FOURTH SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 60243/00
by Vincent BALÁŽ
against Slovakia
The European Court of Human Rights (Fourth Section), sitting on 16 September 2003 as a Chamber composed of
SirNicolas Bratza, President,
MrsV. Strážnická,
MrM. Fischbach,
MrJ. Casadevall,
MrR. Maruste,
MrL. Garlicki,
MrsE. Fura-Sandström, judges,
and Mr M. O’Boyle, Section Registrar,
Having regard to the above application lodged on 8 May 2000,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
The applicant, Mr Vincent Baláž, is a Slovakian national, who was born in 1931 and lives in Leopoldov. The respondent Government were represented by their Agent, Mr P. Vršanský, succeeded by Mr P. Kresák in that function.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
The applicant and his wife are retired and receive an old age pension 5,800 Slovak korunas (SKK) per month, which forms their main source of income. On 30 January 1997 the applicant acquired a trade licence for inter alia operating a merry‑go‑round for children. The licence became operative on 1 April 1997. Since then, the applicant has operated a merry-go-round in the summer season, that is between May and October. According to the applicant, he earns about SKK 500 per month of operation.
A holder of a trade license is considered as a self‑employed person for the purposes of the Social Security Administration Act no. 274/1994 Coll. (Zákon o Sociálnej poisťovni - “the 274/1994 Act”) and is obliged to register with the health insurance fund and the pension fund, and to pay monthly contributions to both funds.
Under Section 14 § 7 (e) of the 274/1994 Act as in force until 1 January 2000, holders of a trade licence who where receiving an old age pension were exempted from the obligation to contribute to the pension fund.
As the applicant was receiving an old‑age pension, he was exempted from the obligation to pay premiums to the pension fund. He did, however, remain obliged to register with the health insurance fund and to pay the monthly contributions to this fund, none of which he in fact did. The applicant did declare his income earned from the exploitation of the merry-go-round to the fiscal authorities. According to his income tax declarations, this taxable income was SKK 0 in 1997, SKK 31 in 1998 and SKK 3,179 in 1999.
On 1 January 2000 an amendment no. 345/1999 Coll. of the 274/1994 Act entered into force. It repealed the exemption set forth in Section 14 § 7 (e) of the 274/1994 Act. Consequently, in addition to his obligation to pay contributions to the health insurance fund, the applicant became liable to contribute to the pension fund as well.
In February 2000 the applicant registered with the health insurance fund and with the pension fund at the Social Security Administration (Sociálna poisťovňa). He indicated 1 January 2000 as the starting date of his participation in the social security scheme on grounds of his self‑employment activity.
On 22 February 2000 the applicant complained to the Constitutional Court (Ústavný súd) that his monthly income from exploiting the merry‑go‑round amounted to SKK 529 whilst his mandatory contributions payable to the Social Security Administration were calculated on the minimum assessment basis of SKK 4,000 thus amounting to SKK 1,292 (i.e. 4.8 % for the health insurance scheme plus 27.5 % for the pension scheme) per month. The applicant alleged that the relevant provisions of the Social Insurance Act violated his property rights.
The applicant complained numerous times, including by letters of 4 April, 5 April, 10 April and 14 April 2000, to various bodies of the Social Security Administration that the level of contributions that he was required to pay was excessive in relation to his actual income and that he was required to pay contributions even for the months in which he did not operate his business.
On various occasions in April and May 2000, including in a letter of 27 April and during a meeting held on 17 May, the Social Security Administration informed the applicant of the legal rules that applied to his self‑employment activity. It informed him in particular that since 1 April 1997, when he had started the operation of the merry‑go‑round, he had been obliged to contribute to the health insurance fund in an amount equivalent to 4.8 % of the above minimum assessment basis. It further informed the applicant that, as from 1 January 2000, he had further become obliged to contribute to the pension fund by 27.5 % of that basis. The Social Security Administration asked the applicant to pay the contributions due, including the arrears.
On 4 May 2000 the Constitutional Court rejected the applicant’s complaint on the ground that the applicant had no standing to bring proceedings challenging the constitutionality of legislation.
By letters of 20 December 2000 and 3 January 2001 the Social Security Administration reminded the applicant of his obligation to pay the outstanding contributions.
On 8 January 2001 the applicant and the Social Security Administration agreed on a schedule for payment of the outstanding contributions.
B. Relevant domestic law
Social Security Administration Act (the 274/1994 Act)
Under Section 14 §§ 1 and 2 of this Act, self‑employed persons are liable to pay contributions to the health insurance fund and the pension fund.
Section 14 § 7 (e) of the Act, as in force until 31 December 1999, provided that self‑employed persons in receipt of an old‑age pension were exempted from the obligation to contribute to the pension fund. This exemption was abolished on 1 January 2000 when the amendment no. 345/1999 Coll. entered into force.
According to Section 15 § 1 of the Act the contributions are a percentage of the “assessment basis” (vymeriavací základ). The percentages applicable to self‑employed persons are 4.8 % for the health insurance fund and 27.5 % for the pension fund (Section 15 § 3 of the Act).
The “assessment basis” is 50% of the average monthly taxable income gained by a self-employed person during the previous fiscal year (Section 16 § 4 in conjunction with Section 17 § 2 of the Act). However, regardless of income actually earned during the previous fiscal year, a personal “assessment basis” for a self‑employed person cannot be lower than the statutory defined “minimum assessment basis”, that is SKK 2700 until 31 December 1997, SKK 3000 from 1 January 1998 to 31 December 1999 and SKK 4000 since 1 January 2000.
Pursuant to Section 18 of the Act, self‑employed persons are inter alia obliged to register themselves with the local branch of the Social Security Administration within eight days from the date on which their licence for their self‑employment activity takes effect.
COMPLAINT
The applicant complained that the premiums he had been obliged to pay under the Social Security Administration Act were substantially higher than his actual income from running his business, which income was about SKK 500 per month. He further complained that he had been obliged to pay the premiums even for the periods when he did not run the business and, accordingly, had no income at all therefrom. In substance he alleged a violation of Article 1 of Protocol No. 1.
THE LAW
The applicant complained about the contributions he had to pay to the health insurance fund and the pension funds. In the first place, he considered their amount to be excessive in light of his actual income from his business. Secondly, he objected to the obligation to pay these contributions even for the months in which he did not run his business. In substance he invoked Article 1 of Protocol No. 1 which, insofar as relevant provides:
“Every natural ... 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 ...
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to ... secure the payment of taxes or other contributions or penalties.”
The Government accepted that compulsory contributions to social insurance schemes necessarily constituted an interference with the peaceful enjoyment of possessions within the meaning of Article 1 of Protocol No. 1, but argued that they derived their right to impose obligations to contribute to social insurance funds from the right to enact laws to secure the payment of taxes or other contributions or penalties licensed by the second paragraph of Article 1 of Protocol No. 1. The Government considered that, in this respect, they enjoyed a wide margin of appreciation.
The Government submitted that the Slovakian pension system was based on the principle of general solidarity and continuous financing. The obligation to contribute to it applied in principle to every earning person. The revenue thus accumulated was directly used to pay benefits to those entitled. According to the regulations applicable until 31 December 1999, self‑employed persons receiving an old‑age pension were exempted from the obligation to contribute to the pension fund. However, the constantly increasing number of beneficiaries of an old‑age pension and the unfavourable situation on the labour market, which resulted in a pension fund deficit, necessitated the decision to abolish the exemption of self‑employed old‑age pensioners from the obligation to contribute to this fund. A further reason for repealing this exemption was to place self‑earning persons who did not benefit from an old‑age pension and those who did in an equal position.
The Government further pointed out that the minimum assessment basis had never exceeded the statutory defined minimum wage.
As to the applicant’s argument that he was required to pay the premiums even for the periods when he did not work, the Government asserted that the assessment basis was calculated on the basis of the average monthly income per fiscal year, thus taking into account possible fluctuations in that income. The Government invoked their right to determine the conditions for running businesses within their jurisdiction, including the obligation to pay taxes and other contributions related to the operation of businesses. They further invoked their right to modify these conditions in response to economic changes. The Government further claimed to be entitled to require self‑employed persons to comply with the conditions set for the running of businesses and their right to deny the right to run businesses to those who failed to observe such conditions.
The Government concluded that they were entitled under Article 1 of Protocol No. 1, given their wide margin of appreciation, to oblige the applicant to pay the contributions at issue and that this obligation did not impose an excessive individual burden on him.
The applicant disagreed and repeated his complaints.
The Court recalls that Article 1 of Protocol No. 1, which guarantees in substance the right of property, comprises three distinct rules. The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property. The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and makes it subject to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled, among other things, to control the use of property in accordance with the general interest. The second and third rules, which are concerned with particular instances of interference with the right to peaceful enjoyment of property, must be construed in the light of the general principle laid down in the first rule (see James and Others v. the United Kingdom, judgment of 21 February 1986, Series A no. 98, pp. 29-30, § 37, and Immobiliare Saffi v. Italy [GC], no. 22774/93, § 44, ECHR 1999-V).
The Court further recalls that a financial liability arising out of the raising of taxes or contributions may adversely affect the guarantee secured under Article 1 of Protocol No. 1 if it places an excessive burden on the person or entity concerned or fundamentally interferes with his or its financial position. However, it is in the first place for the national authorities to decide what kind of taxes or contributions are to be collected. The decisions in this area will commonly involve the appreciation of political, economic and social questions which the Convention leaves within the competence of the Contracting States. The margin of appreciation of the Contracting States is therefore a wide one (see, mutatis mutandis, James and Others, cited above, p. 32, § 46 and WASA Ömsesidigt, Försäkringsbolaget Valands Pensionsstiftelse, a group of approximately 15,000 individuals v. Sweden, no. 13013/87, Commission decision of 14 December 1988, Decisions and Reports (DR) 58, pp. 163, 186)
As regards the lawfulness and aim of the interference, the Court notes that the obligation to contribute to the two social funds at issue is stipulated by the 274/1994 Act, which is designed to fulfil the State’s functions in the social field. The Court observes that the legality under domestic law of the interference has not been disputed by the parties and considers that it pursued a legitimate aim “in accordance with the general interest”.
As to the proportionality of the interference, the Court notes that the contributions are calculated as a percentage of the assessment basis, i.e. in the present case 4.8 % and, as from 1 January 2000, a further 27.5 %. The assessment basis is fixed at 50 % of the average monthly taxable income in the previous fiscal year, which formula takes account of any income fluctuations during that year. In the applicant’s case, the minimum assessment basis was applied, which did not exceed the statutory defined minimum wage.
In light of the above, the Court cannot find that the contributions which the applicant was obliged to pay to the health insurance fund and the pension fund can be regarded as affecting the applicant’s property rights to such an extent that it could be considered as disproportionate or as an abuse of the State’s right under Article 1 of Protocol No. 1 to levy taxes.
It follows that the application manifestly ill‑founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Michael O’BoyleNicolas Bratza
RegistrarPresident
Full & Egal Universal Law Academy