional Court noted that with the application of the disputed standard a person may be punished by a fine incommensurable to the offence. Therefore, the Constitutional Court found that not only the disputed standard does not comply with Article 1 of the Satversme (Constitution), but so does also the latest standard which stipulated that the fine may be decreased not more frequently than once a year.
However, the Constitutional Court acknowledged that it would not be admissible to cancel both standards from the moment of their adoption. “As the field of tax law is an essential field of activities of the state, a situation when the cancellation of the disputed standard leads to revision of majority or all of the decisions of the SRS which have become effective and in which this law standard could be applied should not be allowed”, noted the Court. Therefore both the law standards were acknowledged invalid from the moment of their adoption only regarding the cases which still are being reviewed, namely, the cases in which persons have disputed and appealed the fines imposed or taxes calculated by the SRS, and the final rulings till the announcement of the judgment of the Constitutional Court have not become effective.
The judgment of the Constitutional Court is final and may not be appealed. The text of the judgment is published on the website of the Constitutional Court http://www.satv.tiesa.gov.lv, section “Cases”.
Article 104 of the Administrative Procedure Law states that if a court considers that a law standard does not comply with the Satversme or a standard (act) of the international law, it suspends the court proceedings in the case and files a substantiated application with the Constitutional Court. After the decision or the judgment of the Constitutional Court comes into effect the court renews the proceedings in the case and the following court proceedings are based on the opinion of the Constitutional Court.
Information prepared by
Head of the Division of Communications of the Supreme Court Rasma Zvejniece
E-mail: firstname.lastname@example.org, telephone: 7020396, 28652211