FIRST SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 36985/97
by VÄSTBERGA TAXI AKTIEBOLAG and Nino VULIC
against Sweden
The European Court of Human Rights (First Section), sitting on 3 April 2001 as a Chamber composed of
MrsW. Thomassen, President,
MrsE. Palm,
MrGaukur Jörundsson,
MrR. Türmen,
MrC. Bîrsan,
MrJ. Casadevall,
MrR. Maruste, judges,
and Mr M. O'Boyle, Section Registrar,
Having regard to the above application introduced with the European Commission of Human Rights on 20 May 1997 and registered on 22 July 1997,
Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,
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
The first applicant is a Swedish limited liability company which was declared bankrupt in 1997. The second applicant, a Swedish national born in 1958, was the director of the first applicant and owned 50 per cent of its shares. Before the Court the applicants are represented by Mr Jan Thörnhammar, a lawyer practising in Stockholm. The respondent Government are represented by Ms Eva Jagander, Ministry of Foreign Affairs.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
1. The Tax Authority's decisions on taxation and special charges
In the autumn of 1994, within the context of a large-scale investigation into tax evasion by operators of taxicabs, the Tax Authority (skattemyndigheten) of the County of Stockholm carried out an audit concerning the first applicant's taxi business. Having discovered in the course of the audit certain irregularities in the tax returns for the assessment year 1994, the Tax Authority invited the first applicant to submit comments. It availed itself of this opportunity.
Having had regard to the findings of the audit and the observations submitted by the first applicant, the Tax Authority – by decisions of 10, 11 and 15 August 1995 – adjusted the first applicant's taxable income and imposed additional taxation on it in respect of employment tax (arbetsgivaravgifter) and value-added tax (mervärdesskatt). Moreover, as the information supplied by the first applicant in its tax returns for the assessment year 1994 had been found to be incorrect and as the decision to impose additional taxation was the result of a discretionary assessment, the Tax Authority ordered it to pay a special charge (skattetillägg, avgiftstillägg) which, depending on what type of tax was involved, amounted to 20 or 40 per cent of the tax imposed as a result of the additional taxation. The additional tax levied on the first applicant – including interest – and the special charge totalled 232,069 Swedish kronor (SEK), SEK 34,710 of which referred to the special charge. It appears that the whole of the amount was payable in October 1995.
On 6 October 1995, as a direct consequence of the decisions concerning the first applicant, the Tax Authority raised the second applicant's taxable income and decided to impose additional taxation on him in respect of income tax (inkomstskatt). Like the first applicant, and for the same reasons, he was ordered to pay a special charge. The additional tax levied on the second applicant - including interest - and the special charge totalled SEK 226,776, SEK 57,757 of which referred to the special charge. The whole of the amount was payable on 12 February 1996.
Each of the decisions mentioned above was accompanied by a notice of the right to appeal or, in the alternative, the right to lodge with the Tax Authority a request for reconsideration of the decision (begäran om omprövning).
2. Requests for stay of payment
Claiming that there existed inconsistencies in certain documents relied upon by the Tax Authority to calculate the turnover of the first applicant's business, both applicants, in December 1995, lodged appeals against the Tax Authority's decisions to levy additional tax and to impose on each of them a special charge. Invoking section 49 of the Tax Collection Act (Uppbördslagen, 1953:272), the then relevant legislation, they also requested that each of them be granted a stay in the payment of the amounts imposed on them as a result of those decisions.
The latter request was prompted by the following facts. Under section 103 of the Tax Collection Act, neither an appeal nor a request for reconsideration would in itself have any suspensive effect on the obligation to pay the taxes imposed as a result of the impugned decision. Moreover, chapter 5, section 13, subsection 1 of the Taxation Act (Taxeringslagen, 1990:324) provided that – for tax collection purposes – a special charge should be treated as final or additional tax under the Tax Collection Act. Consequently, in the absence of a stay of payment, not only the actual tax debt but also a special charge would remain payable and enforceable irrespective of the fact that an appeal or a request for reconsideration had been lodged in respect of the Tax Authority's decision.
By decisions of 2 and 17 February 1996 the Tax Authority rejected the applicants' requests for a stay of payment, stating that the prerequisites laid down in section 49 of the Tax Collection Act had not been fulfilled. Also, the Tax Authority found no reason to change its decisions to impose additional tax and special charges and forwarded the applicants' appeals against those decisions to the County Administrative Court (länsrätten) of the County of Stockholm for determination.
By judgments of 22 February and 8 March 1996, following appeals by the applicants, the County Administrative Court quashed the Tax Authority's decisions of 2 and 17 February 1996 and referred the cases back to the Authority. Having found that the formal prerequisites for granting a stay of payment under section 49, subsection 1 (3) of the Tax Collection Act had been fulfilled, the Court went on to state the following:
“However, the granting of a stay of payment under this particular provision is conditional on security being provided, if, for some reason, it can be assumed that the amount in respect of which a stay of payment has been requested will not be duly paid. As the Tax Authority did not rule on the compliance with that condition, the County Administrative Court finds that the decision[s] should be quashed and that the case[s] should be referred back to the Tax Authority, which must examine the question whether it is required that security be provided.”
On 7 and 30 May 1996, respectively, the Tax Authority again rejected the applicants' requests for a stay of payment. The Tax Authority found that the applicants' ability to pay was open to doubt, that a stay of payment could therefore not be granted unless security was furnished and that – although given the opportunity to do so – the applicants had failed to provide security. That being so, their requests could not be granted.
The applicants appealed against these decisions to the County Administrative Court, requesting that they be relieved of the obligation to provide security and that a stay of payment be granted. Both requests rested on the contention that it would amount to a violation of Article 6 of the Convention if enforcement proceedings were instituted against the applicants without their cases having first been determined "in due course".
By judgments of 12 September 1996, subscribing to the reasons given by the Tax Authority, the County Administrative Court upheld the impugned decisions.
The applicants appealed to the Administrative Court of Appeal (kammarrätten) of Stockholm, which, by decisions of 30 October 1996, refused leave to appeal. The applicants did not appeal against these decisions to the Supreme Administrative Court (Regeringsrätten).
3. Enforcement proceedings
Meanwhile, each of the debts being outstanding and no stay of payment having been granted, the applicants had been registered as being in arrears with the taxes and special charges imposed on them as a result of the additional taxation. Enforcement proceedings were therefore instituted against both applicants.
(a) The first applicant
On 20 December 1996 the Enforcement Office (kronofogdemyndigheten) of the County of Stockholm, representing the State, filed a petition with the District Court (tingsrätten) of Stockholm, requesting that the first applicant be declared bankrupt. According to a statement submitted by the Office, the first applicant's tax debt as of 16 December 1996 – including interest – amounted to SEK 292,612, SEK 33,041 of which referred to the special charge. The Office referred to the fact that, upon investigation, the first applicant had been found to own no property that could be seized in order to recover the said debt.
The District Court held a hearing in the case on 3 February 1997. Although duly summoned, however, the first applicant did not appear before the Court. Instead, written observations previously submitted on its behalf were read out. According to the minutes of the hearing, these observations included an allegation of a breach of Article 6 of the Convention, in that the first applicant "had been denied a fair hearing".
By a decision of 10 February 1997 the District Court declared the first applicant bankrupt. In so doing, the Court noted that the alleged breach of Article 6 of the Convention did not affect the State's standing to petition for bankruptcy, that the first applicant was under an obligation to pay the debt and that it must be considered insolvent as it had been found to be in possession of no seizable assets.
The first applicant appealed to the Svea Court of Appeal (Svea hovrätt), claiming, inter alia, that the District Court's decision amounted to a violation of Article 6 of the Convention in that the enforcement proceedings had been allowed to continue irrespective of the fact that the Tax Authority's decisions of 10, 11 and 15 August 1995 had not yet been reviewed by a court.
The first applicant's appeal was rejected by the Court of Appeal on 21 February 1997.
Leave to appeal against the appellate court's decision was refused by the Supreme Court (Högsta domstolen) on 6 May 1997.
On 2 December 1997 the bankruptcy was written off and the first applicant dissolved due to indigence.
(b) The second applicant
As of 25 April 1996, the second applicant's tax debt – including interest – amounted to SEK 240,882, SEK 57,757 of which referred to the special charge. By a decision of that day the Enforcement Office seized bank savings in the amount of SEK 240,882 belonging to the second applicant and deposited in two banks.
The second applicant appealed to the District Court of Stockholm, requesting that the seizure be invalidated. The appeal was rejected by the Court on 28 June 1996.
The second applicant did not appeal against the District Court's decision, finding that an appeal would have no prospects of success.
4. Court proceedings on additional taxation and special charges
The applicants' appeals against the Tax Authority's decisions to levy additional tax and to impose special charges have been determined in separate proceedings by the administrative courts.
(a) The first applicant
By a decision of 17 July 2000 the County Administrative Court dismissed the first applicant's appeal. The Court noted that the first applicant had been dissolved and found that, consequently, it did not have the legal competence (rättshandlingsförmåga) to act as a party. Accordingly, the appeal could not be examined.
On 1 August 2000 the first applicant appealed against this decision to the Administrative Court of Appeal. No decision has yet been taken by the appellate court.
(b) The second applicant
By a judgment of 29 March 2000 the County Administrative Court rejected the second applicant's appeal. It found that the documentation on which the Tax Authority's decision had been based was reliable and that the second applicant had not specified his objections or otherwise shown that the information supplied in his tax return was correct. Thus, the Tax Authority's imposition of additional income tax and a special charge was confirmed.
On 15 December 2000 the Administrative Court of Appeal upheld the County Administrative Court's judgment. On 11 January 2001 the second applicant appealed to the Supreme Administrative Court, where the case is presently pending.
5. Criminal proceedings
On 30 August 1995 the Tax Authority reported the second applicant to the Public Prosecution Office (åklagarmyndigheten) in Stockholm for suspected tax crimes. On 23 May 1997 the second applicant was indicted for a bookkeeping offence. A hearing was held by the District Court on 22 January 2001. During the hearing, the public prosecutor withdrew the charges and the District Court, consequently, struck the case out of its list.
B. Relevant domestic law and practice
The following account refers to the law as it stood at the material time.
1. Tax and special charges
The relevant domestic rules on taxes and special charges were primarily laid down in the Taxation Act, the Tax Collection Act, the Act on Collection of Social Security Charges from Employers (Lagen om uppbörd av socialavgifter från arbetsgivare, 1984:688; hereinafter “the Social Security Charges Act”) and the two Acts on Value-Added Tax (Lagen om mervärdeskatt, 1968:430, and Mervärdesskattelagen, 1994:200; hereinafter “the 1968 VAT Act” and “the 1994 VAT Act” respectively). The 1968 VAT Act was replaced by the 1994 VAT Act as of 1 July 1994. The Tax Collection Act, the Social Security Charges Act and parts of the 1994 VAT Act were replaced by the Tax Payment Act (Skattebetalningslagen, 1997:483), in force as of 1 November 1997.
Income tax, value-added tax and employment tax were all determined by the county tax authorities, to which tax payers were under an obligation to submit information in order to provide guidance for the assessment of taxes. For the purpose of securing that the tax authorities received timely, sufficient and correct information from the taxpayers, there were provisions stipulating that under certain circumstances the tax authorities should impose sanctions on the taxpayer in the form of special charges. Such charges could be imposed if the taxpayer failed to file his tax return or filed it later than provided for or if he gave incorrect information, which could have caused the tax authorities to levy too little tax on him, or if the information which he submitted was so inadequate that the tax assessment had to be made on a discretionary basis.
The special charges were introduced into Swedish legislation in 1971. The new provisions entered into force on 1 January 1972 at the same time as a new act on tax offences. Up till then a taxpayer's submission of incorrect information could only be sanctioned within the penal system. According to the travaux préparatoires (Government Bill 1971:10), the main purpose of the reform was to create a system of sanctions which was more effective and fair than the old system, which was based entirely on criminal sanctions determined by the general courts following police investigation and prosecution. Unlike sanctions for tax offences, the new charges were determined solely on objective grounds, and, accordingly, without regard to any form of criminal intent or negligence on the part of the taxpayer. It was thought that the old system did not function satisfactorily, since a great many tax returns contained incorrect information at the same time as relative few people were charged with tax offences. After the introduction of the new system the prosecutors and the courts were only meant to deal with serious tax offences. The imposition of a special charge on a taxpayer would not, however, exclude a criminal charge based on the same incorrect information (cf. below).
The provisions regarding special charges applied by the Tax Authority in the present case were found in the Taxation Act, the 1968 VAT Act and the Social Security Charges Act, relating to income tax, value-added tax and employment tax, respectively.
If a taxpayer had submitted information in his tax return which was found to be incorrect and which was of relevance to the assessment of his income tax, a special charge should be imposed on him. The charge amounted to 40 per cent of the income tax which, should the incorrect information have been accepted, would not have been levied on the taxpayer (chapter 5, section 1 of the Taxation Act). A special charge of 40 per cent of the additional income tax should also be imposed if, following a discretionary assessment, the tax authority decided to deviate from the information submitted in the tax return (chapter 5, section 2 of the Taxation Act). Such a discretionary assessment should be made if the taxpayer had submitted information which was so inadequate that the tax authorities could not base their tax assessment on it (chapter 4, section 3 of the Taxation Act). A discretionary assessment should also be made if the taxpayer did not file a tax return notwithstanding the fact that he had been reminded of his obligation to do so. In that case the decision to impose a special charge should be revoked if the taxpayer filed a tax return within a certain time-limit. As regards value-added tax and employment tax there were corresponding provisions on special charges and discretionary assessment in the 1968 VAT Act (sections 30 and 64 a) and the Social Security Charges Act (sections 10 and 38-40). As for both types of taxes, however, the special charge amounted to 20 per cent of the additional tax levied on the taxpayer.
In certain cases the special charge amounted to 20 per cent in connection with income tax and to 10 per cent in connection with value-added tax and employment tax (chapter 5, section 1 of the Taxation Act, section 64 a of the 1968 VAT Act and section 38 of the Social Security Charges Act). This was the case, inter alia, if the incorrect information that the taxpayer had submitted had been corrected or could have been corrected with the aid of control material that should normally be available to the tax authorities and which had also become available to them within a stipulated time-limit.
Under certain circumstances no special charge should be imposed at all, even though the taxpayer had submitted incorrect information. Thus, under chapter 5, section 4 of the Taxation Act, this was so, inter alia, if the taxpayer had voluntarily corrected the information, if the information had been corrected or could have been corrected with the aid of certain information that should be available to the tax authorities, such as an employer's information regarding an employee's income, or if the information consisted of a miscalculation or an error in writing that appeared quite clearly from the tax return or some other written information submitted by the taxpayer. Similar rules applied in connection with value-added tax and employment tax (section 64 d of the 1968 VAT Act and section 42 of the Social Security Charges Act).
Furthermore, regarding all three kinds of taxes, there were special provisions according to which the taxpayer could be relieved of the special charge. Thus, under chapter 5, section 6 of the Taxation Act, the taxpayer should not have to pay any special charge, inter alia, if the submission of the incorrect information could be considered excusable due to the taxpayer's age, illness or lack of experience or some comparable circumstance. The provisions on relief had to be observed by the tax authorities of their own accord (chapter 5, section 7 of the Taxation Act). It was, however, up to the taxpayer to prove that a ground for relief existed. Corresponding provisions were found in the 1968 VAT Act (sections 64 f and 64 h) and the Social Security Charges Act (sections 43 and 47).
A special charge should not be imposed after the taxpayer's decease (chapter 5, section 12 of the Taxation Act, section 64 f of the 1968 VAT Act and section 46 of the Social Security Charges Act). On the other hand, in case the taxpayer died after a special charge had been imposed on him but before it had been paid, the estate of the deceased was liable for the payment of the special charge (sections 1 and 61 of the Tax Collection Act, sections 3 and 64 k of the 1968 VAT Act, and sections 19 and 49 of the Social Security Charges Act).
Relevant provisions on reconsideration of decisions concerning tax and special charges and on appeals against such decisions were found in the Taxation Act, the 1968 VAT Act and the Social Security Charges Act (see, in particular, chapter 4, sections 7, 9 and 14 and chapter 6, sections 1, 3, 6 and 7 of the Taxation Act; sections 33, 34, 36, 51, 52, 54 and 55 of the 1968 VAT Act; and sections 50, 52, 58, 68, 70 and 72 of the Social Security Charges Act). The taxpayer could request the tax authority to reconsider its decision on tax and special charges. Such a decision could also be appealed to a county administrative court. As regards income tax, the request for reconsideration or the appeal normally had to be lodged before the end of the fifth year after the assessment year. Similar rules on time-limits applied in connection with value-added tax and employment tax. Even if the taxpayer lodged an appeal, the tax authority usually had to reconsider its decision and if it decided to amend the decision in accordance with the taxpayer's request, the appeal became void. Otherwise the appeal was handed over to the county administrative court. The judgment of that court could be appealed to an administrative court of appeal, whose judgment could in its turn be brought before the Supreme Administrative Court, subject to the conditions for leave to appeal. Decisions on tax assessments and special charges were connected in the sense that a successful objection to the tax itself had an automatic effect on the special charges. Decisions on special charges could, however, be appealed separately, invoking grounds for reduction or relief (cf. above).
If the proceedings before a county administrative court or an administrative court of appeal concerned a special charge, the appellant had the right to have an oral hearing (chapter 6, section 24 of the Taxation Act, to which section 57 of the 1968 VAT Act and section 77 of the Social Security Charges Act referred).
If the tax authority when reconsidering a tax decision decided to reduce the tax, it also automatically had to make a corresponding reduction of the special charge (chapter 5, section 11 of the Taxation Act, section 64 h of the 1968 VAT Act and section 47 of the Social Security Charges Act). If the court examining an appeal found that the taxpayer's taxable income should be lowered, the tax authority had to reduce the tax and as a consequence make a corresponding reduction of a special charge imposed as a result of the tax assessment.
2. Tax collection
Provisions concerning the collection of taxes and special charges were found in the Tax Collection Act, the 1994 VAT Act and the Social Security Charges Act, relating to income tax, value-added tax and employment tax, respectively. Section 103 of the Tax Collection Act provided that a request for reconsideration or an appeal against a decision concerning the tax assessment should have no suspensive effect on the taxpayer's obligation to pay the income taxes. Such an obligation also applied to a special charge (chapter 5, section 13 of the Taxation Act). There were corresponding provisions regarding value-added tax and employment tax (chapter 16, section 16 of the 1994 VAT Act and section 78 of the Social Security Charges Act).
However, on certain conditions, the tax authorities could grant a stay in the payment of taxes and special charges. A stay of payment could be granted in, inter alia, the following three situations (section 49, subsection 1 of the Tax Collection Act, to which chapter 16, section 6 of the 1994 VAT Act and section 13 of the Social Security Charges Act referred). Firstly, it could be granted if it could be assumed that the amount imposed on the taxpayer would be reduced or that he would be relieved of the obligation to pay the amount. Secondly, a stay could be granted if the taxpayer had lodged a request for reconsideration of the decision or an appeal against the decision and the outcome of the proceedings was uncertain. According to the travaux préparatoires (Government Bill 1989/90:74, p. 340) it was possible to grant a stay when it was just as likely that the proceedings would result in a rejection as in an approval. The granting of a stay of payment was also possible in doubtful cases, in which it was somewhat more likely that the proceedings would result in a rejection. On the other hand, a stay should not be granted if the taxpayer's request for reconsideration or appeal was likely to be rejected. Thirdly, a stay could be granted if the taxpayer had lodged a request for reconsideration or an appeal and the payment of the amount imposed would result in considerable damage being inflicted on him or otherwise appear unjust. For example, the forced sale of the taxpayer's real estate or his business or other property of great importance to his economy and his possibility to earn a living could be considered to cause “considerable damage” (ibid., pp. 342-43).
If it could be assumed, as far as the second and third of the situations just referred to were concerned, that the amount for which a stay of payment had been requested would not be duly paid, a stay could only be granted on condition that the taxpayer provided security for the amount in the form of a banker's guarantee or some other form of guarantee. A stay could, however, be granted without security being provided, if the amount was relatively insignificant or if there were other particular reasons (section 49, subsection 2 of the Tax Collection Act).
The application of section 49 of the Tax Collection Act was examined by the Supreme Administrative Court in a judgment of 17 November 1993 (published in Regeringsrättens Årsbok 1993 ref. 89). In that case, the National Tax Board (Riksskatteverket) and the Administrative Court of Appeal had found that the applicant company – who had appealed against the National Tax Board's decision to impose on it certain energy taxes and interest in the total amount of approximately 6.4 million SEK – could not be granted a stay of payment. The Supreme Administrative Court noted, however, that there was some uncertainty as regards the main issue in the case – whether the income in question was at all taxable – and that the imposed tax constituted a considerable amount. For these reasons, the Court found that it would be unreasonable to demand payment of the amount before a court had determined the applicant company's tax liability. Noting that security in principle had to be provided by the company, the Court nevertheless took into account that the Administrative Court of Appeal was expected to determine the tax liability issue within a short time and that, thus, there were particular reasons not to demand security. Accordingly, the applicant company was granted a stay without security until one month after the Administrative Court of Appeal's judgment.
According to provisions laid down in the Tax Collection Act, the 1994 VAT Act and the Social Security Charges Act, a decision by the tax authority not to grant a stay of payment could be reconsidered by the authority. It could also be appealed to a county administrative court, whose judgment could be appealed to an administrative court of appeal, subject to the conditions for leave to appeal (sections 96 and 102 of the Tax Collection Act; chapter 20, sections 1 and 9 of the 1994 VAT Act; and sections 68 and 76 of the Social Security Charges Act). The latter court's judgment or its decision to refuse leave to appeal could be brought before the Supreme Administrative Court, subject to the conditions for leave to appeal. A request for reconsideration or an appeal concerning the issue of a stay of payment had in themselves no suspensive effect on the taxpayer's obligation to pay the taxes or the special charge.
3. Enforcement and bankruptcy
The enforcement authorities had to levy execution on a debtor upon request, notwithstanding the fact that the decision of a tax authority concerning tax and special charges had not gained legal force (chapter 3, section 1 and chapter 4, section 1 of the Enforcement Code (Utsöknings-balken) in conjunction with sections 59 and 103 of the Tax Collection Act, chapter 16, section 16 of the 1994 VAT Act and sections 28 a and 78 of the Social Security Charges Act). In case the debtor did not have enough seizable property to recover his debt, the enforcement authority could request a district court to declare him bankrupt. Unless otherwise shown, the debtor should be considered insolvent when, in the event of enforcement under chapter 4 of the Enforcement Code, within six months before the bankruptcy petition, it had appeared that he did not have assets for full payment of the debt (chapter 2, section 8 of the Bankruptcy Act (Konkurslagen, 1987:672)). If the court considered that the assets of the bankruptcy estate were not sufficient for payment of bankruptcy expenses incurred and expected and other debts that the estate had incurred, the court should decide to write off the bankruptcy after an estate inventory had been confirmed under oath and the administrator had fulfilled certain obligations (chapter 10, sections 1 and 2 of the Bankruptcy Act).
As taxes and special charges are payable even if the decision of the tax authority has not gained legal force, it may happen that the tax decision is quashed after payment has taken place. In that case the money that has been paid is refunded together with interest (chapter 18, Section 2 and chapter 19, sections 1, 3, 12 and 14 of the Tax Payment Act). If the taxpayer has had his property seized or been declared bankrupt on account of the tax debt, the decision on seizure or bankruptcy will be invalidated on appeal. Should the decision have gained legal force, the taxpayer may, upon request, have the case re-opened and the decision on seizure or bankruptcy may be quashed (chapter 58, sections 1, 7 and 10 of the Code of Judicial Procedure (Rättegångsbalken)). Property that has been seized will then, if possible, be restored to the taxpayer (chapter 3, section 22 of the Enforcement Code). So will property forming part of the bankruptcy estate to the extent that it is not required to pay the bankruptcy expenses and other debts that the estate has incurred (chapter 2, section 25 of the Bankruptcy Act). If the taxpayer's property has been sold and the sum obtained from the sale has been used to pay off the alleged tax debt or part of it, the taxpayer will be compensated with money. In addition, the taxpayer may claim compensation from the State for financial loss caused by the seizure or the bankruptcy (chapter 3, section 2 of the Tort Liability Act (Skadeståndslagen, 1972:207)), invoking that the authorities or the courts have acted wrongfully.
4. Tax offences
A taxpayer who does not fulfil his obligation to submit correct and relevant information to the tax authority may be subjected to a criminal charge according to the provisions laid down in the Tax Offences Act (Skattebrottslagen, 1971:69). For the taxpayer to be convicted on such a charge it has to be established that the failure to submit correct information is the result of criminal intent or gross negligence on his part. A charge under the provisions of the Tax Offences Act is brought in accordance with the rules governing criminal charges in general. This means, inter alia, that the taxpayer can only be convicted upon prosecution and trial by a general court. According to sections 2-4 of the Tax Offences Act a taxpayer who makes an incorrect statement intentionally, thereby causing the risk of an erroneous taxation to his own advantage, may be sentenced to a penalty ranging from a fine for petty offences to imprisonment for not more than six years for serious cases of tax fraud. The fine is maximised to SEK 150,000.
For the determination of the question whether to bring a criminal charge against a taxpayer it is of no relevance that a special charge has already been imposed on him on the same grounds as those forming the basis of the possible criminal charge. Moreover, a decision to impose a special charge has no binding force, or any other prejudicial implication, in the determination of the criminal charge. When considering the criminal charge, however, the court is supposed to pay attention to the fact that a special charge has been imposed (Government Bill 1971:10, pp. 351 and 364).
COMPLAINTS
1. The applicants complain of the fact that the Tax Authority's decisions concerning the additional tax and the special charges were enforced prior to a court determination of the disputes. They consider that they have thereby been deprived of their rights secured to them under Article 6 of the Convention. In particular, they maintain that the tax assessment proceedings have not been determined within a reasonable time and that they cannot obtain a fair hearing in these pending proceedings since payment of the alleged tax debts and the special charge have already been enforced and the first applicant has been declared bankrupt. Alleging that the imposition of special charges is a sanction of a penal character, they further state that the enforcement of the Tax Authority's claims prior to their final determination has deprived them of their right to be presumed innocent until proved guilty according to law.
2. The applicants complain also that, during the proceedings before the Tax Authority, they were refused access to certain documents relied upon by the Authority and the Authority refused to carry out further investigative measures requested by the applicants. Moreover, certain of their objections to the imposition of additional tax and special charges have not been answered by the Tax Authority. Thus, they have been deprived of every opportunity to challenge the findings of the tax audit. They claim that, also in these respects, there has been a violation of their right to a fair hearing under Article 6 of the Convention.
THE LAW
1. The applicants complain that they have been deprived of the rights secured to them under Article 6 of the Convention as the Tax Authority's decisions concerning the imposition of additional tax and special charges were enforced prior to a court determination of the disputes. Article 6 of the Convention reads, in so far as relevant, as follows:
“1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. ...
2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.
...”
1. The first applicant's legal standing before the Court
The respondent Government firstly question whether the first applicant can have legal standing in the present case. Whereas they do not dispute that the first applicant could be considered a victim of the alleged violations of the Convention at the time of the introduction of the application, they point out that it was dissolved on 2 December 1997 as a consequence of the writing off of the bankruptcy.
The Court notes that the first applicant's complaints are pursued by the second applicant, who was the director and major shareholder of the first applicant. The Court also recalls that the first applicant's bankruptcy and its later dissolution were effects of the enforcement proceedings which followed the Tax Authority's decision to levy additional tax and special charges on it. The fact that it was dissolved is thus an indistinguishable part of the complaint that enforcement proceedings were taken against it prior to a court determination of the underlying tax issues. Having regard to the nature of the application, the Court therefore concludes that the first applicant has legal standing in the proceedings before the Court.
2. Exhaustion of domestic remedies
The Government further maintain that the applicants have not exhausted domestic remedies. First, they point out that the applicants' appeals against the Tax Authority's decisions regarding the tax assessments have not yet been finally reviewed by the administrative courts. In addition, the Government submit that the applicants did not appeal against the imposition of the special charges as such but only requested the Tax Authority to reconsider their decisions to impose additional tax on them. Also, the Government state that the applicants did not appeal to the Supreme Administrative Court against the decisions of the Administrative Court of Appeal concerning the stay of payment issue. Referring to the judgment of the Supreme Administrative Court of 17 November 1993 (see above), the Government is of the opinion that an appeal to that Court constituted an effective and sufficient means of redress. Finally, the Government point out that the second applicant failed to exhaust domestic remedies in the enforcement proceedings, as he did not appeal against the District Court's decision concerning the seizure of bank savings. Although it might have been difficult for the second applicant to make a successful appeal against this decision, the Government contend that an appeal to the Court of Appeal would have fulfilled the requirements of being an effective and sufficient remedy.
The applicants dispute that they did not exhaust domestic remedies within the meaning of Article 35 § 1 of the Convention. In particular, they state, inter alia, that their appeals against the tax assessments involve an automatic reconsideration of the special charges. Furthermore, they allege that it would have been pointless for them to appeal against the Administrative Court of Appeal's decisions on stay of payment and for the second applicant to appeal against the District Court's decision in the enforcement proceedings. In the two latter respects, they refer to established Swedish case-law and chapter 3, section 1 of the Enforcement Code, respectively.
The Court recalls that the rule of exhaustion of domestic remedies obliges those seeking to bring their case against a State before an international judicial organ to use first the remedies provided by the national legal system. However, there is no obligation to have recourse to remedies which are inadequate or ineffective. Only remedies which are likely to provide redress for an applicant's complaints need to be taken into account. In particular, the existence of such remedies must be sufficiently certain, not only in theory but also in practice, failing which they will lack the requisite accessibility and effectiveness. Furthermore, it falls to the respondent State to establish that these conditions are satisfied (cf., e.g., Akdivar and Others v. Turkey judgment of 16 September 1996, Reports of Judgments and Decisions 1996-IV, p. 1211, § 68).
In the present case, the Government have referred to the fact that the tax assessment proceedings are still pending and that the applicants did not appeal, as such, against the imposition of the special charges. The Court notes, however, that the applicants in fact complain about the length of the proceedings. Furthermore, they call into question the fairness of the pending proceedings since, allegedly, the disputed obligation to pay additional tax and special charges has already been determined because of their enforcement. Finally, the Court notes that the pending proceedings will in this case automatically affect also the question of the special charges. In these circumstances, the Court is not convinced that the administrative courts' final determination of the appeals against the tax assessments or the lodging of a separate appeal against the imposition of the special charges as such will or would be likely to provide redress for the applicants' complaints.
As regards the applicants' failure to appeal to the Supreme Administrative Court concerning the stay of payment issue, the Court recalls that the applicants' requests for stay of payment were refused by the Administrative Court of Appeal as the they had failed to provide security. Under section 49, subsection 2 of the Tax Collection Act, a stay of payment could in principle be granted only if security was provided. The provision states, however, that exceptions could be made to this rule if the amount was relatively insignificant or if there were other particular reasons. The Court considers that the amounts in question – SEK 232,069 and 226,776, respectively – could not be considered insignificant. While the provision itself does not give any guidance as to what would constitute “particular reasons” to dispense with the obligation to provide security, the Government refer to the judgment of the Supreme Administrative Court of 17 November 1993. In that case the Supreme Administrative Court found that there were particular reasons not to require that security be provided for the stay of payment of taxes as a determination of the tax assessment issue was expected to be made shortly by the Administrative Court of Appeal. In the present case, the Court cannot speculate as to what could be foreseen with respect to the length of the tax assessment proceedings pending before the administrative courts at the time of the Administrative Court of Appeal's decisions of 30 October 1996 to reject the applicants' requests for stay of payment. It notes, however, that in fact the County Administrative Court's decisions in these proceedings were taken about three and a half years later. It is thus apparent that the applicants could not have been granted a stay of payment without having provided security on the ground that the tax assessment cases would be examined shortly. No other grounds that could constitute “particular reasons” to dispense with the obligation to provide security have been adduced or are otherwise apparent in the present case, nor has it been claimed that the applicants would have been able to provide the required security. In these circumstances, the Court is not convinced that an appeal to the Supreme Administrative Court concerning the stay of payment issue would have constituted an effective and sufficient means of redress for the applicants.
Further, with respect to the fact that the second applicant did not appeal against the District Court's decision concerning the seizure of bank savings, the Court recalls that taxes and special charges are payable and execution is levied even if the decision of the tax authority has not gained legal force. In fact, the applicants complain that execution took place prior to the court determination of the underlying tax liabilities, and, as a stay of payment had not been granted, execution could only have been avoided if the administrative courts had passed judgments on the tax issues in their favour before execution took place. The Court therefore concludes that an appeal to the Court of Appeal in the enforcement proceedings by the second applicant would not have provided redress for his complaints.
Consequently, the Court considers that the applications should not be rejected for failure to exhaust domestic remedies.
3. Compliance with the six-month time-limit
The Government also contend that the second applicant's application must be considered as having been lodged out of time. They refer to the fact that the District Court's decision concerning the seizure of the second applicant's bank savings – which, as no appeal was made against it, in fact was the final decision in the enforcement proceedings against him – was taken on 28 June 1996. As the second applicants' application was introduced on 20 May 1997, he has not observed the six-month time-limit under Article 35 § 1 of the Convention.
The Court considers, however, that the determination of the applicants' liability to pay additional tax and special charges and the enforcement of the amounts imposed by the Tax Authority are so closely linked that the issues cannot be separated for the purpose of the six-month rule. In this respect, the Court recalls that, as part of their complaint that the Tax Authority's decisions were enforced prior to a court determination, the applicants assert that the tax assessment proceedings have not been determined within a reasonable time and that they cannot obtain a fair hearing in these proceedings as enforcement of the alleged tax debts have already taken place. As the tax assessment proceedings have not yet been concluded, the Court finds that the second applicant's application cannot be rejected for failure to observe the six-month rule.
Consequently, the Court finds that the applicants have not failed to comply with the requirements of Article 35 § 1 of the Convention.
4. Application of Article 6 of the Convention
The Government finally contend that Article 6 of the Convention does not apply to the proceedings in question in that they do not involve either a “civil right and obligation” or a “criminal charge” within the meaning of Article 6. The applicants dispute this.
The Court finds that the question of whether Article 6 of the Convention applies in the present case raises issues which are so closely related to the complaints made and are of such a complex nature that a determination thereof should be reserved for the post-admissibility stage. Accordingly, the Court considers that the final determination of the issue concerning the applicability of Article 6 of the Convention should be joined to the merits and reserved for later consideration.
In view of the above, and in the light of the parties' submissions, the Court considers that the present complaint raises complex issues of law and fact under the Convention, the determination of which should depend on an examination of the merits. The Court concludes, therefore, that this part of the application is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. Subject to a final determination of the question of the applicability of Article 6 of the Convention, no other grounds for declaring this part of the application inadmissible have been established.
2. The applicants complain also that their right to a fair hearing under Article 6 of the Convention has been violated as, due to the Tax Authority's handling of the cases concerning tax assessments and special charges, they have been deprived of every opportunity to challenge the findings of the tax audit.
The Court notes that the proceedings concerning tax assessments and special charges have not yet been the subject of a final judicial determination as they are still pending before the administrative courts. These courts are competent to determine the tax assessments and the imposition of special charges. Further, they may address the complaints concerning alleged irregularities in the proceedings before the Tax Authority. Even assuming that Article 6 of the Convention is applicable to this complaint, the Court cannot speculate on the outcome of the fairness of the pending proceedings. The Court therefore concludes that this part of the application is premature and, on that account, is inadmissible as being manifestly ill-founded within the meaning of Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Joins to the merits the question of the applicability of Article 6 of the Convention;
Declares admissible, without prejudging the merits, the applicants' complaint that they have been deprived of their rights under Article 6 of the Convention as the Tax Authority's decisions concerning the imposition of additional tax and special charges were enforced prior to a court determination of the disputes;
Declares inadmissible the remainder of the application.
Michael O'BoyleWilhelmina Thomassen
RegistrarPresident
Full & Egal Universal Law Academy