FOURTH SECTION
DECISION
Application no. 52969/14
Péter LEGEZA against Hungary
and 3 other applications
(see list appended)
The European Court of Human Rights (Fourth Section), sitting on 16 January 2018 as a Committee composed of:
Faris Vehabović, President,
Carlo Ranzoni,
Iulia Motoc, judges,
and Andrea Tamietti, Deputy Section Registrar,
Having regard to the above applications lodged on the various dates indicated in the appended table,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants,
Having deliberated, decides as follows:
THE FACTS
1. A list of the applicants is set out in the appendix.
2. The Hungarian Government (“the Government”) were represented by their Agent, Mr Z. Tallódi, of the Ministry of Justice.
THE CIRCUMSTANCES OF THE CASE
3. The facts of the case, as submitted by the parties, may be summarised as follows.
4. On various dates, the applicants were dismissed from service which they had at State-owned enterprises.
5. The uppermost portions of their severance payments were then subjected to a special tax of 75%.
6. The details of the underlying legislation are outlined in M.A. v. Hungary ([Committee] (dec.), no. 36642/14, §§ 11 to 14, 28 November 2017).
7. In application no. 52969/14 (Legeza v. Hungary), the portion of the severance payment exceeding the statutory threshold of 3.5 million Hungarian forints (HUF) was HUF 35,128,583 (approximately 113,000 euros (EUR)). The 75% special tax on this amount was HUF 26,346,437 (approximately EUR 85,000). Mr Legeza’s compounded gross annual income in 2014, the tax year concerned, was HUF 70,935,751 (approximately EUR 229,000). The deduction of the special tax alone reduced this sum by about 37%.
Mr Legeza’s monthly salary was about HUF 2,945,000 (approximately EUR 9,500) before taxes. He was dismissed on 18 June 2014 and found new employment as of 15 January 2015.
The overall tax burden on Mr Legeza’s severance payment was 69.7%.
8. In application no. 6248/15 (Holló v. Hungary), the portion of the severance payment exceeding the statutory threshold of HUF 3.5 million was HUF 16,810,192 (approximately EUR 54,200). The 75% special tax on this amount was HUF 12,607,644 (approximately EUR 40,700). Excluding the severance payment, Mr Holló’s compounded gross annual income in 2010, the tax year concerned, was HUF 39,077,146 (approximately EUR 126,000). The deduction of the special tax alone reduced this sum by about 32%.
Mr Holló was dismissed on 5 July 2010.
The overall tax burden on Mr Holló’s severance payment was 64.8%.
9. In application no. 7833/15 (Don v. Hungary), the portion of the severance payment exceeding the statutory threshold of HUF 3.5 million was HUF 46,136,364 (approximately EUR 149,000). The 75% special tax on this amount was HUF 34,602,273 (approximately EUR 111,600). Mr Don’s compounded gross annual income in 2014, the tax year concerned, was about HUF 116.7 million (approximately EUR 375,000) according to the Government and about HUF 105.7 million (approximately EUR 339,000) according to the applicant. The deduction of the special tax alone reduced the gross annual income by about 29.8% according to the Government’s figure and 32.9% according to the applicant’s one.
Mr Don was dismissed on 19 June 2015.
The overall tax burden on Mr Don’s severance payment was 70.8%.
10. In application no. 9577/15 (Fekete v. Hungary), the portion of the severance payment exceeding the applicable statutory threshold of HUF 2 million was HUF 3,800,000 (approximately EUR 12,300). The 75% special tax on this amount was HUF 2,850,000 (approximately EUR 9,200). Mr Fekete’s compounded gross annual income in 2014, the tax year concerned, was HUF 29,480,467 (approximately EUR 95,000). The deduction of the special tax alone reduced the gross annual income by about 9.7%.
Mr Fekete was dismissed on 31 December 2014.
The overall tax burden on Mr Fekete’s severance payment was 54.6%.
COMPLAINTS
11. The applicants complained under Article 1 of Protocol No. 1 about the imposition of the special tax rate on part of their severance payments, which in their view was a disguised and unjustified deprivation of their possessions. They also argued that Article 14 of the Convention read in conjunction with Article 1 of Protocol No. 1 was violated because the imposition of the special tax was allegedly discriminatory. Lastly, relying on Article 13 read in conjunction with Article 1 of Protocol No. 1, they complained of the absence of an effective remedy against the measure.
THE LAW
A. Joinder of the applications
12. Given the similarity of the present applications, the Court decides to order their joinder (Rule 42 § 1 of the Rules of Court).
B. Complaint under Article 1 of Protocol No. 1 to the Convention
13. The applicants complained about the levying of the special tax on part of their severance payments. They relied on Article 1 of Protocol No. 1, which provides as follows:
“Every natural or legal 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 and by the general principles of international 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 control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
14. The parties’ arguments in the present applications are in essence identical to the ones outlined in paragraphs 17 to 20 in M.A. v. Hungary ((dec.), no. 36642/14, 28 November 2017).
15. In its assessment of the present cases, the Court makes reference to the considerations presented in paragraphs 21 to 35 of M.A. v. Hungary (cited above).
16. It notes in particular that, purely on account of the special tax levied only on the uppermost portion of their severance payments, the present applicants sustained reductions of their gross annual incomes of 37%, 32%, 29.8% or 32.9%, and 9.7% respectively, as opposed to 17.6% in M.A. v. Hungary (see paragraph 9 of that decision). The tax burden on the severance payments themselves was respectively 69.7%, 64.8%, 70.8% and 54.6% in the present case (see paragraphs 7 to 10 above), as opposed to 42.7% in M.A. v. Hungary (see paragraph 6 of the decision). Nevertheless, bearing in mind the specific circumstances of the present applications – in particular the high incomes at issue and the resultant large amounts of severance payments – the Court is not ready to accept, in these cases either, that the application of the special tax law fundamentally undermined the applicants’ financial situation.
17. The Court thus concludes that the applicants cannot be regarded as having had to bear an excessive and disproportionate individual burden. The State, in the present case, did not overstep its wide margin of appreciation in the field of taxation when striking a fair balance between the public interest and the applicants’ right to peaceful enjoyment of their possessions.
18. It follows that this part of the applications is manifestly ill-founded within the meaning of Article 35 § 3 (a) and must be rejected, pursuant to Article 35 § 4 of the Convention.
C. Complaint under Article 14 of the Convention
19. The applicants also complained that the impugned legislation was discriminatory, in breach of Article 14 read in conjunction with Article 1 of Protocol No. 1.
20. Article 14 of the Convention provides:
“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”
21. The parties’ arguments in the present applications are in essence identical to the ones outlined in paragraphs 37 to 38 in M.A. v. Hungary (cited above).
22. For its part, the Court refers, mutatis mutandis, to the assessment contained in paragraphs 39 to 45 of M.A. v. Hungary (cited above) and finds that the applicants have not demonstrated that, as former employees of State enterprises, they were in a relevantly similar situation to employees in the private sector for the purposes of the taxation of severance payments.
23. It follows that there has been no indication of any discrimination and, therefore, no appearance of a violation of Article 14 taken in conjunction with Article 1 of Protocol No. 1. Consequently, this part of the applications is likewise manifestly ill-founded within the meaning of Article 35 § 3 (a) and must be rejected, pursuant to Article 35 § 4 of the Convention.
D. Complaint under Article 13 of the Convention
24. Lastly, the applicants complained about the alleged absence of an effective remedy against the measure complained of, in breach of Article 13 of the Convention, which reads as follows:
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
25. Since the Court has declared the complaint under Article 1 of Protocol No. 1 manifestly ill-founded (see paragraph 18 above), it finds that the applicants do not have an “arguable claim” of a violation of that provision for the purposes of Article 13 of the Convention (see, mutatis mutandis and amongst many other authorities, Walter v. Italy (dec.), no. 18059/06, 11 July 2006).
26. It follows that this part of the applications is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected, pursuant to Article 35 § 4 of the Convention.
For these reasons, the Court, unanimously,
Joins the applications;
Declares the applications inadmissible.
Done in English and notified in writing on 8 February 2018.
Andrea TamiettiFaris Vehabović
Deputy RegistrarPresident
APPENDIX
No.
Application no.
Lodged on
Applicant
Date of birth
Place of residence
Nationality
Represented by
52969/14
16/07/2014
Péter LEGEZA
23/01/1961
Budapest
Hungarian
László Pál FARKAS
6248/15
26/01/2015
József HOLLÓ
24/09/1963
Debrecen
Hungarian
Dániel András KARSAI
7833/15
04/02/2015
Miklós DON
07/02/1971
Budapest
Hungarian
Dániel András KARSAI
9577/15
13/02/2015
Csaba FEKETE
09/08/1971
Budaörs
Hungarian
Dániel András KARSAI
Full & Egal Universal Law Academy