Amending local taxes – unconstitutional (Complaint No. 2a/2014)
On 28 January 2014 the Constitutional Court delivered its judgment on the constitutionality of the paragraphs 113-119, 122 and 123 of Article IX of the Law No. 324 of 23 December 2013 on amending and supplementing certain legislative acts, that amended the Tax Code (Complaint No. 2a/2014).
Circumstances of the case
At the origin of the case lies the application submitted to the Constitutional Court on 13 January 2014, by the MP's, Messrs Valeriu Munteanu, Gheorghe Brega and Mrs. Corina Fusu.
On 14 January 2014 the application was supplemented with new reasoning.
During public sitting, the authors called for the extension of the subject matter of the application, requesting the Court to review also the constitutionality of the Government Decision No. 1051 of 24 December 2013 on the draft law on the state budget for the year 2014, whereby the Government accepted post-factum the increase, by the Parliament, of the revenues and expenditures of the state budget for 2014, adopted on 23 December 2013.
The authors of the application alleged, in particular, that the challenged provisions, by which were excluded some local taxes and limited the current ones, are contrary to Articles 1, 8, 72, 109, 112, 130, 131 and 132 of the Constitution, as well as to the provisions of the international acts.
The Constitutional Court ruled on the application in the following composition:
Mr Alexandru TĂNASE, President,
Mr Aurel BĂIEŞU,
Mr Igor DOLEA,
Mr Tudor PANŢÎRU,
Mr Victor POPA,
Mr Petru RĂILEAN, judges
Conclusions of the Court
Hearing the reasoning of the parties and examining the case file, the Court held that, under Article 131 para. (4) of the Constitution, any legislative initiative or amendment, which entails the increase or the decrease of the budgetary revenues or loans, as well as the increase or curtail of the budgetary expenditures shall be adopted only following an approval of the Government.
The Court noted that the challenged norms were not included in the draft law approved by the Government and submitted to the Parliament for approval (Government Decision No. 959 of 3 December 2013). These amendments have been included in the draft law on 17 December 2013 after the adoption by Parliament of the draft law in the first reading. Both Parliament and the Government could not inform the Court of constitutional jurisdiction about the identity of the author (authors) of the amendments, attributing the authorship to the Committee on Economy, Budget and Finances.
The Court noted that, on 23 December 2013, the Parliament adopted the challenged provisions, without the consent of the Government.
The Court rejected the reasoning of the Government and of the Parliament on the post-factum acceptance by the Government of the adopted amendments, by the Decision No. 1051 of 24 December 2013.
The Court held that the Government can not disclaim its right / constitutional liability, including the express consent / rejection on legislative initiatives or amendments with a budgetary impact.
Therefore, the Court held that the lack of prior consent of the Government on the amendments that are determining the increase or decrease of the budgetary revenues and expenditures represents an omission. The Court found that this omission has occurred as a result of the failure to carry out the provisions of the Article 131 para. (4) of the Constitution, wherefore the norms thus adopted are unconstitutional.
Furthermore, the Court held that the challenged amendments have a direct impact on budget revenues of the local public administration, because, besides the allocations from the state budget, the local budgets are formed from the own revenues that include local taxes imposed under the Tax Code.
The Court held that, under Article 4 para. (6) of the European Charter of Local Self-Government, local authorities shall be consulted, insofar as possible, in due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly.
The Court noted that the challenged provisions were adopted by the legislative body without consulting the local authorities.
In this context, the Court noted that, under Article 26 para. (1) of Law No. 847 of 24 May 1996 on budgetary system and budgetary process, the Government presents to Parliament, by 1 October each year, the draft law on annual budget, the law whereby the Parliament approves annual budget, including sources of revenues and purposes of expenses for a financial year.
Annual Budget Law, which shall be adopted by 5 December each year, includes allocations from the state budget to local authorities, intended for financing the capital expenditures, as well as transfers from the state budget to the budgets of the territorial-administrative units.
In accordance with Article 20 para. (1) of Law No. 397-XV of 16 October 2003 on local public finances, the executive authority shall submit a provision to the representative and deliberative body, no later than 1 November, the draft law on the budget for the next year of the territorial-administrative unit, for examination and approval. The representative and deliberative authority shall approve the budget of the territorial-administrative unit for the next financial year no later than 10 December.
The Court held that, being adopted on 23 December 2013 and published, as well as the Annual Budget Law, in the Official Gazette of the Republic of Moldova on 31 December 2013 and applicable since 1 January 2014, the challenged norms do not comply with the accessibility, transparency and predictability requirements, that all legislative acts have to fulfill under Article 23 of the Constitution.
In this context, given the lateness and the method of adopting the challenged amendments, without granting a reasonable period for implementation and without subsidizing local public authorities from the state budget, in order to compensate for lost revenues, the local budgets were undermined and, therefore, was violated the principle of local autonomy, enshrined in Article 109, par. (1) of the Constitution.
Moreover, the Court rejected as inadmissible ratione materiae the request on the constitutional review of the Government Decision No. 1051 of 24 December 2013 on the draft law on the state budget for the year 2014, because it does not produce separate legal effects from the draft law which it endorses, being just one level in the legislative process and from its content it can not be individualized the norms that would refer to the challenged provisions.
Judgment of the Court
Starting from the reasoning invoked above, the Constitutional Court:
- accepted the application submitted by the MP's Valeriu Munteanu, Gheorghe Brega and Corina Fusu on the constitutionality of some financial provisions on local taxes;
- declared unconstitutional the provisions of the Article IX, para. 113-119, 122, 123 of the Law No. 324 of 23 December 2013 on amending and supplementing some legislative acts;
- rejected as inadmissible ratione materiae the request on the constitutional review of the Government Decision No. 1051 of 24 December 2013 on the draft law on the state budget for the year 2014.
The Judgment of the Constitutional Court is final, cannot be appealed, shall enter into force on the date of passing, and shall be published in the Official Gazette of the Republic of Moldova.