Communicated on 12 July 2018
FIRST SECTION
Application no. 5854/18
Mikko Juhani TULOKAS
against Finland
lodged on 25 January 2018
STATEMENT OF FACTS
The applicant, Mr Mikko Juhani Tulokas, is a Finnish national who was born in 1946 and lives in Helsinki. He is represented before the Court by Mr Markku Fredman, a lawyer practising in Helsinki.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
On 1 July 2012 the applicant retired at the age of 66 years from public office and started to receive an old age pension.
As a result of budgetary negotiations, the Income Tax Act (tuloverolaki, inkomstskattelagen) was amended in 2012 and an additional tax of 6% was imposed on those pensioners whose annual pension exceeded 45,000 euros. This amendment entered into force on 1 January 2013 and applied for the first time to the tax year 2013. It is a permanent amendment which is still in force. At the same time, an additional tax of 2% was imposed on those employed tax-payers whose annual income exceeded 100,000 euros. This amendment was of a temporary nature and only concerned the tax years 2013, 2014 and 2015. During the enactment of these amendments, no constitutional implications were examined, nor were the amendments submitted to the Parliamentary Constitutional Law Committee (eduskunnan perustuslakivaliokunta, riksdagens grundlagsutskott) for verification of their compatibility with the Finnish Constitution (Suomen perustuslaki, Finlands grundlag).
As the applicant’s annual pension exceeded 45,000 euros, he was charged 3,178.07 euros in additional taxes in respect of the tax year 2013 and 3,258.81 euros in respect of the tax year 2014.
By letter dated 13 November 2014, the applicant sought rectification of the taxation decision for the tax year 2013, claiming that the imposition of the tax had been unconstitutional and that he had been discriminated against without any justification.
On 11 August 2015 the local Tax Rectification Committee (verotuksen oikaisulautakunta, prövningsnämnden i beskattningsärenden) dismissed the applicant’s complaint of unconstitutionality without examining the merits. It noted that it had no competence to examine such complaints as it was not a court. As to the rest of the applicant’s application, the Committee rejected it.
By letter dated 15 December 2015, the applicant appealed to the Helsinki Administrative Court (hallinto-oikeus, förvaltningsdomstolen), reiterating the grounds of appeal already relied on before the Tax Rectification Committee and requesting, inter alia, that an oral hearing be organised on the issue of unconstitutionality of the tax decisions concerning the tax years 2013 and 2014. He claimed that the additional tax on pension income was discriminatory and that the relevant provision should be left inapplicable by the court by virtue of Article 106 of the Constitution. He referred to a judgment of the Italian Constitutional Court which, in 2013, declared unconstitutional and discriminatory similar tax laws on the basis of which pensioners were imposed a heavier tax burden than employed tax-payers (see judgment 116 from 2013).
On 24 March 2017 the Administrative Court rejected the applicant’s appeal in respect of the tax years 2013 and 2014. It found that the provisions on additional tax concerning pension income were not in apparent contradiction with the Constitution, nor were they incompatible with the Convention. The holding of an oral hearing in the matter was for this reason manifestly unnecessary.
By letter dated 24 May 2017 the applicant appealed to the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen), reiterating the grounds of appeal already presented before the lower courts and requesting, inter alia, that an oral hearing be organised.
On 16 August 2017 the Supreme Administrative Court refused the applicant leave to appeal.
B. Relevant domestic law and practice
1. Constitution
Article 6 of the Constitution (Suomen perustuslaki, Finlands grundlag; Act no. 731/1999) provides:
“Everyone is equal before the law.
No one shall, without an acceptable reason, be treated differently from other persons on the ground of sex, age, origin, language, religion, conviction, opinion, health, disability or other reason that concerns his or her person. Children shall be treated equally and as individuals and they shall be allowed to influence matters pertaining to themselves to a degree corresponding to their level of development.
Equality of the sexes shall be promoted in society and working life, especially in the determination of pay and other terms of employment, as provided for in more detail by an [implementing] Act.”
According to Article 15 of the Constitution, the property of everyone is protected. Provisions on the expropriation of property, for public needs and against full compensation, are laid down by an Act.
Article 22 of the Constitution provides that
“[t]he public authorities shall guarantee the observance of basic rights and liberties and human rights.”
According to Article 106 of the Constitution,
“[i]f, in a matter being tried by a court of law, the application of an Act would be in evident conflict with the Constitution, the court of law shall give primacy to the provision in the Constitution.”
2. Income Tax Act
According to section 124, subsections 1 and 4, of the Income Tax Act (tuloverolaki, inkomstskattelagen; Act no. 1535/1992, as amended by Act no. 785/2012),
”[a] natural person or a death estate shall pay to the State income tax on taxable earned income in accordance with the progressive income tax scale and on taxable unearned income in accordance with the income tax percentage. In addition, a natural person shall pay to the State an additional tax on pension income in such a manner as provided in subsection 4. Other tax-payers shall pay income tax on taxable income in accordance with the income tax percentage. (14.12.2012/785)
...
A natural person shall pay an additional tax of 6 per cent on pension income to the extent the pension income, minus deduction on pension income, exceeds 45,000 euros. The additional tax on pension income is applied in the same manner as the income tax on earned income paid to the State is applied in this Act or in other acts. (14.12.2012/785)”
The travaux préparatoires of the Act (see HE 87/2012 vp) indicate that the aim of the amendment was to collect taxes from those whose ability to pay taxes was the highest; to diminish the tax treatment gap between pensions and income received from employment; and to give an incentive for older people to stay longer in working life.
In 2016 section 124, subsection 4, of the Act was amended in such a manner that the additional tax of 6% imposed on pensioners was lowered to 5.85% and the annual pension threshold of 45,000 euros was increased to 47,000 euros. This amendment entered into force on 1 January 2017 and applied for the first time to the tax year 2017. It will be in force until 31 December 2018 (see Act no. 1535/1992, as amended by Act no. 1529/2016).
During the legislative procedure, the amendment of 2016 was brought to the Parliamentary Constitutional Committee which heard experts in the matter. The opinions of the experts were divided: half of them considered the amendment unconstitutional while the other half did not. The Committee subsequently found that the amendment was compatible with the Constitution and that it did not place pensioners in a clearly unfavourable position vis-à-vis employed tax-payers (see the statement PeVL 53/2016 vp).
COMPLAINTS
The applicant complains under Article 14 of the Convention and Article 1 of Protocol No. 12 to the Convention that the Income Tax Act discriminates against retired tax-payers without any justification and thus constitutes discrimination on the ground of age. As a pensioner, he has to pay an additional tax of 6% for his annual pension exceeding 45,000 euros while employed tax-payers only pay 2% for annual income exceeding 100,000 euros. He thus pays more tax for the same income than an employed tax-payer. Moreover, the additional tax for retired tax-payers is permanent, while the one for employed tax-payers was only temporary.
The applicant further complains under Article 13 of the Convention that the existing domestic remedies have proved to be inefficient in the present case. The matter was not examined by the Parliamentary Constitutional Law Committee, nor did the administrative courts find the legislation unconstitutional. There was thus no effective remedy.
QUESTIONS TO THE PARTIES
1. Has the applicant suffered discrimination in the enjoyment of his Convention rights, contrary to Article 14 of the Convention or Article 1 of Protocol No. 12 to the Convention? In particular, has the applicant been subjected to a difference in treatment in the taxation of his pensions? If so, did that difference in treatment pursue a legitimate aim; and did it have a reasonable justification?
2. Has the applicant had at his disposal an effective remedy within the meaning of Article 13? In particular, as regards Article 106 of the Constitution of Finland, what is the relationship between constitutional rights and rights guaranteed under the Convention in regard to arguable claims of a violation arising from the application of an Act of Parliament; what is the legal position in regard to arguable claims under the Convention in such situations, inter alia, in terms of a threshold such as that laid down in Article 106 of the Constitution, referring to a manifest conflict; and what redress is available?
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