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Exemption of an economic agent from payment to the state budget – unconstitutional
On 13 February 2014 the Constitutional Court delivered its judgment on the constitutionality of the Law No. 199 of 12 July 2013 on the exemption from payment of taxes, contributions, premiums and deductions, as well as the cancellation of the increasing penalties and fines related to them (Complaint No. 3a/2014).
Circumstances of the case
At the origin of the case lies the application submitted to the Constitutional Court on 20 January 2014 by the MPs, Messrs Mihai Ghimpu, Valeriu Munteanu and Gheorghe Brega.
In particular, on 4 July 2013 the MPs Veaceslav Ioniţă, Marian Lupu, Vadim Cojocaru and Iurie Chiorescu have proposed the legislative initiative No. 306 on the exemption, by deviating from financial provisions, for the "Glorinal" LLC, from payment of some taxes and contributions to the state budget in the amount of 12 million MDL, in the account of the debts gained in the process of performing the reconstruction and restoration of the "Curchi" Monastery Complex in the Curchi village, Orhei District. Furthermore, was proposed the cancellation of the penalties and financial sanctions (fees) for the "Glorinal" LLC.
On 10 July 2013, by the Decision No. 506, the Government approved its opinion on the legislative initiative, by which opposed to the submitted proposals, noting that the exemption from payment of taxes only for the "Glorinal" LLC violates the principle of financial equality.
Moreover, the Government noted that, given the fact that the reconstruction of the "Curchi" Monastery Complex was not foreseen to be financed from the state budget within some investment programs, the legal ground for recognizing the debt as from the state budget is missing.
According to the Government, the debt of the "Glorinal" LLC to the state budget dates from 2008 - 2013 and aims the entire activity of the company, not only the reconstruction and restoration of the "Curchi" Monastery Complex in the Curchi village, Orhei District.
The Government also mentioned that, under the financial amnesty introduced in 2007, "Glorinal" LLC has already benefited, like other companies, from the cancellation of all debts to the state budget at the section "financial payments".
Furthermore, the Government pointed out the absence of the funding source, due to the lack of financial resources available in the state budget; and for improving the situation of the "Glorinal" LLC there had to be identified and implemented measures that would have not involve support from the state budget, so that the established level of the budget deficit should have been ensured.
On 12 July 2013, contrary to the objections raised by the Government, the Parliament adopted the legislative initiative.
Subsequently, on 23 December 2013, by Law No. 324 on amending and supplementing certain legal acts, whereby was established a new financial policy, the Parliament adopted amendments to the Law No. 199 of 12 July 2013.
Under these amendments, exemptions for the "Glorinal" LLC were extended also for the value added tax, as well as for the future fees and taxes. Moreover, the amount of these exemptions was increased from 12 to 25 million MDL.
The authors of the application alleged that the challenged provisions, whereby an economic agent was exempt from paying taxes, fees, penalties and financial sanctions, are violating the procedure of establishing the state budget and the principle of free competition, being contrary to the Articles 6, 126, 130, 131 and 132 of the Constitution.
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 files, 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 held that both the original Law of 12 July 2013 and the amendments of 23 December 2013 were adopted by Parliament without the approval of the Government.
Therefore, the original Law was adopted without the approval and despite the negative opinion of the Government, given the fact that the legislative initiative had a budgetary impact which determined the decrease of the budget revenues and affected the budgetary balance, in the amount of 12 million MDL.
Moreover, the adopted amendments, whereby the amount of exemptions was increased from 12 to 25 million MDL, have not been included in the legislative initiative adopted 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 legislative initiative after its adoption in the first reading on 17 December 2013. Both the 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 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.
The Court emphasized that, under the constitutional norm, the approval has to be expressed by the Government, as a collegial body, and not as a member of the executive.
Therefore, the Court held that the lack of a prior, express and univocal 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.
The Court noted that, in accordance with constitutional requirements, any legislative initiative or amendment with a budgetary impact shall be submitted only after identifying the source of funding and with the prior approval of the Government. In this respect, the provision of the paragraph (4) of Article 131 of the Constitution shall be applied in conjunction with paragraph (6) of this Article.
Furthermore, the Court underlined the importance of guaranteeing the principle of transparency of the budgetary procedures, which is the very essence of the parliamentary system. In this context, the Court noted the need to respect the chronological order and time limits in the process of drafting and approving the public budget, as well as the full publication in the Official Gazette of the Republic of Moldova of the Government opinions on legislative initiatives and amendments with budgetary impact.
Concurrently, the Court held that such tax facilitation establishes a privileged treatment towards an economic agent in relation to his/her competitors, which violates the constitutional principles of free competition and market economy.
However, regarding the exercise of the MP's right on legislative initiative, including their legislative proposals and amendments, the Court noted that the constitutional requirements entail the individualization of the authors, even if their ownership as assumed by the standing committees; anonymity is inadmissible in parliamentary procedures.
Judgment of the Court
Starting from the reasoning invoked above, the Constitutional Court:
- upheld the application of the MPs, Messrs Mihai Ghimpu, Valeriu Munteanu and Gheorghe Brega on the constitutionality of some legal provisions exempting a company from payments to the state budget;
- declared unconstitutional the Law No. 199 of 12 July 2013 on the exemption from payment of taxes, contributions, premiums and deductions, as well as the cancellation of the increasing penalties and fines related to them.
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.