CEDH · CASELAW;DECISIONS;ADMISSIBILITY;ENG — 25 mai 2004

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Pellonpää ,   Mrs   V. Strážnická ,   Mr   R. Maruste ,   Mr   S. Pavlovschi ,   Mr   L. Garlicki ,   Mr   J. Borrego Borrego, judges , and Mr M. O'Boyle , Section Registrar , Having regard to the above application lodged on 17 March 1999 and registered on 22 September 1999, Having regard to the Court's partial decision of 4 June 2002, Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant, Having deliberated, decides as follows: THE FACTS The applicant, Peter Frátrik, is a   Slovakian national, who was born in 1951 and lives in Trnava, Slovakia. The respondent Government were represented by their Agent, Mr   P.   Vršanský, succeeded by Mr   P.   Kresák in that function.   A.     The circumstances of the case The facts of the case, as submitted by the parties, may be summarised as follows. On 5   November 1992 the applicant was granted a   trade licence ( živnostenský list ) entitling him, inter alia , to run a   business in musical instruments. He thus became a   self ‑ employed person. On 5   January 1993 the applicant registered himself with the health insurance fund ( nemocenské poistenie ) and with the pension fund ( dôchodkové zabezpečenie ). In 1993, for income tax purposes, the applicant declared to   have earned an   annual income of 9,550 Slovakian korunas (SKK) from his self ‑ employment activity. In 1994 he declared an   annual income of SKK 7,595, in 1995 SKK 11,050, in 1996 SKK 18,225 and in 1997 SKK 2,850. On 1   January 1995 the Social Security Administration Act no.   274/1994 Coll. ( Zákon o Sociálnej poisťovni - “the 274/1994 Act”) entered into force. This Act regulates inter alia the obligation to   contribute to the health insurance fund and the pension fund, the calculation of these contributions and the modalities of their payment. Self-employed persons, like the applicant, are required to   pay contributions to both funds, the amount of which is calculated on the basis of their average monthly taxable income gained during the previous fiscal year. The Act also defines the minimum and the maximum amount of such contributions (see under “Relevant domestic law” below). On 8   September 1997 the Trnava branch office ( pobočka ) of the Social Security Administration ( Sociálna poisťovňa ) ordered the applicant to   pay within 15 days a   contribution of SKK 24,978 to the health insurance fund and the pension fund for the period between on 1   January 1995 and 30   June 1997. This amount was composed of SKK 9,504 for the fiscal year 1995 (i.e.   SKK 792 per month), SKK 10,236 for 1996 (i.e. SKK 793 per month until April 1996 and SKK 873 per month as from April 1996), and SKK 5,238 for 1997 (i.e. SKK 873 per month). The applicant was informed that failure to pay or a   late payment entailed the imposition of a   fine. The applicant filed an   appeal with the Head Office ( ústredie ) of the Social Security Administration arguing that, given his low income, he could not afford to   pay these contributions. On 24   October 1997 the Head Office of the Social Security Administration upheld the decision of its Trnava branch. The applicant filed an   administrative law appeal with the Trnava Regional Court ( Krajský súd ) against the decisions taken by the Social Security Administration. The applicant submitted that his income was below the statutorily defined minimal living standard ( životné minimum ) and argued that, in these circumstances, he should be   exempted from his payment obligations under the 274/1994 Act. In his opinion, the application of this Act in his personal situation was unethical and unconstitutional. In its judgment of 24   September 1998 the Regional Court upheld the challenged decisions. No appeal was available against this judgment. It became final and binding on 30   October 1998 when it was served on the applicant. In 1998 and in 1999 the applicant declared to the income tax authorities that he had earned an annual income of SKK 8,737 and SKK 675 from his self ‑ employment activity. On 17   May 1999 the Trnava branch office of the Social Security Administration ordered the applicant to pay within 15 days a   contribution in the amount of SKK 20,742 to the health insurance fund and the pension fund for the period between 1   July 1997 and 30   April 1999. This amount was composed of SKK 5,238 payable for the fiscal year 1997 (i.e. SKK 873 per month as from July until December 1997), SKK 11,628 for 1998 (i.e. SKK 969 per month) and SKK 3,876 for 1999 (i.e. SKK 969 per month until April 1999). On 25   May 1999 the Trnava branch office of the Social Security Administration ordered the applicant to pay a   fine of SKK 2,065 for late payment of his contributions to the health insurance fund and the pension fund for the years 1995 and 1996. On the applicant's request, his trade licence was cancelled on 31   May 1999. The applicant has been unemployed since. On 3   June 1999 the applicant was informed by a   judicial enforcement officer that enforcement proceedings had been brought against   him in order to   obtain payment of the contributions due as well as the fines for late payment. According to the applicant, he was thus forced to contract debts in order to   pay the amounts due. On 16   November 1999, after having conducted an audit of the applicant's situation, the Trnava branch office of the Social Security Administration found that the applicant still owed a   total amount of SKK 138,221 in fines for late payments of his contributions to the social funds for the years 1993 - 1999. B.     Relevant domestic law Social Security Act no.   100/1988 Coll. (Zákon o sociálnom zabezpečení), as in force at the material time Under Section 4a § 1 (b) persons who hold a   trade licence for carrying out a   small trade ( živnosť ) are considered self ‑ employed persons. Section   6 §   1 (c) provided that self ‑ employed persons took part in and were entitled to   benefit from the pension schemes. These pension schemes comprise, inter alia , the old ‑ age pension, the (partial) invalidity pension, and the widow pension (Section   7). Sections   145a and the following govern the participation of self ‑ employed persons in the health insurance and the pension insurance schemes. Under Section   145b §   1 self ‑ employed persons are entitled to health insurance benefits such as sickness benefits ( nemocenské) , maternity benefits ( peňažná pomoc v materstve ), and spa treatment benefits ( kúpeľná starostlivosť ). According to Section   145ba §   1, the sickness benefits for self ‑ employed persons are paid on a   daily basis. Under Section   145ba §§ 2 and 3 the amount of such benefits is calculated as a   daily average of the “assessment basis” (see below). Social Security Administration Act (the 274/1994 Act) Under Section   14 §§ 1 (b) and 2 self ‑ employed persons are liable to   pay contributions to   the health insurance fund and the pension fund. According to Section   15 §   1 the level of these contributions are a   “percentage” of the “assessment basis” ( vymeriavací základ ), which is 50% of the average monthly taxable income earned by a   self-employed person during the previous fiscal year (Section   16 §   4 in conjunction with Section   17 §   2 of the Act). The “percentages” applicable to self ‑ employed persons varied in the course of the material period. Until 31   December 1995 it was 4.8 % for the health insurance fund and 27.5 % for the pension fund. Since 1   January until 31   December 1996 the applicable “percentages” were respectively 3.8 % and 28.5 %. Since 1   January 1997 these “percentage” changed again to 4.8   % and 27.5 %, respectively. However, regardless of income actually earned by a   self ‑ employed person during the previous fiscal year, Section   16 §   8 provides that his or her personal “assessment basis” cannot be   lower than the statutorily defined “minimal assessment basis” and cannot be   higher than the statutorily defined “maximal assessment basis”. The minimal basis is equal to the statutorily defined “minimum wage” (see below) and the maximal basis is this “minimum wage” multiplied by eight. The Statutory Regulation of the Minimum Wage Until 31   March 1996, the “minimum wage” was defined by the governmental Decree no.   53/1992 Coll. on Minimum Wage ( Nariadenie vlády o minimálnej mzde ), as amended. From 30   October 1993 until 31   March 1996 the “minimum wage” was fixed at SKK 2,450 per month. As from 1   April 1996 the “minimum wage” was regulated by the Act no.   90/1996 Coll. on the Minimum Wage ( Zákon o minimálnej mzde ), as amended. It was increased to SKK 2,700 per month. COMPLAINTS 1.     The applicant complained that the obligation to pay the social security contributions under the 274/1994 Act violated his rights under Article   1 of Protocol No.   1 in that the level of these contributions, given his low income, constituted an excessive individual burden. 2.     The applicant also complained under Article   14 of the Convention in conjunction with Article 1 of Protocol No. 1 that, having a   lower average monthly taxable income as a   self ‑ employed person in the previous fiscal year than twice the statutorily defined “minimum wage”, he had been discriminated against in relation to self ‑ employed persons earning a   taxable income equal to or higher than twice the statutorily defined “minimum wage”. He argued that, as his income was below the statutorily defined minimum level, the actual percentage of his income that he had to   pay to the insurance schemes was higher than the statutorily defined “percentage”. THE LAW 1.     The applicant complained that the obligation to   pay contributions to the social funds was contrary to Article 1 of Protocol No. 1 as it constituted an   excessive financial burden. Article   1 of Protocol No   1, in so far as relevant, provides: “Every natural ... person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law ... The preceding provisions shall not, however, in any way impair the right of a State to   enforce such laws as it deems necessary to ... secure the payment of taxes or other contributions or penalties.” The Government submitted that compulsory contributions to social insurance schemes necessarily constitute an   interference with the   peaceful enjoyment of possessions within the meaning of Article 1 of Protocol No. 1, but that they derive their right to   impose obligations to   contribute to   social insurance funds from the right to   enact laws to   secure the payment of taxes or other contributions or penalties licensed by the second paragraph of Article 1 of Protocol No. 1. As to the question of legality, the Government pointed out that the applicant's duty to   contribute to the social funds was based on the 274/1994 Act and they explained the manner of calculation of contributions, as applied in the applicant's case. As regards the necessity of this factual and legal arrangement, the Government submitted that compulsory contributions to   social schemes form an   integral part of financing a social security system designed to   fulfil the State's obligations in the social field and that States enjoy a   wide margin of appreciation in respect of shaping a social security system and its modalities. The Government further invoked their right to   determine and – in response to economic changes – to   modify the conditions for running businesses within their jurisdiction, including the obligation to   pay taxes and other contributions related to   operating businesses. According to the Government, a   State is under no obligation to   allow the carrying on of a   business activity by those who disrespect the applicable conditions and has the right to   deny the possibility to   run businesses to those who fail to   observe such conditions. As to the proportionality of the applicant's contribution duty, the Government pointed out that the amount of the applicant's contributions was determined on the “minimal assessment basis” although his declared income in the material time did not attain twice the “minimum wage” whereas the level of the social benefits to which the applicant was entitled at this time also corresponded to this “minimal assessment basis”, despite the fact that the applicant had not earned an amount equivalent to twice the “minimum wage”. The Government emphasised that the “minimal assessment basis” that had been applied in the applicant's case had never exceeded the statutory “minimum wage”. They further underlined that, at the relevant time, the “maximal assessment basis” was equally limited, namely to the “minimum wage” multiplied by eight. The Government further considered that the amounts declared by the applicant as his only income earned by his self ‑ employment activity at the material time constituted such a   low income that the applicant was to   be   considered as being “without means of subsistence” within the meaning of the Slovakian social system. They doubted whether a   self ‑ employment activity with such poor results could in fact be   considered a   business, it being statutorily defined as a   profit ‑ oriented activity. They maintained that, in the given circumstances, it was open to the applicant to cease such an   activity and to   apply for unemployment benefits and general welfare benefits which would be   likely to   exceed the amount of his declared income. The Government finally argued that the applicant had the possibility (i)   to   apply to the Social Security Administration for permission to   pay the contributions in instalments (Section   32 §   1 of the 274/1994 Act); (ii)   to   request the Social Security Administration to   reduce the penalty interest applicable for the late payment in his case from 0.2 % to 0.1 %; and (iii)   to   request the Social Security Administration to   waive this interest (Section   27 of the 274/1994 Act). The Government maintained that the applicant had failed to   make use of these possibilities in accordance with the applicable legal rules. The Government concluded that they were entitled under Article   1 of Protocol No. 1 to   oblige the applicant to   pay the contributions at issue and that this obligation did not impose an excessive individual burden on him. The applicant did not question the legal basis for his obligation to   contribute to the social funds as such. Nor did he challenge the legitimacy of the aim of the obligation to   contribute to these funds itself. Pointing out that his participation in the social security scheme was mandatory pursuant to the 274/1994 Act, he objected mainly to the determination of the “minimal assessment basis” for calculating the amount of the contributions for those self ‑ employed persons, including himself, whose actual income did not reach twice the “minimum wage”. He maintained that, by this legal mechanism, he was made to   pay the contributions from an   income that he did not actually earn. The applicant concluded that the amount of the contributions payable by him to the social funds in connection with his self ‑ employment activity was disproportionate, in particular having regard to the income he had actually earned by that activity. The Court finds that the obligation to pay contributions to the social schemes   under   the   274/1994   Act   amounts to   an   interference with the applicant's right to peaceful enjoyment of possessions and that, consequently, Article 1 of Protocol No.   1 is applicable in the present case. It must therefore be examined whether the interference was justified. The Court recalls that the second paragraph of Article 1 of Protocol No.   1 provides that States may levy taxes or other contributions. A   financial liability arising out of the raising of taxes or contributions may adversely affect the guarantee secured under Article 1 of Protocol No. 1 if it places an   excessive burden on the person or entity concerned or fundamentally interferes with his, her or its financial position. However, it is in the first place for the national authorities to decide what kind of taxes or contributions are to   be   collected. Furthermore, decisions in this area will commonly involve the appreciation of political, economic and social questions which the Convention leaves within the competence of the Contracting States. The margin of appreciation of the Contracting States is therefore a   wide one (see, mutatis mutandis , James and Others v. the United Kingdom , judgment of 21   January 1986, Series   A, no.   98, p.   32, §   46 and see Union Nationale (Tourism and Sea Resorts) Ltd and Others v. Cyprus (dec.), no. 39375/98, 4   May 2000) The Court notes that the applicant's obligation to   pay to the social schemes is stipulated by the 274/1994 Act and that the parties have not disputed the lawfulness of this obligation. The Court considers that this provides a   legal basis in domestic law, which was sufficiently clear to   enable the applicant to   foresee the obligation to   pay the applicable contributions if he engaged in a   self ‑ employed activity. The Court observes that the 274/1994 Act is designed to fulfil the State's functions in the social field and that the parties have not disputed the legitimacy of this aim. The Court thus accepts that the interference with the applicant's property rights pursued a   legitimate aim “in accordance with the general interest”. As regards the proportionality of the interference, the Court notes that, besides defining the manner of calculating ordinary contributions that a   self ‑ employed person is to pay to the health insurance fund and the pension fund, the 274/94 Act also specifies the minimum and the maximum amount of such contributions. In the applicant's case, the minimum amount of such contributions applied. It was calculated as a percentage of the “minimal assessment basis”, which has never exceeded the statutorily defined “minimum wage”. The “minimal assessment basis” forms the basis not only for calculating the minimum level of social security contributions for self-employed persons, but also for the calculation of the minimum level of social security benefits for self-employed persons. The Court further notes the amounts, which the applicant declared for the income tax purposes as his earnings in the relevant period, i.e.   SKK   9,550 for 1993, SKK   7,595 for 1994, SKK   11,050 for 1995, SKK   18,225 for 1996, SKK   2,850 for 1997, SKK   8,737 for 1998 and SKK   675 for 1999. In the period from 30   October 1993 until 31   March 1996, the statutory “minimum wage” was SKK   2,450 per month (i.e.   SKK   29,400 per year) and as from 1   April 1996 SKK   2,700 per month (i.e.   SKK   32,400 per year). In these circumstances, it could no longer reasonably have been in the applicant's business interest to   continue his self ‑ employment activity. Although the applicant could have applied for unemployment benefits and general welfare benefits, which could have possibly exceeded the amount of his declared income, he took voluntary decision to   continue his self ‑ employment. In view of the above, the Court cannot find that the amount of social security contribution the applicant had to   pay imposed such an   excessive individual burden on him that it should be   considered as being contrary to Article 1 of Protocol No. 1 (see also Baláž v.   Slovakia (dec.), no.   60243/00, 16   September 2003). It follows that this part of the application is manifestly ill-founded and must be   rejected in accordance with Article 35 §§ 3 and 4 of the Convention. 2.     Relying on Article   14 of the Convention in conjunction with Article   1 of Protocol No.   1, the applicant further complained that he had been discriminated against in that, given that his average monthly taxable income for the previous fiscal year had been lower than twice the “minimum wage”, he had in fact to   pay a   higher percentage of his actual income to the social schemes than self ‑ employed persons earning an   income equal to or higher than twice the “minimum wage”. Article 14 of the Convention reads: “The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.” The Government submitted in the first place that Article 14 of the Convention did not apply to the present case. Although there was a   difference in treatment between, on the one hand, self ‑ employed persons earning a   taxable income equal to or higher than twice the statutorily defined “minimum wage” and, on the other, self ‑ employed persons like the applicant who earn less, they argued, referring to their arguments submitted under Article 1 of Protocol No. 1, that this difference in treatment was not significant enough to   bring Article 14 of the Convention into play. In the alternative, the Government submitted that the applicant's treatment pursued a   legitimate aim, namely securing the financing and complex functioning of the social security system. They considered that the choice of system for calculating contributions to the   social funds fell well within their margin of appreciation and referred to their arguments submitted with respect to the complaint under Article   1 of Protocol No.   1. They concluded that there had been a   reasonable relationship of proportionality between the means employed and the aim sought to   be   realised and that, therefore, there was no appearance of a   violation of the applicant's rights under Article   14 of the Convention taken together with Article 1 of Protocol No. 1. The applicant did not question the legal basis under domestic law for the violation of his rights protected under Article   14 of the Convention that he alleged, but maintained that the use of the “minimal assessment basis” for self ‑ employed persons whose average monthly income tax basis in the previous fiscal year was lower than twice the statutorily defined “minimum wage” was arbitrary and discriminatory. In his opinion, such an   arrangement clearly constituted an unequal and unfair treatment of, on the one hand, self ‑ employed persons earning as much as or more than the defined minimum and, on the other hand, self ‑ employed persons earning less. However minor the difference in treatment between the two categories of self ‑ employed persons was, it fell foul of the principles in the 274/1994 Act and therefore could not have any acceptable justification. The Court recalls that, according to its established case-law, Article   14 of the Convention complements the other substantive provisions of the Convention and the Protocols. It has no independent existence since it has effect solely in relation to “the enjoyment of the rights and freedoms” safeguarded by those provisions (see, among other authorities, Gaygusuz v.   Austria , no. 17371/90, § 36, ECHR 1996-IV). The right under Article 14 not to be discriminated against in the enjoyment of the rights guaranteed under the Convention is violated when States treat differently persons in analogous situations without providing an   objective and reasonable justification or when States without an   objective and reasonable justification fail to treat differently persons whose situations are significantly different (see Thlimennos v. Greece [GC], no.   25735/94, §   44, ECHR 2000-IV). In the present case, the applicant was subject to a   special regime for calculating his contributions to the social schemes. This was so because the applicant earned less taxable income in the previous fiscal year than the statutorily defined minimum. However, the applicant has not shown that he was treated in a different manner from any other self ‑ employed person in the same situation as him, namely any person earning a   lower taxable income than the defined minimum. In the light of the above, the Court finds that the facts of the case do not disclose any appearance of a   violation of the applicant's rights protected under Article 14 of the Convention taken together with Article 1 of Protocol No. 1. It follows that this complaint is manifestly ill-founded and must be   rejected in accordance with Article 35 §§ 3 and 4 of the Convention. For these reasons, the Court unanimously Declares the application inadmissible.   Michael O'Boyle   Nicolas Bratza   Registrar   President