FOURTH SECTION
DECISION
Application no. 41853/05
by Lauri and Taina GRANATH
against Finland
The European Court of Human Rights (Fourth Section), sitting on 20 January 2009 as a Chamber composed of:
Nicolas Bratza, President,
Lech Garlicki,
Giovanni Bonello,
Ljiljana Mijović,
Päivi Hirvelä,
Ledi Bianku,
Nebojša Vučinić, judges,
and Lawrence Early, Section Registrar,
Having regard to the above application lodged on 17 November 2005,
Having deliberated, decides as follows:
THE FACTS
The applicants, Mr Lauri Granath and Mrs Taina Granath, are Finnish nationals who were born in 1933 and 1931 respectively and live in Turtola. They were represented before the Court by Mr Jarkko Tamminen, a lawyer practising in Turku. The Finnish Government (“the Government”) were represented by their Agent, Mr Arto Kosonen of the Ministry for Foreign Affairs.
The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
The limited liability company owned by the applicants was subject to a tax inspection in 1997. The company’s book-keeping was found to be unreliable as some of the sales income from the tax year 1995 had not been entered in the books but had apparently been transferred to the applicants. The conclusions of the inspection report, dated 11 December 1997, which contained a proposal for the estimated amounts of disguised dividends, were sent to the applicants for comments. On 19 August 1998 the local tax authorities estimated that the first applicant had received 495,000 Finnish marks (FIM; about 96,400 euros) as disguised dividends and his spouse FIM 70,000 (about 13,600 euros) during the tax year 1995. They ordered the first applicant to pay additional tax, interest and tax surcharges (veronkorotus, skatteförhöjning), in total FIM 405,440 (about 78,960 euros) of which FIM 49,000 (about 9,500 euros) were surcharges. The second applicant was ordered to pay in total FIM 52,530 (about 10,230 euros) of which FIM 7,000 (about 1,360 euros) were surcharges.
On 19 November 2001 the applicants sought rectification from the Lapland Tax Rectification Committee (verotuksen oikaisulautakunta, prövningsnämnden i beskattningsärenden) which rejected their claims on 9 December 2002. It found that there were grounds for a tax assessment by estimation as a large proportion of sales had not been entered in the books. According to case-law, in such cases the income was considered as disguised dividends which had benefited the shareholders, unless they could prove the contrary. The applicants had not proved the above presumption to be incorrect in their case and tax surcharges could thus be imposed on them.
On 15 April 2003 the applicants appealed to the Rovaniemi Administrative Court (hallinto-oikeus, förvaltningsdomstolen), claiming that they had already proved the presumption wrong and that there were no grounds for a tax assessment by estimation. They requested, inter alia, that an oral hearing be held. They claimed that an oral hearing was necessary in order to hear their witnesses who could tell how the cash sales were recorded and the receipts handled, and in order to hear their accountant as well as the auditors as witnesses.
On 9 October 2003 the Administrative Court rejected the request for an oral hearing as unnecessary, finding that the hearing of witnesses could not add anything to the case file that would have any impact on the outcome of the case. The testimony of the witnesses could not explain why the applicants’ assets had increased during the tax year. As to the merits, the court lowered the amount estimated as disguised dividends to FIM 370,000 (about 65,590 euros) and FIM 40,000 (about 7,090 euros) respectively, and reduced the payable tax surcharges to FIM 37,000 (about 6,560 euros) in so far as the first applicant was concerned and to FIM 5,000 (about 890 euros) in so far as the second applicant was concerned. The court found that it was for the tax authorities to show that the applicants’ assets had increased during the tax year and for the applicants to show that this increase was free of tax. As the applicants had not proved otherwise, the increase of assets could only have been the income omitted from their company’s book-keeping. Thus, the basis for the imposition of tax surcharges was correct.
On 8 December 2003 the applicants appealed to the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen), reiterating the grounds of appeal relied on before the Administrative Court and requesting that an oral hearing be held.
On 27 May 2005 the Supreme Administrative Court refused leave to appeal. One of the justices gave a dissenting opinion stating that he was in favour of granting leave to appeal. In his opinion it was necessary to decide whether in similar cases, when examining the need to hold an oral hearing, Article 6 of the Convention might be applicable to such cases.
COMPLAINTS
1. The applicants complained under Article 6 § 1 of the Convention that the total length of the proceedings in their case had been incompatible with the “reasonable time” requirement.
2. They further complained, under the same Article, that their right to a fair hearing had been violated as the administrative courts had not held an oral hearing and witnesses could thus not be heard.
3. Finally, they complained under the same Article that they had not had a fair hearing as there had been no equality of arms since the taxation authorities had had better possibilities and resources to examine the issue than the applicants and since the burden of proof had not been equally distributed between the parties.
THE LAW
By letter dated 20 October 2008 the Government’s observations were sent to the applicants’ representative, who was requested to submit any observations together with any claims for just satisfaction in reply by 1 December 2008.
By letter dated 26 November 2008 the applicants’ representative informed the Court that the applicants wanted to withdraw the application.
The Court considers that, in these circumstances, the applicants may be regarded as no longer wishing to pursue their application, within the meaning of Article 37 § 1 (a) of the Convention. Furthermore, in accordance with Article 37 § 1 in fine, the Court finds no special circumstances regarding respect for human rights as defined in the Convention and its Protocols which require the continued examination of the case. In view of the above, it is appropriate to strike the case out of the list.
For these reasons, the Court unanimously
Decides to strike the application out of its list of cases.
Lawrence EarlyNicolas Bratza
RegistrarPresident
Full & Egal Universal Law Academy