Information Note on the Court’s case-law 215
February 2018
Cacciato v. Italy (dec.) - 60633/16
Decision 16.1.2018 [Section I]
Article 1 of Protocol No. 1
Article 1 para. 2 of Protocol No. 1
Control of the use of property
Taxation on expropriation compensation interfering with property rights: inadmissible
Facts – Both applicants owned land that was subject to an expropriation order issued by the local authority. The applicants brought a court action and were awarded expropriation compensation corresponding to the market value of the land. In accordance with Law no. 413/1991 the local authority deducted taxation on the compensation at a flat rate of 20%, although the applicants also had the option of having the capital gain arising from the compensation taxed under the ordinary taxation rules when filing their annual tax return.
In the Convention proceedings, the applicants complained that the 20% reduction in the expropriation compensation represented a disproportionate interference with their property rights under Article 1 of Protocol No. 1.
Law – Article 1 of Protocol No. 1: The award of compensation by the domestic court amounted to a “possession” attracting the guarantees of Article 1 of Protocol No. 1. The applicants’ complaint was examined from the standpoint of control of the use of property “to secure the payment of taxes”, under the second paragraph of that provision.
In assessing whether a fair balance had been struck between the demands of the general interests of the community and the requirements of the protection of the individual’s fundamental rights, the Court considered that it was well within the area of discretionary judgment for the Italian legislature to develop substantive tax rules providing for taxation of expropriation compensation, and determining the type and amount of taxation and the concrete means of enforcement (deduction at source in the instant case).
The fiscal measures applied in the applicants’ case had not impaired the very substance of their property rights: the 20% tax rate could not be considered quantitatively prohibitive and the deduction of the amount had not had the effect of nullifying or essentially frustrating the award to the extent of causing the applicants’ tax burden to acquire a “confiscatory” nature.
There was no evidence that the levying of the tax had fundamentally undermined the applicants’ financial situation and the applicants could have opted for taxation under the ordinary income tax regime had they so wished.
Lastly, the Court clarified that, unlike the position in Scordino (no. 1) and Gigli Costruzioni, in which awards of expropriation compensation had been drastically reduced by retrospective legislation, the compensation award in the present case had not been subjected to any reduction with respect to the market value. Moreover, Scordino (no. 1) could not be understood as implying that the application of the 20% tax on expropriation compensation, per se, ran contrary to Article 1 of Protocol No. 1.
In sum, taking into account the wide margin of appreciation which the States have in taxation matters, the levying of the tax on the expropriation compensation did not upset the balance which must be struck between the protection of the applicants’ rights and the public interest in securing the payment of taxes.
Conclusion: inadmissible (manifestly ill-founded).
(See Scordino v. Italy (no. 1) [GC], 36813/97, 29 March 2006, Information Note 85; and Gigli Costruzioni S.r.l. v. Italy, 10557/03, 1 April 2008)
© Council of Europe/European Court of Human Rights
This summary by the Registry does not bind the Court.
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