Concurring opinion of Judge Dr. Jadranka Sovdat, joined by Judge Mag. Miroslav Mozetič

Transcription

1 U-I-158/ December 2013 Concurring opinion of Judge Dr. Jadranka Sovdat, joined by Judge Mag. Miroslav Mozetič "No, this tenet does not mean: Everything that benefits the people is law. Rather, it is the other way around: Only what law is benefits the people."[1] 1. In the case at issue, the Constitutional Court did not decide on whether the plaintiff in the proceedings for the judicial review of administrative acts has the right, with regard to his success and responsibilities when performing the tasks of the former president of the management board of a bank, to keep his bonus inasmuch as it exceeded the social security contributions paid and taxation on the basis of the personal income tax (in conformity with the Personal Income Tax Act (Official Gazette RS, No. 13/11 official consolidated text, 24/12, 30/12, 75/12, 94/12, and 96/13 the PITA-2)), as can be read and heard in the media. The Constitutional Court decided on whether the legislature admissibly retroactively introduced a tax obligation i.e. with ex tunc effect. On the basis of the decision of the Constitutional Court, the Administrative Court, which initiated these proceedings for the review of constitutionality, will decide on the (constitutionality and) legality of the [tax] assessment decision by which a tax obligation was imposed retroactively on individuals. The subject of this review of constitutionality is underlined in paragraph 19 of the reasoning of the Decision, which stresses that a decision on the possible subjective responsibility of an individual which would proceed from the failure to act with due diligence or possibly even from allegations of the abuse of authorisations when exercising the tasks of the management or supervisory body of a company can only be a subject of concrete proceedings. I agree with that and I add that this can only be subject to concrete proceedings in which all constitutional procedural guarantees are also ensured to such individuals. However, what was mentioned cannot be subject to decision-making in

2 proceedings to review the constitutionality of a law, in the case at issue namely whether the legislature constitutionally admissibly introduced the retroactive effect of a tax law. 2. The essential finding of the Decision is that the legislature did not demonstrate a public interest that would justify the retroactive effect of the challenged statutory provision. When this was established, the Constitutional Court halted its assessment at this point and did not assess the existence of other conditions for the constitutional admissibility of retroactivity determined by the second paragraph of Article 155 of the Constitution. In fact, it was not necessary to do so because the conditions are determined cumulatively. I concur with the Decision in this respect and for such reason I also voted for it. However, in this context, my view of the content of the second paragraph of Article 155 of the Constitution is somewhat different. In addition, I wish to concur with the positions expressed in certain parts of the reasoning by also stating my own reasons. I also wish to emphasise that in my opinion, under all the conditions determined by the second paragraph of Article 155 of the Constitution, including the admissibility of the interference with "acquired rights", the assessment of the constitutional admissibility of retroactivity would lead to the same final decision, i.e. to the abrogation of Article 12 of the Act on the Additional Taxation of a Part of Managers' Income in the Period of Financial and Economical Crisis (Official Gazette RS, No. 78/09 hereinafter referred to as the AATPMI). The final decision would in my opinion also be the same if the Constitutional Court modified its position regarding the starting point of the review of constitutionality with regard to the retroactive effect of tax regulations and instead of the so-called concept of a taxable event, accepted the so-called concept of a tax period on which the German Federal Constitutional Court insists, despite critics in legal theory, when assessing the constitutional admissibility of changes to tax legislation during a tax year. 3. With regard to the above, I first present my view of the content of the second paragraph of Article 155 of the Constitution, then I state my arguments for the assessment of all the elements of the mentioned constitutional provision, and finally I also demonstrate why in my opinion the operative provisions of the Decision would have to be the same even if the view of the starting point of the assessment with regard to the retroactivity of tax laws was different. However, I concur with the fact that the Constitutional Court did not change its position in the case at issue. I. 4. The Decision proceeds from the fact that the meaning of the prohibition of

3 the retroactive effect of statutory provisions determined by the first paragraph of Article 155 of the Constitution, which was expressly written by the Constitution-framer, lies in ensuring one essential element of a state governed by the rule of law, i.e. legal certainty, and thereby in maintaining and reinforcing trust in the law, which are two of the principles of a state governed by the rule of law. I, of course, concur with that. In a state governed by the rule of law, a human has, on one hand, the right to request freedom and opportunities to plan his or her life with a reasonable degree of certainty, and on the other, he or she must be protected by law and order which enable him or her to follow his or her path without interference.[2] On this path, in order to ensure harmony with others and due to the public interest, individuals must adapt their behaviour to regulations that limit their freedom in a constitutionally admissible manner. They can only do this by becoming acquainted with such regulations beforehand, for such reason the constitutional requirement that regulations must be published before they enter into force (the first paragraph of Article 154 of the Constitution), i.e. before an individual is required to abide by them,[3] is even more important. Of course, I also agree that a prohibition of retroactivity extending to all laws regardless of the field of regulation is not absolute,[4] because the Constitution-framers envisaged an exception under the second paragraph of Article 155 of the Constitution. The prohibition under the first paragraph of Article 155 of the Constitution can be seen as a legal rule that concretises the legal principles determined by Article 2 of the Constitution[5] and as a constitutional principle at the same time.[6] On the contrary, such does not apply to the second paragraph of Article 155 of the Constitution, which undoubtedly is a constitutional rule, which is something that is not negligible with regard to the possibilities of its interpretation. Legal rules that introduce exceptions must already in principle be interpreted restrictively. The legislature, which must respect the Constitution when adopting laws, must take this into consideration. The second paragraph of Article 155 of the Constitution imposes on the legislature [the duty] to assess whether the constitutional conditions that allow it to implement statutory provisions with retroactive effect are fulfilled. This assessment must also have a recognisable and outwardly visible manifestation from which it is evident that the legislature takes its obligation to respect the Constitution seriously. For such reason, it must be evident already in the legislative file (i.e. all legislative material from the legislative procedure) why these conditions are fulfilled (paragraph 27 of the reasoning of the Decision). 5. In accordance with the position adopted by the Decision, two conditions are prescribed in order for the exception determined by the second paragraph of Article 155 of the Constitution to be admissible: 1) if this is required in the public interest and 2) provided that no acquired rights are infringed thereby

4 (paragraph 25 of the reasoning of the Decision). At the public hearing, Acad. Prof. Dr. Marijan Pavčnik identified three conditions for the admissibility of retroactivity in this provision: 1) only certain of its provisions can have retroactive effect, 2) if this is required in the public interest, and 3) provided that no acquired rights are infringed thereby. In this regard he specifically underlined the cumulative nature of certain conditions. Even before assessing whether the mentioned three conditions [are fulfilled], it is in my opinion necessary to assess whether what is actually at issue is the retroactive effect of a statutory provision. If we establish that what is at issue is retroactivity, I agree that we are also dealing with three conditions, of which two are positive and one is negative. In this respect, the first condition in fact twice emphasises the statutory level of legal norms only a law can determine that certain of its (i.e. statutory) provisions can have retroactive effect. And of course, I agree that all conditions must be fulfilled cumulatively, which entails that already the absence (or the presence of the negative condition an interference with an acquired right) of one of them results in an unconstitutionality. 6. Firstly then, [I will assess] whether in the case at issue we are actually dealing with the retroactive effect of statutory provisions, and afterwards also other conditions. If what is at issue is not retroactivity, Article 155 of the Constitution is not at all applicable, but the matter at issue could possibly only be a question of an interference with the principle of trust in the law, which the Constitutional Court assesses in conformity with Article 2 of the Constitution. As is stated by paragraph 21 of the reasoning of the Decision, in conformity with the established case law, a law has retroactive effect 1) as a general rule when the moment it becomes applicable is before it enters into force and 2) when the moment it becomes applicable is after it enters into force, but some of its individual provisions have such an effect that they retroactively interfere with legal situations or legal facts that had become final when the previous legal norm was in force. The challenged provision entered into force on 6 October 2009; it determines that the Act "applies to income referred to in this Act received[7] from 1 January 2009 onwards." So far, in such cases the Constitutional Court deemed that what is at issue is the first mentioned situation, i.e. that the moment when the Act became applicable is before the moment of its entry into force. In this regard, both in Decision No. U-I-62/95, dated 16 February 1996 (Official Gazette RS, No. 14/96, and OdlUS V, 18) and in Decision No. U-I-81/96, dated 12 March 1998 (Official Gazette RS, No. 27/98, and OdlUS VII, 46) the Constitutional Court expressly stated that the manner of the calculation of tax (e.g. by an annual calculation) does not represent a basis for an interpretation under which the validity of a tax obligation is extended to income paid when such statutory obligation did not yet exist. Respect for this position brings us to the conclusion that the

5 challenged statutory provision introduced a retroactive effect of the provisions of the AATPMI. 7. In order to depart from the mentioned explicitly expressed starting point that proceeds from the so-called concept of a taxable event (paragraph 23 of the reasoning of the Decision), the Constitutional Court would need serious constitutional reasons. At this time, I do not see them myself. I do see, however, those which oppose a change in this position. If a free individual and his or her dignity are the source of the constitutional order and they are, if the public authority must act in such a manner so as to respect this freedom then this must also apply in the field of the freedom of property (Article 33 of the Constitution). The state has constitutional authorisation to limit the freedom of property by (inter alia) prescribing tax obligations (Article 147 of the Constitution),[8] but in such a manner that individuals at any moment know what their obligations are (by a law that is published so that anyone can become acquainted therewith; the first paragraph of Article 154 of the Constitution), because only in such a manner will they also be able to adapt their behaviour and remain free at the same time. Such freedom would be substantially limited if virtually until the end of the year they did not know whether the state would impose additional tax obligations on them either by increasing tax rates or by imposing new taxes, by means of which they would create a burden on the income that they received during the year and which undoubtedly became their private property, and they thus acquired the freedom to dispose of such. Individuals can act freely if they know at any moment what obligations are imposed thereon by the state, therefore [any] obligations must be clearly and specifically determined by law. A tax law on the basis of which individuals cannot understand what their tax obligation is would not fulfil the requirements regarding clarity and precision. Therefore, such a law would be inconsistent already with the principle of the clarity and precision of regulations, which is one of the principles of a state governed by the rule of law determined by Article 2 of the Constitution. Only if individuals know their obligations (in this regard, also legal predictability as one of the elements of legal certainty is at issue), they will be able to fulfil them and exercise their freedom of conduct at the same time. Or, in the context of the field of a tax law and the substantiation presented by Asst. Prof. Dr. Aleš Kobal at the public hearing: A tax obligation arises in the month when an individual receives an income; at the end of the year there arises the state's claim for the payment of the tax. What the principle of the precision of tax regulations ensures to individuals is precisely that at any moment in a tax year when they receive an income they can calculate the amount of their tax obligation, and the remainder is what they can allocate for their further personal spending, for investments, for anything. For such reason, already the

6 first day of the tax year and at any moment in the tax year they must know (be able to calculate) how much tax they will pay at the end of the tax year. 8. A modification of the position regarding the so-called concept of a tax period would entail that the taxable obligation in fact does arise at the moment when an income is paid, however the tax is calculated with finality only annually, wherefore an individual could not count on the fact that the state will not modify the tax obligation (i.e. increase it or introduce additional taxation) during the tax year; the competent administrative authority will issue an assessment decision only in the first months of the following year and thus the law, although, for instance, it entered into force only in December of the tax year, will apply with finality only after it has entered into force (when the assessment decision is issued); the state of the facts of the tax assessment will be final only when the tax period comes to an end. If in the case at issue the Constitutional Court had changed its position and followed this path, this would entail that due to respect for the principle of equality (the second paragraph of Article 14 of the Constitution) such position would also have to apply in future cases. This would open the door to the legislature being able to increase tax obligations during a tax year, whereby new or increased obligations would in any event apply to all income in the tax year regardless of when the amendment would enter into force, and the legislature would not have to respect the second paragraph of Article 155 of the Constitution, because this would not be retroactivity at all. The legislature would only have to respect the principle of trust in the law determined by Article 2 of the Constitution meaning that individuals could only be certain that the state will not deteriorate their position during a tax year arbitrarily, i.e. without a real substantiated reason predominantly in the public interest.[9] I do not find such modification of the position acceptable precisely due to an individual's freedom to act and legal predictability. In addition to the constitutional reasons already mentioned, two additional reasons strengthen my conviction that the hitherto constitutional case law is correct. On one hand, there is the warning of Asst. Prof. Dr. Kobal that due to the criticisms in legal theory, the Federal Finance Court of Germany (which is one of the specialised supreme courts) is already leaning towards the full prohibition of retroactivity in the field of periodic taxes. With regard to the above, I can easily imagine the arguments for such a change. On the other hand, although the German Federal Constitutional Court maintains its current position, what is essential is the assessment test that was introduced for instances referred to as the quasi-retroactivity of a tax law. This test is not the same as the test in the established case law of our Court with regard to interferences with the principle of trust in the law determined by Article 2 of the Constitution. [I will address] this issue later (in Section III).

7 9. I therefore agree that we are dealing with the retroactive effect of statutory provisions. Consequently, firstly the question of whether the first condition is fulfilled is raised: only a law can determine that certain of its provisions have retroactive effect. In Decision No. U-I-181/94, dated 30 March 1995 (Official Gazette RS, No. 21/95, and OdlUS IV, 31), to which the plaintiff in the proceedings for the judicial review of administrative acts also refers, the Constitutional Court abrogated the retroactive effect of an executive regulation of a ministry, by which the obligation to make payments into the budget was introduced, due to two inconsistencies, namely with Articles 147 and 155 of the Constitution. Article 147 of the Constitution prohibits the ex nunc introduction of tax burdens by implementing regulations, while Article 155 prohibits their ex tunc introduction. By Decision No. U-I-185/10, Up-1409/10, dated 2 February 2012 (Official Gazette RS, No. 23/12, and OdlUS XIX, 33), by which the Constitutional Court abrogated a statutory provision that ordered the retroactive application of an executive regulation, the Constitutional Court specifically emphasised that only a law can determine that statutory provisions have retroactive effect. However, the emphasis that only individual statutory provisions can have retroactive effect, not an entire law, is not yet present in the hitherto case law. The fact that also this emphasis could be relevant in the case at issue was stressed by Asst. Prof. Dr. Kobal at the public hearing. Namely, the challenged provision does not introduce the retroactive effect of "individual" provisions of the Act, but the retroactive effect of the entire Act the Act which "introduces the obligation of the payment of an additional tax on income received for the management or supervision of business entities determined by this Act" (Article 1 of the AATPMI). In my opinion, this warning must be taken seriously. The case at issue does not only concern a correction of individual legal norms in a system of taxation and their ex tunc application,[10] but the introduction of a completely new tax obligation that the legislature introduced by an entirely new law[11], which is in its entirety also applicable retroactively, as is formulated in the wording of the challenged statutory provision. In fact, second thoughts regarding a [possibly] too narrow interpretation of the Constitution would be possible in this part, especially from the viewpoint [of preventing] that the choice of the legislative technique would in itself influence the adoption of the position whether what is at issue are individual statutory provisions or the entire Act. However, the position that an interpretation which disregards this perspective widens the application of a legal rule which is to be an exception and which explicitly refers to individual provisions of a law is also pertinent (and even more so when what is at issue is a law that introduces a new tax). 10. The Decision does not elaborate upon the first condition, but argues the absence of the public interest, the existence of which is the second condition

8 for the retroactive effect of individual statutory provisions. In this context, it must be underlined that in conformity with the second paragraph of Article 155 of the Constitution, there must exist a public interest for any retroactive effect of statutory provisions, even if they do not interfere with acquired rights. What is at issue is a public interest which can only be attained by the retroactive effect of statutory provisions or as is formulated in the Decision: "[a] public interest, one which substantiates [ ] the retroactive effect of the regulation" (paragraph 26 of the reasoning of the Decision). The Decision introduces a measure of strictness as regards the legislature in the sense that already in the legislative procedure it must be clearly evident what the public interest is due to which the retroactive effect of individual statutory provisions must be introduced. However, such strictness is logical and based on the fact that the second paragraph of Article 155 of the Constitution entails an exception to an important constitutional rule (the principle of the prohibition of retroactivity determined by the first paragraph of this Article), which falls within an elementary part of [the nature of] a state governed by the rule of law. Such conduct also requires the responsible exercise of the legislative power. Consequently, I concur with the argumentation in paragraphs 28 and 29 of the reasoning of the Decision. II. 11. Even if we recognised by citing what has been presented in the legislative procedure and by which the Government subsequently substantiated the public interest for the existence of the retroactive effect of statutory provisions a public interest that would retroactively impose a tax on indeed very high income, the third condition determined by the second paragraph of Article 155 of the Constitution would even then not be fulfilled. From Decisions No. U-I-62/95 and No. U-I-81/96 it clearly proceeds that the Constitutional Court deemed the right to dispose of income paid when a tax was not yet in force an acquired right. This is in a way understandable. If a law regulating taxation is clear and precise, an individual can calculate, when [he or she receives] each paid income, what is the amount of his or her tax obligation and what remains in the sphere of his or her freedom of property.[12] We can take a look at this also from an alternative viewpoint. Laws regulating taxation impose obligations. If an obligation is known at the time of receiving the income, what is at issue is the legitimate expectation of the taxable person to know, by consulting the statutory regulation, how much tax he or she must pay, even if the state is to calculate this officially and with finality only after the end of the tax year. Consequently, the taxable person can freely dispose of the remainder of his or her income, because on the basis of the determined tax obligations he or she can legitimately expect that this part

9 of the income will remain his or hers also after the tax assessment, and this is also protected by the right to private property (Article 33 of the Constitution).[13] Therefore, in the case at issue, taxable persons had a legitimate expectation that they could freely dispose of the income paid on the basis of contractual relations[14] insomuch as they exceed the taxable obligation which was in force when they received them.[15] Together with the prohibition of retroactivity, also at issue, above all, is the legitimate expectation of individuals that the state will not retroactively impose new obligations on them, because their freedom of property would be substantially limited if until the end of the tax period they did not know whether the state would impose an additional tax burden on them or not. Namely, if a prohibition on the retroactive interference with acquired rights is in force, there must a fortiori exist a prohibition on imposing retroactive tax burdens when what is at issue is actually the fact that in reality the content of this "right" is, from such perspective, "the right not to have obligations". 12. In Decisions No. U-I-62/95 and U-I-81/96 the Constitutional Court interpreted the second paragraph of Article 155 of the Constitution as a legal rule that does not allow further exceptions. If the conditions determined therein are fulfilled, retroactivity is allowed, if they are not, it is not allowed. As soon as the Constitutional Court established that there was an interference with acquired rights, it deemed such retroactivity to be inadmissible. However, already in Decision No. U-I-340/96 (which was adopted at the same session as Decision No. U-I-81/96!) the Constitutional Court indicated that in conformity with the third paragraph of Article 15 of the Constitution it might also allow a retroactive law that would interfere with acquired rights if this were necessary due to the protection of an even more weighty right or due to the elimination of even more severe interferences with others' rights. This is what in fact it has done two times thus far: the first time by Decision No. U-I-60/98, dated 16 July 1998 (Official Gazette RS, No. 56/98, and OdlUS VII, 150), when what was at issue was an interference with legitimate expectations[16] regarding the payment of lost profit when confiscated property was returned, and the second time by Decision No. U-I-60/99, dated 4 October 2001 (Official Gazette RS, No. 91/01, and OdlUS X, 168; paragraph 24 of the reasoning this Decision expressly refers also to Decision No. U-I-340/96), when what was at issue was an interference with the right of authorised investment companies to select state property. Thereby, the Constitutional Court interpreted the third condition "provided that no acquired rights are infringed thereby" as if in fact it stated "provided that no acquired rights are inadmissibly infringed thereby". The reasoning of such admissibility is in its entirety evident in Decision No. U- I-60/99. The Constitutional Court deemed an interference with acquired rights to be admissible if in addition to the fact that a public interest is demonstrated

10 (which must anyway exist in conformity with the second paragraph of Article 155 of the Constitution therefore in addition to the fact that a public interest which justifies the retroactive effect of statutory provisions is demonstrated) the interference with acquired rights passes the so-called strict test of proportionality, i.e. that the interference with acquired rights is appropriate and necessary for attaining a public interest and is also proportionate in comparison with the interest that is being protected. An interference with acquired rights can thus be admissible under the conditions determined for interferences with human rights and fundamental freedoms. 13. In such context, we can first of all raise the question of whether it is possible to assess retroactive interferences with acquired rights and the retroactive imposition of obligations in accordance with the same criteria. Such question particularly arises when the Constitutional Court at the same session in one case interprets the second paragraph of Article 155 of the Constitution strictly regarding an ex tunc imposition of obligations and in the other case regarding an ex tunc interference with acquired rights, allowing a relaxation of this strictness, however on the basis of the strict test of proportionality when different rights oppose each other. One could also possibly conclude from the above that by Decision No. U-I-81/96 the Constitutional Court established a stricter assessment regarding the interpretation of the second paragraph of Article 155 of the Constitution in the part "no acquired rights are infringed thereby" when additional obligations are imposed ex tunc, because what is at issue in this context is not that different rights can collide but the relationship state individual, whereby the state imposes obligations on individuals. 14. Even if we ignore the mentioned question and even if the test referred to in Decision No. U-I-60/99 was relevant to the retroactive imposition of tax obligations, it is clearly evident that the mentioned test in fact includes both tests of the admissibility of interferences with human rights, i.e. the test of legitimacy (the third paragraph of Article 15 of the Constitution; in conformity with the established constitutional case law, also the public interest is a constitutionally admissible objective for the limitation of human rights) and the strict test of proportionality (Article 2 of the Constitution; appropriateness, necessity, and proportionality in the narrower sense). However, the test of legitimacy is the first condition, therefore at this point again first of all the question is raised whether there exists a public interest that justifies the retroactive effect. Just as it was not demonstrated with regard to the second condition determined by the second paragraph of Article 155 of the Constitution, it would neither be demonstrated in the first step of the assessment of the third condition with regard to the interference with an acquired right if we followed this path.

11 15. If, for instance, we deemed the need to protect public funds granted to business entities in the form of sureties or guarantees, or funds for the attenuation of the consequences of the financial and economic crisis on the basis of measures adopted by the National Assembly and the Government (the second paragraph of Article 3 of the AATPMI) to be a demonstrated public interest, we would come to the conclusion that the retroactive interference was not necessary for the protection of the mentioned funds. All the measures that were adopted and that envisaged the involvement of public funds are namely statutorily expressly regulated and contain to which also the Decision draws attention (paragraph 13 of the reasoning) express limitations to ensure that these public funds are used for eligible purposes. The measures were only possible if expressly determined limitations with regard to the income of the members of the management and supervisory bodies in these business entities [were respected] during the time when public funds were being received. Supervision by competent authorities was also envisaged, together with the sanction of either the return of the funds or the nullity of contracts, and minor offence sanctions were envisaged as well. The state thus established aid from public funds in the time of crisis, but at the same time determined the conditions under which this aid was allocated, including the condition of the limitation of payments to management and supervisory bodies. Therefore, in order to protect public funds the state did not need the measure of the retroactive effect of a tax law as well; consequently the measure was not necessary. 16. With regard to the companies of which the state was the majority owner and could as such influence the conduct of the management and supervisory boards by exercising its rights, another reason joins the mentioned one that speaks against the necessity. At the public hearing, Higher Court Judge Counsellor Marjanca Faganel drew attention thereto in the name of the applicant of this review of constitutionality. She warned that in these instances the state had at its disposal absolutely all the measures in conformity with the law regulating companies in order to achieve that its influence be enforced. One can agree with that as well. If a state acts iure gestionis, then it must act, as other entities, in conformity with existing regulations in order to enforce its interests. Corporate law gives it sufficient mechanisms to this end. If the state does not exploit these mechanisms as one would expect in the interest of efficient management, then it cannot use (abuse?) its position in power iure imperii and thereby ex tunc repair what it did not do right iure gestionis. Such conduct would also create an inequality (without a real reason proceeding from the nature of the matter) between business entities with respect to the question of who their owner is.

12 17. If we assessed the interference with "acquired rights" from the viewpoint of the strict test of proportionality, then at least also the question of proportionality in the narrower sense would arise. The part of income which remained to individuals after taxation under the personal income tax became subject to the additional tax. With regard to the rate of 49%, calculations indicate that, for instance, the total tax rate of the plaintiff in the proceedings for the judicial review of administrative acts would exceed 80% if the personal income tax is [taken into consideration] as well. By taking into consideration Decision of the Constitutional Court No. U-I-91/98, we would thus as well be faced with a tax burden which substantially exceeds 50% taxation on income, therefore the question of proportionality in the narrower sense and thus of the admissibility of an interference with private property protected by Article 33 of the Constitution would become pertinent.[17] 18. If the Constitutional Court continued its assessment and also addressed the question of how to interpret the concept of the infringement of acquired rights from the second paragraph of Article 155 of the Constitution with regard to Decision No. U-I-81/96, on one hand, and Decisions No. U-I-340/96 and No. U-I-60/99, on the other, then already in this Decision it would first have to adopt a clear position with regard to the question that I highlighted in paragraph 13 of this separate opinion. What is in my opinion especially important for the case at issue is that regardless of which path the Constitutional Court were to follow, i.e. either the path of Decision No. U-I- 81/96 or the path of Decision No. U-I-60/99, it would have arrived at the same conclusion. III. 19. Why would we come to the same conclusion even if we changed the standpoint from the hitherto constitutional case law and followed the example of German constitutional case law? It is true that despite the criticisms in legal theory, the German Federal Constitutional Court persists in its starting point as regards the so-called tax period, according to which the emergence of tax debt is deemed to be the legally decisive moment, which with regard to periodic taxes arises on the last day of the tax period for which the tax is being assessed and is assessed by an assessment decision issued by the competent authority. The German constitution does not contain a provision such as the provision in Article 155 of the Constitution [of the Republic of Slovenia], therefore the entire assessment proceeds from the viewpoint of an interference with the principle of trust in the law, [namely] both "true retroactivity" and "quasi-retroactivity", whereby the first one is absolutely prohibited and the second one can be admissible. Different provisions of

13 constitutions can of course already entail the first essential reason due to which different positions of different constitutional courts can (and must) emerge. However, what in this context is even more essential in my opinion is the fact that also the German Federal Constitutional Court is very much aware that in instances of tax obligations it is dealing with special situations in which mere supervision over the arbitrariness of the legislature's behaviour as regards changing tax obligations during a tax period does not suffice. For such reason, it stresses that the retroactive effect of tax regulations is only compatible with the principle of trust in the law if the interference is substantiated by a special public interest, one which substantiates precisely the retroactive effect of a regulation, and if the principle of proportionality thereby remains protected therefore if an interference is appropriate and necessary for the attainment of the statutory objective and if with regard to the overall assessment of the weight of the affected trust and the weight and necessity of the reasons for retroactive effect the limit of attributability remains protected (BVerfG, BvL 6/07, dated 10 October 2012). The German Federal Constitutional Court thus assesses the admissibility of quasi-retroactivity by a test, which is the same as our test of the admissibility of interferences with human rights, therefore by the test of legitimacy (a public interest which justifies precisely the retroactive effect of statutory provisions) and the strict test of proportionality it is an interference that is appropriate, necessary, and proportionate in the narrower sense. 20. Therefore, even if the Constitutional Court did have constitutionally admissible reasons for modifying the position and assessed the constitutionality of the challenged statutory provision in accordance with the mentioned criteria, the assessment would bring us, due to the reasons I have presented (in Section II), to the same result, i.e. to the establishment of unconstitutionality, whereby the Constitutional Court could have equally halted [its assessment] already at the first step of the assessment because a public interest which specifically justifies retroactive effect is not demonstrated. 21. Due to the presented reasons, by following any possible parameters from the constitutional case law, I myself come to the same decision in the case at issue. All this further strengthens my conviction that the [decision from the] operative provisions of the Decision, which I have supported with my vote, is correct. The decision brings long-term respect for individuals' freedom (and the freedom of property as well) by simultaneously fulfilling the obligations towards the state, which is called upon to ensure the common welfare, but in such a manner that also thereby respects the law. Dr. Jadranka Sovdat

14 Judge Mag. Miroslav Mozetič Judge Notes: [1] At the public hearing in this case, Acad. Prof. Dr. Marijan Pavčnik cited (not coincidentally!) the final thought from Radbruch's Second Minute of Legal Philosophy. See G. Radbruch, Five Minutes of Legal Philosophy, Filozofija prava, Cankarjeva založba, Ljubljana 2001, p [2] J. Harvey, L. Bather, The British Constitution, 3 rd Edition, McMillan St Martin's Press, London 1972, p. 11. [3] "Abstract legal norms contained in the laws are by their nature [ ] rules of conduct which apply ex nunc and encompass those legal relations that exist or arise after the norms entered into force. Logically, certain conduct can only be required from people ex nunc. From this it logically follows that legal norms should not have retroactive power." Statement of the former president of the Constitutional Court in the Commentary on the Constitution of L. Šturm in: L. Šturm (Ed.), Komentar Ustave Republike Slovenije, Fakulteta za podiplomske državne in evropske študije, Ljubljana 2002, p [4] Ibidem, p [5] M. Pavčnik, Teorija prava: prispevek k razumevanju prava, 4 th revised edition, Cankarjeva založba, Ljubljana 2011, p [6] Ibidem, p With regard to the prohibition of retroactivity as a constitutional principle see L. Šturm in: L. Šturm (Ed.), op. cit., p. 54. [7] In conformity with the fourth paragraph of Article 4 of the AATPMI, an income is deemed to be received when it is paid or in any other manner made available to the taxable person. [8] The Constitutional Court does not deem these tax obligations to constitute an interference with the private property determined by Article 33 of the Constitution, as long as the amount of the prescribed tax is not such as to jeopardise the essence of property, whereby it becomes such when it exceeds one half of the income; see Decision No. U-I-91/98, dated 16 July 1999 (Official Gazette RS, No. 61/99, and OdlUS VIII, 196). See also the criticisms of this Decision, namely E. Kerševan, Ustavne omejitve davčnega poseganja v lastninsko pravico, Javna uprava, Nos. 1-2 (2013), pp Prof. Kerševan is opposed to the position that an interference with private property arises only above the 50% tax rate. [9] The Constitutional Court adopted such position already in Decision No. U-I- 123/92, dated 22 March 1993 (Official Gazette RS, No. 67/93) and in numerous later decisions.

15 [10] As was stated, for instance, by the European Court of Human Rights in N. K. M. v. Hungary, dated 14 May 2013, namely that retroactive taxation can be applicable "essentially to remedy technical deficiencies of the law" (paragraph 51), whereby the Convention for the Protection of Human Rights and Fundamental Freedoms (Official Gazette RS, No. 33/94, MP, No. 7/94 ECHR) does not contain a provision which would be substantially equal to Article 155 of the Constitution. [11] At the public hearing, Asst. Prof. Dr. Kobal economically and legally qualified the tax determined by the AATPMI as double taxation i.e. as a new tax that creates a burden on income that has already been subject to tax (the personal income tax). [12] Also Prof. Pirnat deems that the right to dispose of income [remaining] after taxation as in force at the time of acquiring the income entails an integral part of private property determined by Article 33 of the Constitution. See R. Pirnat, Pravne omejitve ukrepov za izhod iz krize, Podjetje in delo, Nos. 6-7 (2010), p [13] Or, as was stated by the European Court of Human Rights: "[A] 'legitimate expectation' of obtaining an asset may also enjoy the protection of Article 1 of Protocol No. 1." Judgment in N. K. M. v. Hungary, paragraph 35. [14] Whether they were also entitled to receive this income was neither the subject of the tax procedure nor is the subject of this review of constitutionality. [15] The allegation of the Government that with regard to rights proceeding from contracts one should not even speak of acquired rights, because they are allegedly only at issue when a right is recognised by a decision of an authority of the state, is so obviously erroneous that it is not even necessary to specifically discuss it. After all, by Decision No. U-I-340/96, dated 12 March 1998 (Official Gazette RS, No. 31/98, and OdlUS VII, 48), to which the plaintiff in the proceedings for the judicial review of administrative act brought attention, the Constitutional Court specifically underlined that the second paragraph of Article 155 of the Constitution also protects acquired obligations law rights. [16] At this point one must agree with Prof. Pirnat that what was at issue was not an interference with acquired rights, but an interference with expected rights; see R. Pirnat, Instrumentalnost javnega prava in načelo zaupanja v pravo (the example of provisions regarding the pay for annual leave in the Fiscal Balance Act), Podjetje in delo Nos. 6-7 (2012), p However, also expected rights that are protected by Article 33 of the Constitution must be protected by the second paragraph of Article 155 of the Constitution. [17] See note 8.