Bulgaria was convicted with Judgement dated 28.05.2020 of the European Court of Human Rights (ECHR) for violation of Mr. Yordan Antonov’s right to peaceful enjoyment of his possessions. Article 1 of Protocol 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) was violated.
The judgment of the ECHR was pronounced unanimously. It puts an end to the absurd situation where illegally collected taxes were not refunded years long to an individual despite the final court decisions in his favor.
Facts on the case
- In 2001 a tax audit act was issued against Mr. Antonov with determining income taxes and VAT obligations. Mr. Antonov was at that time legal representative of an agricultural association. The Supreme Administrative Court (SAC) refused the review of Mr. Antonov’s claim because the claim had been submitted outside the statutory time-limits for judicial review.
- In 2003 the tax authorities dismissed Mr. Antonov’s request for setting aside the tax audit and conducting a new tax audit for the same periods. The dismissal was revoked with a court decision. The court found out a breach of statutory provisions under the tax audit: the latter was held against an individual for obligations of the association.
- In 2004 a new tax audit act was issued with obligations for income taxes and VAT. The tax audit act was revoked at two court instances, finally in 2007 by SAC with identical arguments: tax audit conducted against an individual for obligations of the association.
- In the period 2003-2008, the tax authorities collected the taxes and interests employing enforcement.
- In 2007 Mr. Antonov submitted two requests for refunding of the illegally collected sums under the tax audit acts. The tax authorities dismissed them. The two dismissals were revoked with decisions of SAC dated 28.11.2008 and 15.12.2008.
- In 2008 Mr. Antonov submitted new requests for refunding of the unduly collected sums. Again, without any success.
- In 2009 the tax authorities brought proceedings with a court seeking the declaration of the decisions of the SAC dated 28.11.2008 and 15.12.2008 as null and void, as well as reopening of the proceedings. The requests were dismissed by the competent courts on the ground of lack of the legal conditions for nullity and reopening.
- In 2009 Mr. Antonov tried through court proceedings to receive compensation for the damages suffered. SAC dismissed his claims in 2010.
- In 2010 Mr. Antonov submitted a claim with the ECHR.
- In 2012 the tax authorities refunded the unduly collected taxes together with the interests of Mr. Antonov.
Bulgarian legislation has changed from 2001. The above is not intended to propose a solution, but only to explain the reason for the case at the ECHR.
The main positions of the parties under the case at the ECHR
The position of Mr. Antonov:
- The two decisions of SAC dated 28.11.2008 and 15.12.2008 obliged the tax authorities to refund the unduly collected taxes and interests;
- The tax authorities initiated proceedings as maneuvers for delay of the refunding;
- Meanwhile, actions on enforcement were undertaken – Mr. Antonov’s assets were blocked and sold at public auctions;
- The tax authorities refunded to Mr. Antonov the unduly collected sums in 2012, i.e. after almost four years;
- For that period, he was forced to defend himself under various proceedings, placed in a state of uncertainty further to the unjustified interference of the State with his rights under article 1 of Protocol 1 to the Convention.
The position of the State:
- The obligation for refunding of the amounts arose for the State by means of the 2012 judgment, by which the court dismissed the request of the tax administration to declare the decision of the SAC of 28.11.2008 null and void;
- No delay in the refunding in 2012 was at hand;
- The claim of the tax administration for declaration null and void was in made in accordance with the law, had been pursued in the public interest, and had not overstepped the tax authorities’ margin of appreciation in ensuring the collection of taxes.
The judgment of the ECHR
The ECHR declared Mr. Antonov’s application admissible and well-founded. The State was sentenced to pay the applicant:
- EUR 3,500.00 as compensation for non-pecuniary damages – despite that at the time the judgment was issued the State had already refunded the taxes and interests to the applicant;
- EUR 1,00 as costs and expenses.
The ECHR’s judgment justified the State’s liability in the particular case and confirmed the following principles:
- Debt can be a “possession” within the meaning of Article 1 of Protocol 1 to the Convention if it is sufficiently established to be enforceable. The impossibility for the applicant to obtain duly execution of a judgment in his favor is a violation of the right to the peaceful enjoyment of possessions.
- The legitimate expectations of the individual the unduly collected taxes to be refunded represent a “possession” within the meaning of Article 1 of Protocol 1 to the Convention. In the particular case, the applicant had two court judgments in his favor and a procedure established for refunding.
- The delay in the execution of final decisions regarding tax obligations and refunding of unduly collected taxes violates the right to peaceful enjoyment of possessions and enters into the scope of Article 1 of Protocol 1 to the Convention.
- A violation of Article 1 of Protocol 1 to the Convention is at hand also when the conditions for refunding impose an excessive burden on the individual or legal entity concerned and fundamentally interfere with their financial security.
- The tax authorities have the right to discretion and effective action to collect tax liabilities by all legal means. In this case, the tax authorities stubbornly initiated proceedings provided the initial obvious lack of chance of success. It has not been demonstrated that the repeated and dismissed actions were founded in the circumstances of the case. That has led to an unjustified delay in tax refunds.
- The ECHR also considers the availability and effectiveness of the means under national law for the individual or legal entity concerned to obtain compensation for damages. The applicant in the particular case tried to defend himself under the national law, but without success.
Despite the amendments in the legislation from 2001 until now, the particular judgment of the ECHR is relevant and important for the protection of rights in the event of tax arbitrariness.
It confirms the principles and conclusions of the ECHR’s consistent practice, including the applicability of Article 1 of Protocol 1 to the Convention concerning tax obligations.
Referral to the ECHR in cases of non-refunding of taxes collected legally is possible after the protection means under the national order have been exhausted and the other conditions for the admissibility of the application are at hand.
