CEDH · CASELAW;DECISIONS;DECCOMMISSION;ENG — 23 octobre 1997

.sDD6737AE { font-size:11pt } .s211D6B00 { margin-top:0pt; margin-bottom:0pt; line-height:normal; widows:0; orphans:0; font-size:8.5pt } .sBB9EE52A { font-family:Arial }                          AS TO THE ADMISSIBILITY OF                           Application No. 32667/96                       by Harri Ilari RUOHOLA                       against Finland           The European Commission of Human Rights (First Chamber) sitting in private on 23 October 1997, the following members being present:              Mrs    J. LIDDY, President            MM     M.P. PELLONPÄÄ                  E. BUSUTTIL                  A. WEITZEL                  C.L. ROZAKIS                  L. LOUCAIDES                  B. CONFORTI                  N. BRATZA                  I. BÉKÉS                  G. RESS                  A. PERENIC                  C. BÎRSAN                  K. HERNDL                  M. VILA AMIGÓ            Mrs    M. HION            Mr     R. NICOLINI              Mrs    M.F. BUQUICCHIO, Secretary to the Chamber         Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;         Having regard to the application introduced on 14 June 1996 by Harri Ilari Ruohola against Finland and registered on 20 August 1996 under file No. 32667/96;         Having regard to the report provided for in Rule 47 of the Rules of Procedure of the Commission;         Having deliberated;         Decides as follows:   THE FACTS         The applicant is a Finnish citizen, born in 1960 and resident in Turku.         The facts of the case, as submitted by the applicant, may be summarised as follows.         On 18 April 1983 the applicant founded a company with his brother. By 1988 the company had expanded and a change of company form was carried out with a view to limiting the partners' personal liability.         On 17 December 1988 the applicant sold his partnership share in the company for 1,944,444 Finnish marks (FIM) to a limited company in which the applicant and his brother were minority shareholders. The majority shareholder of the limited company was the above-mentioned company founded by the applicant and his brother. A bank financed the transaction by giving a loan to the limited company. To secure the payment of the loan a sum of money equal to the purchase price was deposited in the bank.         In January 1989 the applicant submitted to the tax authorities his annual tax return from which it appeared that he had given up his partnership share in the company founded by himself and his brother and was accordingly no longer a partner therein. He supplemented the tax return with a letter of 27 April 1989 enclosing a copy of the sales contract. Subsequently, on 16 May 1989 he was released from paying advance taxes which were based on this partnership as regards the year 1989. Apart from some corrections concerning the year 1987 no other tax liabilities were imposed at that time.         Later the limited company which had bought the applicant's partnership share experienced financial difficulties and the applicant ceased to be a shareholder of the limited company.         In 1992 a tax inspection of the limited company was conducted. In their subsequent inspection report of 19 January 1993 the inspectors considered that, in fact, the above-mentioned sale of the applicant's partnership share had no other effect than that the applicant was able to obtain the purchase price from the company. Therefore it involved a hidden dividend to the applicant. Referring to Sections 56 and 57 of the Taxation Act (verotuslaki, beskattningslag) No. 482/1958, later amended, the inspectors concluded that the tax authorities had not been aware of the sale at the time the applicant's annual tax assessment was conducted and that therefore a reassessment of taxes was required. They proposed that a residual tax be imposed on the hidden dividend, i.e. the entire sum of FIM 1,944,444, which the applicant had obtained for his partnership share.         According to Section 21 of the Act on Income and Property Tax (tulo- ja varallisuusverolaki, lag om inkomst- och förmögenhetsskatt) No. 1043/1974, as in force at the relevant time, sales profits were on certain conditions exempt from taxes provided that the vendor had owned the property for five years prior to the sale. Section 56 of the Taxation Act provided that simulated transactions were to be taxed in accordance with their real nature. Section 57 of the Act included provisions concerning the taxation of hidden dividend. According to Section 83 of the Taxation Act residual taxes could be imposed if 1) a taxpayer had failed to submit a tax return or had submitted an insufficient, deceiving or faulty return, information or document, 2) a taxpayer had evaded taxes in the annual taxation, and 3) there was a causal link between the shortcomings of the tax return and the evaded taxes. Residual taxation consisted of the evaded tax, interest for delay on the amount of tax due and a tax supplement (i.e. a punitive tax increase).         On the basis of the above-mentioned inspection report the Tax Board (verolautakunta, skattenämnden) of Turku decided on 15 April 1993 that a tax of FIM 1,567,447.74, which included a tax supplement of FIM 145,038.45, as well as an interest for delay of FIM 573,510, totalling FIM 2,140,957.70, were to be imposed on the amount which the applicant had received for his partnership share. Thus, the entire purchase price was considered to be hidden dividend.         On 18 November 1993 the applicant appealed to the County Administrative Court (lääninoikeus, länsrätten) of Turku and Pori. He requested that the above-mentioned decision concerning the residual taxation be quashed arguing, inter alia, that since he had submitted the relevant information in his tax return and in his letter of 27 April 1989 with the sales contract enclosed, the Tax Board had been aware of the sale before his annual taxes were fixed and therefore there was no causal link between his not being taxed for the sale and his tax report within the meaning of Section 83 of the Taxation Act. Furthermore, he maintained that Sections 56 and 57 of the Taxation Act did not apply to the sale at issue. Moreover, he contended that he had had to assume personal responsibility for the above-mentioned loan given to the limited company as a result of which he had lost the sales profits. Finally, he considered the residual taxation unfair. The applicant did not request an oral hearing.         The tax authorities submitted observations in reply to the appeal. The applicant then submitted observations on account of these observations.         On 14 February 1995, the County Administrative Court ruled, inter alia, that the sale had been real but the purchase price had been unusually high. Accordingly, it found that part of the price, FIM 777,777, was hidden dividend. It considered that the fact that the applicant had lost the sales profits did not prevent imposing a tax on it. Moreover, it held that the applicant had evaded taxes on account of his insufficient tax report. It also found that it had not been established that the percentage of the tax supplement was excessive. The County Administrative Court ordered that a tax was to be levied on the said FIM 777,777 and that the Tax Office (verotoimisto, skattebyrån) was to calculate the changes this decision caused and to correct the debiting. The decision was based on Sections 56, 57, 77 and 83 of the Taxation Act.         On 23 March 1995 the applicant requested leave to appeal to the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen). Renewing what he had stated in his submissions to the County Administrative Court he demanded that the decision concerning his taxation be quashed. He contended, in particular, that the sale had come to the knowledge of the Tax Board by his letter of 27 April 1989 and that he had submitted all the relevant documents and information. Moreover, he claimed that Sections 56 and 57 of the Taxation Act did not apply to the sale because the sale was real and the price was not excessive. He also referred to the fact that he had lost the sales profits. He did not request an oral hearing.         The Supreme Administrative Court granted the applicant leave to appeal. On 15 February 1996, however, it upheld the decision of the County Administrative Court.         On 14 August 1996 the applicant lodged an extraordinary appeal with the Supreme Administrative Court demanding the reopening of the case decided on 15 February 1996. He argued that there had been a procedural error, since the appellate courts had not had his letter of 27 April 1989 and the relevant documents concerning the year 1989 at their disposal. On 2 June 1997 the Supreme Administrative Court rejected the appeal stating that it had been aware of the documents in question.         In the meantime, on 28 February 1995, the Tax Office of Turku had calculated, as far as relevant, that the tax to be imposed was FIM 259,538.68 and the interest for delay FIM 573,510. It did not specify the amount of the tax supplement. The applicant was informed thereof by the enforcement authority in December 1995.         On 3 June 1996 the applicant lodged a petition for the reconsideration of the decision of the Tax Office of 28 February 1995 with the County Administrative Court of Turku and Pori. He also requested an interim measure to the effect that the enforcement of the decision be suspended. He argued that the interest for delay was disproportionate and excessive compared with the amount of tax he had to pay. He requested that the decision be quashed and the Tax Office be ordered to calculate the interest for delay in accordance with Section 83 of the Taxation Act. The County Administrative Court transferred the matter to the County Tax Office (lääninverovirasto, länskattebyrån) of Turku for action to be taken by the Tax Rectification Committee (verotuksen oikaisulautakunta, prövningsnämnden i beskattingsärenden).         On 26 June 1996 the County Tax Office rejected the petition in so far as it concerned the interim measure. It appeared from the decision that no appeal lay open against it.         The Tax Rectification Committee of Turku examined the remainder of the petition. In its decision of 25 March 1997 the Committee noted that by the Tax Office's decision of 28 February 1995 the amount to be paid had been reduced by FIM 1,307,908.32. It found that the reduction had been incorrectly directed only at the tax, the amount of which had been reduced to FIM 259,538.68, while the interest had remained at FIM 573,510, totalling FIM 833,049. Furthermore, it found that the tax collection division (veronkanto, skatteuppbörden) within the Tax Office had later corrected the reduction so that it was directed at both the tax and the interest. Thus, the tax was FIM 609,903 and the interest FIM 223,146, the total being FIM 833,049. Therefore the Tax Rectification Committee did not amend the amount due. Appeal against this decision lay open.         On 15 April 1997 the applicant lodged an appeal with the County Administrative Court of Turku and Pori against the decision of the Tax Rectification Committee demanding, inter alia, that the residual taxation be quashed as to the amount of tax exceeding FIM 259,538.68. He argued that the correction could not be made to his detriment and without hearing him and that the tax collection department was not competent to make the correction. The case is at present pending before the County Administrative Court.        Finally, as to the sum of money equal to the purchase price which was deposited as a security for the loan the limited company received, the bank claimed it on the basis of the applicant's responsibility for the payment of the loan on 4 January 1995. Thus, as indicated above, the applicant lost the entire sum.     COMPLAINTS   1.     The applicant complains that he was denied a fair trial before the appellate courts, i.e. the County Administrative Court and the Supreme Administrative Court, when appealing against the decision of the Tax Board of 15 April 1993. He maintains that the Tax Office failed to disclose certain documents to these appellate courts. Moreover, he contends that the County Administrative Court failed to comply with procedural principles in that it went beyond the parties' claims, that it exceeded its authority by taking on the role normally reserved for the tax authorities and that it based its decision on new grounds, i.e. an exorbitant price, and failed to elaborate its reasons for the decision. He invokes Article 6 of the Convention.   2.     Furthermore, the applicant complains that the proceedings in the Tax Office were not fair when it examined and decided a petition for the reconsideration of its own decision of 28 February 1995 and rejected it without giving reasons. The applicant complains also that imposing a residual tax on the sales profits, allegedly against national law, violated his right to the peaceful enjoyment of his possessions. In his opinion the taxation involved a confiscation of his possessions having regard to the fact that he had lost all his sales profits. In addition, he complains that the interest for delay was more than twice the size of the tax. He invokes Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention.   3.     Finally, the applicant complains of the lack of an effective remedy because there was no right to appeal against the decision of the Tax Office in which it rejected the applicant's petition concerning the reconsideration of the Tax Office's decision of 28 February 1995. In this connection he invokes Article 13 of the Convention.     THE LAW   1.     The applicant complains that he was not afforded a fair trial before the County Administrative Court and the Supreme Administrative Court when he appealed against the decision of the Tax Board of 15 April 1993. He maintains that certain documents were not disclosed to these appellate courts and that the County Administrative Court failed to comply with procedural principles, exceeded its authority and based its decision on new grounds for which it failed to elaborate its reasons. He invokes Article 6 (Art. 6) of the Convention which reads as far as relevant:         "1.   In the determination of his civil rights and       obligations or of any criminal charge against him, everyone       is entitled to a fair and public hearing within a       reasonable time by an independent and impartial tribunal       established by law. ..."         According to the Commission case-law Article 6 (Art. 6) of the Convention does not apply to proceedings concerning the assessment of taxes (see e.g. No. 11189/84, Dec. 11.12.86, D.R. 50, pp. 121, 140-141 and the reference therein). The complaint, however, raises the question, in so far as it concerned the imposition of a tax supplement, whether the case involved a determination of a criminal charge within the meaning of Article 6 (Art. 6) of the Convention and, if so, whether the applicant was afforded the guarantees of this provision in the relevant proceedings (cf. No. 11464/85, Dec. 12.5.87, D.R. 53, pp. 85 and 101 and Eur. Court HR, Bendenoun v. France judgment of 24 February 1994, Series A no. 284, p. 20, para. 47).         The Commission considers that in the present case the question whether the proceedings involve a determination of a criminal charge can be left open.         Even assuming that Article 6 (Art. 6) applies to the present case, the question whether the proceedings satisfy the requirements of Article 6 para. 1 (Art. 6-1) can only be determined by examining the proceedings as a whole, i.e. once they have been concluded. The Commission finds that the proceedings at issue concerning the imposition of the tax and the tax supplement as such were concluded by the Supreme Administrative Court's decision of 15 February 1996. Thus the above-mentioned complaints can be examined as far as Article 6 (Art. 6) is concerned.         In this regard, the Commission first recalls that, in accordance with Article 19 (Art. 19) of the Convention, its only task is to ensure the observance of the obligations undertaken by the Parties to the Convention. In particular, it is not competent to deal with an application alleging that errors of law or fact have been committed by domestic courts, except where it considers that such errors might have involved a possible violation of any of the rights and freedoms set out in the Convention. The Commission refers, on this point, to the established case-law of the Convention organs (see e.g. Eur. Court HR, Schenk v. Switzerland judgment of 12 July 1988, Series A no. 140, p. 29, para. 45).         It is true that the applicant also alleges that the tax authorities failed to disclose certain documents to the appellate courts. Assuming that he refers to his letter of 27 April 1989 and its enclosure, the Commission observes that he referred to them in his own submissions to the appellate courts and, furthermore, it appears from the Supreme Administrative Court's decision of 2 June 1997 that the Court was aware of these documents. In addition, the Commission has not found any other substantiated facts which could lead to the conclusion that the courts examined the case on the basis of documents unknown to the applicant or otherwise examined the case contrary to the requirements of Article 6 (Art. 6) of the Convention. In this respect the Commission also notes that the County Administrative Court gave a reasoned decision in which it found to a limited extent in favour of the applicant.         It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention.   2.     The applicant complains that the proceedings in the Tax Office concerning tax calculations were not fair as it examined and decided a petition for the reconsideration of its own decision of 28 February 1995 and rejected it without giving reasons. He also complains that imposing a tax as well as a tax supplement on the sales profits interfered with the peaceful enjoyment of his possessions. He invokes Article 6 (Art. 6) of the Convention and Article 1 of Protocol No. 1 (P1-1) to the Convention.         In so far as the applicant relies on Article 6 (Art. 6) of the Convention, and assuming that this provision applies to the proceedings in question, the Commission recalls that according to its established case-law, in order to determine whether Article 6 para. 1 (Art. 6-1) of the Convention has been complied with, the Commission must examine the proceedings as a whole once they have been concluded, although it is not excluded that a particular procedural element could be so decisive to the proceedings that the conduct thereof should be assessed at an earlier stage (cf. No. 9938/82, Dec. 15.7.86, D.R. 48, p. 21). In the present case the Commission does not find it necessary to consider any particular procedural element separately and thus finds, in the light of the fact that the proceedings are still pending, that it is premature to consider whether these are, as to their fairness, conducted in conformity with Article 6 para. 1 (Art. 6-1) of the Convention.         It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para 2 (Art. 27-2) of the Convention.         In so far as the applicant relies on Article 1 of Protocol No. 1 (P1-1) to the Convention, the Commission finds that it is not required to decide whether or not the facts alleged by the applicant disclose any appearance of a violation of this provision as, under Article 26 (Art. 26) of the Convention, it may only deal with a matter after all domestic remedies have been exhausted according to the generally recognised rules of international law. The applicant has lodged an appeal with a domestic instance, the County Administrative Court, concerning the taxes in question as regards the amount in excess of FIM 259,538.68. Since the case concerning the outcome of the tax calculations is pending the applicant has not, in accordance with Article 26 (Art. 26) of the Convention, exhausted the remedies available to him under Finnish law. Moreover, an examination of this part of the application does not disclose the existence of any special circumstances which might have absolved the applicant, according to the generally recognised rules of international law, from exhausting the domestic remedies at his disposal.         It follows that the applicant has not complied with the condition as to the exhaustion of domestic remedies as regards this part of the application and it must accordingly be rejected under Article 27 para. 3 (Art. 27-3) of the Convention.   3.     The applicant complains that his right to an effective remedy was violated, since there was no right to appeal against the decision of the Tax Office. In this connection he invokes Article 13 (Art. 13) of the Convention.         In so far as the applicant complains of the lack of an effective remedy as to the decision of the County Tax Office of 26 June 1996, the Commission notes that this decision concerned only an interim measure requested by the applicant. The remainder of the applicant's petition was decided by the Tax Rectification Committee on 25 March 1997. An appeal lay open against the decision of the Committee. The Commission further recalls from above that upon the applicant's appeal the case concerning the tax calculations is now pending before the County Administrative Court. In these circumstances, even assuming that the applicant has an arguable claim under any of the other provisions of the Convention, the Commission considers that he has an effective remedy at his disposal within the meaning of Article 13 (Art. 13).         It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention.         For these reasons, the Commission, unanimously,           DECLARES THE APPLICATION INADMISSIBLE.       M.F. BUQUICCHIO                                  J. LIDDY      Secretary                                     President to the First Chamber                         of the First Chamber