DECISION OF THE CONSTITUTIONAL COURT OF UKRAINE

of March 24, 2005 No. 2-rp/2005

On case on the constitutional representation of 48 People's Deputies of Ukraine concerning compliance of the Constitution of Ukraine (constitutionality) of provisions of Item 1.17 of Article 1, article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds" (case on tax pledge)

Case No. 1-9/2005

NAME OF UKRAINE

Constitutional court of Ukraine as a part of judges of the Constitutional Court of Ukraine:

Selivon Nikolay Fedosovich - the chairman,

Voznyuk Vladimir Denisovich,

Ivashchenko Vladimir Ivanovich,

Kostitsky Mikhail Vasilyevich,

Mironenko Alexander Nikolaevich,

Nimchenko Vasily Ivanovich,

Wheaten Valery Grigoryevich - the judge-speaker,

Savenko Nikolay Dmitriyevich,

Victor Egorovich's buffoons,

Stanik Syuzanna Romanovna,

Tkachuk Pavel Nikolaevich,

Chubar Lyudmila Panteleevna,

Shapoval Vladimir Nikolaevich,

with the assistance of the representative of the person of law on the constitutional representation Svintsitsky Anatoly Vladimirovich; representative of the Verkhovna Rada of Ukraine Selivanov of Anatoly Aleksandrovichapostoyanny of the representative of the Verkhovna Rada of Ukraine in the Constitutional Court of Ukraine; the representative of the President of Ukraine Efimenko Leonid Vasilyevich - the deputy minister of justice of Ukraine; the representative of the Ministry of Justice of Ukraine Yukhimenko Lilia Vitalyevna - the head of department of the budget legislation and financial services; representatives of State Tax Administration of Ukraine: Moroz Yaroslava Petrovna - the main state inspector of taxes of department of development of technique of collection of tax debt of Department of providing the tax liabilities, Polishchuk of Lesya Fedorovnyzamestitelya of the head of department - the head of department of the legal analysis and examination of regulatory legal acts of Legal department, Tarasenko Vladimir Aleksandrovich - the deputy head of department - the head of department of development of technique of collection of tax debt of Department of providing the tax liabilities; representatives of the State committee of Ukraine concerning regulatory policy and entrepreneurship: Gavva Leonid Vladimirovich - the chief of Legal management, Lakhtadir Andrey Nikolaevich - the head of department of development of the legal framework of entrepreneurship,

considered at plenary meeting case on the constitutional representation of 48 People's Deputies of Ukraine concerning compliance of the Constitution of Ukraine (constitutionality) of provisions of Item 1.17 of Article 1, of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds" of December 21, 2000 N 2181-III (Sheets of the Verkhovna Rada of Ukraine, 2001, N 10, the Art. 44).

Reason for consideration of the case according to Articles 39, 40 Laws of Ukraine "About the Constitutional Court of Ukraine" became the constitutional representation of 48 People's Deputies of Ukraine.

The basis for consideration of the case according to Articles 71, 82 Laws of Ukraine "About the Constitutional Court of Ukraine" are availability of dispute on compliance of the Constitution of Ukraine (constitutionality) of provisions of Item 1.17 of Article 1, of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds".

Having heard Wheaten V.G.'s judge-speaker, Svintsitsky A. V. explanations., Selivanova A. O., Efimenko L. V., Yukhimenko L. V., Moroz Ya. P., Polishchuk L. F., Tarasenko V. O., Gavva L. V., Lakhtadira A. M. and having researched case papers, the Constitutional Court of Ukraine established:

1. The person of law on the constitutional representation - 48 People's Deputies of Ukraine - appealed to the Constitutional Court of Ukraine with the petition to recognize unconstitutional provisions of Item 1.17 of Article 1, of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds" (further - the Law).

People's Deputies of Ukraine consider that provisions of article 8 of the Law put subjects of managing of different patterns of ownership in uneven position, granting the right to tax authority to enter tax pledge on any assets of the taxpayer, and it contradicts part four article 13 of the Constitution of Ukraine which provides protection of the rights of all persons of law of property and managing.

Challenging the provisions of the paragraph of third Item 8. 1, subitem 8.2.2 of Item 8.2 of article 8 of the Law regarding emergence of the right of tax pledge without written registration and its distribution on any kinds of assets of the taxpayer, the author of the constitutional representation claims that "the tax authority is granted the right automatically, without provision of opportunity to the subject of managing to use constitutional right on appeal of decisions of tax authority in court... apply the right of tax pledge".

According to People's Deputies of Ukraine, provision of subitems 8.6. 1, 8.6.2 Items 8.6 of article 8 of the Law contradict Articles 41, 42 Constitutions of Ukraine as "limit the rights of legal entities and physical persons concerning ownership, uses, orders of the property and the right to be engaged in business activity".

2. In the letter of the Chairman of the Verkhovna Rada of Ukraine in the Constitutional Court of Ukraine it is noted that tax pledge is temporary restriction of the rights of the taxpayer concerning the order the pledged assets which arises in connection with failure to carry out or untimely accomplishment by the payer of the obligations concerning tax payment established by the Constitution and the laws of Ukraine.

The Cabinet of Ministers of Ukraine in written explanation in the Constitutional Court of Ukraine claims that the right of tax pledge extends to any kinds of assets of the taxpayer irrespective of pattern of ownership, and emergence of the right of tax pledge does not provide obligatory realization of these assets. The right to implementation of business activity can be limited by law for the purpose of protection of any public interest, in particular for providing social orientation of economy. Such restriction can be performed also by establishment of imperative procedure for emergence of the right of tax pledge to assets of the taxpayer and consequently, the provisions of the law disputed by the person of law on the constitutional provision answer the Constitution of Ukraine.

The Ministry of Justice of Ukraine specifies that recovery by enforcement of assets of the taxpayer on account of repayment of its tax debt is performed exclusively by a court decision, and regulations of article 8 of the Law "do not create different conditions of managing for subjects of different patterns of ownership and respectively do not break the principle of their equality before the law". The provisions of the law specified in the constitutional representation answer the Constitution of Ukraine.

The State Tax Administration of Ukraine considers that "the system of precepts of law is constructed on parallel existence of the state guarantees and sanctions enshrined in legal acts; the constitutional guarantees concerning protection of the rights of persons of law of property cannot prevent application to violators of the tax legislation of the constitutional sanctions. The disputed provisions of the law do not break the principle of rule of the Fundamental Law of Ukraine".

The line item of the State committee of Ukraine concerning regulatory policy and entrepreneurship is that "application of institute of tax pledge is effective in defiance of the current legislation of Ukraine and needs settlement at the legislative level".

The Ukrainian Union of Industrialists and Entrepreneurs expressed opinion that the disputed provisions of the law contradict the Constitution of Ukraine.

Specialists of law department of Yuriy Fedkovych Chernivtsi National University, National academy of the State Tax Service of Ukraine note that the challenged provisions of the Law do not contradict the Constitution and other laws of Ukraine.

3. At plenary meeting of the Constitutional Court of Ukraine representatives of the person of law on the constitutional representation, the Verkhovna Rada of Ukraine, the Ministry of Justice of Ukraine, State Tax Administration of Ukraine, the State committee of Ukraine concerning regulatory policy and entrepreneurship supported according to line item of those whom they represented.

The line item of the President of Ukraine stated by his representative comes down to the fact that the legislative provisions challenged by People's Deputies of Ukraine answer regulations of the Fundamental Law of Ukraine.

4. Constitutional court of Ukraine, resolving the questions which are brought up in the constitutional representation, leaves it.

4.1. The constitution of Ukraine provides the right of everyone to own, use and dispose of the property, results of the intellectual, creative activities and the right to business activity which is not prohibited by the law (Articles 41, of 42). The fundamental law of Ukraine determines the instruction that the property shall not be used to the detriment of the person and society (Article 13).

Provisions of the Constitution of Ukraine concerning property are corresponded to article 1 of Protocol N 1 to the Convention on human rights protection and fundamental freedoms according to which each physical person or legal entity has the right peacefully to own the property. Nobody can be deprived of the property differently as for the benefit of society and on the conditions provided by the law or the general principles of international law which does not limit at all the right of the state to enact such laws which are necessary for control of use of property according to common interests or for ensuring tax payment or other charges or penalties.

The given provisions of the Constitution of Ukraine and Protocol N 1 gained the further development in the Civil code of Ukraine. In particular, article 321 of this Code fixes inviolability of the property right according to which person can be deprived of the property right or is limited in its implementation only in cases and according to the procedure, established by the law.

Accomplishment of the constitutional debt, stipulated in Article 67 Constitutions of Ukraine, is implemented by payment of taxes and fees by everyone. Establishment of system of the taxation, taxes and fees, their sizes and payment procedure is only law prerogative. In case of regulation of these public relations the state has the right to determine mechanisms which provide with the payer proper tax payment and charges. One of methods of such providing is the institute of tax pledge entered by the Law. So, in particular, provisions of Item 1.17 of Article 1, of article 8 of the Law regulate emergence of the right of tax pledge, its content, registration, stop, restriction concerning its application and so forth.

According to the Law the essence of tax pledge consists in introduction for certain term of special procedure for the order by the taxpayer the assets. This institute as method of providing the tax liability which is not extinguished in time is source of filling of budgets and the state trust funds.

Available legislative provisions concerning implementation of institute of tax pledge, and also concerning possibility of approach of certain negative effects for the taxpayer do not contradict requirements of Articles 13, of 41, 42 Fundamental Laws of Ukraine. The fact of failure to pay by the taxpayer in the time of the amount of the tax liability determined by the Law is the basis for the use of adequate measures by the state on behalf of its tax authorities for the purpose of accomplishment by the debtor of the constitutional debt.

Having resorted to such method of providing the tax liabilities as establishment of tax pledge, the legislator acted in limits of the Constitution of Ukraine.

4.2. One of the most important conditions of definiteness of the relations between the person and the state is fixing in articles 3, of 21 Constitution of Ukraine of the principle of inviolability of human rights and freedoms. Recognizing the person by the highest social value, the Fundamental Law of Ukraine establishes the list of the rights and freedoms, guarantees and provides their protection, including against violation from the state, its bodies and officials. The specified rights and freedoms determine measure of possible behavior of man and citizen, in particular as owner, certain borders of these rights and opportunity to use the benefits for satisfaction of the interests display.

Provides provisions of paragraph two of subitem 8.2.1 of Item 8.2 of article 8 of the Law that the basis of emergence of the right of tax pledge is failure to provide or untimely provision by the taxpayer of the tax declaration. Thereby the legislator actually equates failure to provide or untimely provision of the tax declaration to the fact of failure to pay the tax liability. But the mentioned basis does not demonstrate existence of the tax liability at the taxpayer and furthermore about emergence of tax debt.

Establishing such basis for introduction of tax pledge, the legislator did not consider availability or lack of existence of the tax liability, and also effect which can come for the taxpayer in case of failure to provide or untimely provision of the tax declaration and illegally limited the right of the last to dispose of the property that breaks part one of article 41 of the Constitution of Ukraine. It gives the chance to the Constitutional Court of Ukraine to recognize such which does not answer the Fundamental Law of Ukraine, provision of paragraph two of subitem 8.2.1 of Item 8.2 of article 8 of the Law.

4.3. Provisions of subitem 8.2.2 of Item 8.2 of article 8 of the Law are provided by distribution of the right of tax pledge to any kinds of assets of the taxpayer which stayed at the time of emergence of such right in its property (complete economic maintaining), and also on any other assets on which the taxpayer will acquire the property rights in the future, until repayment of its tax liabilities or tax debt.

Follows from content of this provision, and practice of its application confirms that the right of tax pledge extends practically to all asset types of the taxpayer. At the same time adequacy of the amount of the tax liability or tax debt with size of the pledged assets of the taxpayer is not considered that does not help fair permission of questions of application of the right of tax pledge between subjects of tax legal relationship.

According to the Constitutional Court of Ukraine, the amount of tax pledge proceeding from the general principles of the right shall answer the amount of the tax liability that would provide the constitutional requirement of justice and dimension. Dimension as element of concept of justice provides establishment of public restriction of the order with assets of the taxpayer for failure to pay or untimely payment of the tax liability and differentiation of such restriction depending on the amount of failure to pay tax debt by the payer.

In the Decision the Constitutional Court of Ukraine of November 2, 2004 N 15-rp/2004 noted that justice - one of the basic principles of the right, is decisive in its determination as regulator of the public relations, one of universal measurements of the right. Right elements, in particular dimension, equality, morals, unite quality which answers justice ideology, the idea of the right which substantially received display in the Constitution of Ukraine.

Ensuring receipt in budgets and the state trust funds of taxes and fees shall be performed by implementation of tax pledge on assets of the taxpayer in such size which would provide the guaranteed compensation to the state of unpaid taxes in full.

Distribution of the right of tax pledge to any kinds of assets of the taxpayer who exceeds the amount of the tax liability or tax debt can entail to deprivation of such payer not only profits, and and other assets, threatening its further business activity up to its termination.

Considering the stated provision of subitem 8.2.2 of Item 8.2 of article 8 of the Law which provides possibility of distribution of the right of tax pledge to any kinds of assets of the taxpayer irrespective of the amount of tax debt, breaks fair permission of questions of application of the right of tax pledge (Articles 8, 42 Constitutions of Ukraine, i.e. are unconstitutional.

4.4. On the content provisions of Item 1.17 of Article 1, of Item 8.4 of article 8 of the Law regarding establishment of priority behind body of collection concerning receipt of satisfaction from the cost of pledged property mainly before other creditors are referential. The law of Ukraine "About providing requirements of creditors and registration of burdenings" of November 18, 2003 provides establishment of priority of public burdenings to which also tax pledge belongs. However settlement of order of registration of burdenings and priorities of collection from the debtor of outstanding amount is not subject of consideration of this constitutional implementation as the person of law on the constitutional representation did not dispute the specified Law.

4.5. The constitution of Ukraine guarantees the right to everyone on appeal in court of decisions, actions or divergence of public authorities, local government bodies, official and officials (Article part two 55).

The constitutional court of Ukraine in the Decision of November 25, 1997 stated to N 6-zp line item that claims are subject to direct consideration in courts regardless of the fact that other procedure for their consideration could be established by the law adopted earlier (appeal to body, the official of higher level in relation to that body and the official who made the decision actions made or allowed divergence).

The provision of the paragraph of third Item 8.1 of article 8 of the Law provides that the right of tax pledge arises according to the law and does not need written registration. Transition to tax pledge of assets of the taxpayer is consequence of failure to carry out of the tax liability or tax debt by it.

According to subitem 5.2.5 of Item 5.2 of article 5 of the Law the taxpayer taking into account prescriptive limits has the right to appeal in court the decision of monitoring body on charge of the tax liability at any time after receipt of the corresponding tax message. Thus, the taxpayer is not deprived of the right to judicial protection.

4.6. Provisions of subitem 8.6.1 of Item 8.6 of article 8 of the Law provide opportunity to the taxpayer whose assets stay in tax pledge, to perform the free order them, except for transactions which are subject to written approval of tax authority. Subitem 8.6.2 of Item 8.6 of article 8 of the Law for such taxpayer determines conditions of implementation of transactions with means without their approval of tax authority, and subitem 8.6.3 of Item 8.6 of this Article provision of property which stays in tax pledge, in the following pledge or its use for providing the valid or future requirement of the third parties is not allowed.

In the Solution of the Constitutional Court of Ukraine of February 12, 2002 N 3-rp/2002 is noted that the property guarantees not only the rights of owners, and and obliges, assigns to them certain obligations. It is about it in articles 13 and 41 of the Constitution of Ukraine according to which use of property cannot do harm to the person, the rights, freedoms and advantage of citizens, interests of society.

Thus, legal cause to approve concerning the debtor carrying out such economic activities with its assets that will provide accomplishment of the tax liability and realization with respect thereto the constitutional debt of the debtor on tax payment and charges is provided to tax authority.

4.7. The analysis of the constitutional representation demonstrates that People's Deputies of Ukraine, challenging the provisions of article 8 of the Law in general, do not give legal reasons for approvals concerning illegality of provisions of Items 8. 3, 8.5, subitems 8.6. 4, 8.6.5 Items 8. 6, Items 8. 7, 8.8, 8.9 of the mentioned Article. Under such circumstances the constitutional proceeedings regarding relatively compliance of the Constitution of Ukraine (constitutionality) of the specified provisions of the Law are subject to the termination based on Item 2 of article 45 of the Law of Ukraine "About the Constitutional Court of Ukraine" discrepancy of the constitutional representation to the requirements provided by the Constitution of Ukraine, the Law of Ukraine "About the Constitutional Court of Ukraine".

Based on stated and being guided by Articles 147, of 150, 152 Constitutions of Ukraine, Articles 51, of 61, of 63, of 65, of 70, 73 Laws of Ukraine "About the Constitutional Court of Ukraine", paragraph 51 of Regulations of the Constitutional Court of Ukraine, the Constitutional Court of Ukraine solved:

1. Recognize answering to the Constitution of Ukraine (are constitutional), provisions of Item 1.17 of Article 1, of Item 8. 1, paragraphs of the first, third, fourth subitem 8.2.1 of Item 8. 2, Item 8. 4, subitems 8.6. 1, 8.6.2, 8.6.3 of Item 8.6 of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds".

2. Recognize such which do not answer the Constitution of Ukraine (are unconstitutional), provisions of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds", namely:

paragraph two of subitem 8.2.1 of Item 8.2 of Article 8, according to which the right of tax pledge arises in case of failure to provide or untimely provision by the taxpayer of the tax declaration - from the first working day following behind the last day of the term established by the law on the corresponding tax, collection (obligatory payment) for submission of such tax declaration;

subitem 8.2.2 of Item 8.2 of Article 8 regarding distribution of the right of tax pledge to any kinds of assets of the taxpayer without the amount of its tax debt.

3. Stop the constitutional proceeedings regarding relatively compliance of the Constitution of Ukraine (constitutionality) of provisions of Items 8. 3, 8.5, subitems 8.6. 4, 8.6.5 Items 8. 6, Items 8. 7, 8.8, 8.9 of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds".

4. Subitem 8.2 paragraph two provisions. 1, subitem 8.2.2 of Item 8.2 of article 8 of the Law of Ukraine "About procedure for repayment of obligations of taxpayers to budgets and the state trust funds", recognized as unconstitutional, lose force from day of acceptance by the Constitutional Court of Ukraine of this Decision.

5. The solution of the Constitutional Court of Ukraine is obligatory to execution in the territory of Ukraine, final and cannot be appealed.

Decision of the Constitutional Court of Ukraine is subject to publication in "the Messenger of the Constitutional Court of Ukraine" and in other official publications of Ukraine.

 

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