DECISION № 6 OF 27 APRIL 2010 ON CONSTITUTIONAL CASE No 16/2009
Revocation of the exemption from VAT for judicial representation services related to the exercise of the right to defense of natural persons in pretrial, trial, administrative and arbitration procedures does not constitute an infringement on the Constitution-granted right to defense as while it is conformant to the underlying principles of the state committed to the rule of law and to the Constitution principle of equality before the law, it complies with the commitments that the country has made as a European Union member.
The President approached the Constitutional Court with a challenge of the constitutionality of § 12 of the Act Amending the Value Added Tax Act (VAT Act) of 2009, the amendment being a revocation of Art. 44, para 1, item 5 of the VAT Act whereon the VAT will be levied on deliveries of judicial representation services related to the exercise of the right to defense of natural persons in pretrial, trial, administrative and arbitration procedures.
The challenge insists that the revocation infringes on the right to defense as per Art. 56 in relation to Art. 30, para 4 and Art. 122, para 1 of the Constitution. Doubt was expressed that the text in question was in conflict with Art. 60, para 1 of the Constitution reading that citizens shall pay taxes and duties established by law proportionately to their income and property. Further, the challenge insists that the revocation infringes on the equality of citizens before the law that Art. 6, para 2 of the Constitution proclaims.
I. On the claim of the noncompliance with Art. 56 of the Constitution
Cases in precedent of the Constitutional Court and jurisprudence study the legal nature of the right to defense that the Constitution proclaims. It is a fundamental and universal judicial right whose specifics is manifested as a guarantee for other fundamental rights that the Constitution proclaims and that are codified and treated in specific terms in laws and bylaws. The right to defense cannot exist in law unless political, economic and legal guarantees coexist. Otherwise the right to defense will be just declarative. With Art. 30, para 4 reading that everyone shall be entitled to legal counsel from the moment of detention or from the moment of being charged and with Art. 122, para 1 reading that citizens shall have the right to legal defense at all stages of a trial, the fathers of the Constitution have imparted to the right to defense maximum judicial strength of exercise. The passage of judicial legislation, the Attorney Act, the Legal Assistance Act and many pieces of legislation outlined a broad range of legal guarantees that the right to defense will be exercised. Given these guarantees the challenged amendments will not affect this right.
The passage of an act amending the VAT Act and revoking its Art. 44, para 1, item 5 is a National Assembly's competence under Art. 84, item 3 of the Constitution. Art. 60, para 2 of the Constitution reads thus: “Any tax concession or surtax shall be established by law” The establishment comprises the drafting of legislation as a first step and the amendment or revocation of that legislation in consequence as needed. Therefore the revocation of Art. 44, para 1, item 5 of the VAT Act is a competence of the National Assembly and reflects political and economic appropriateness. That appropriateness shall not be discussed in a Constitutional Court decision. The Court can just judge whether the removal of the tax concession for judicial representation infringes on the fundamentals of the state committed to the rule of law.
The Court disagreed with the assertion that when a codified guarantee for a fundamental right is withdrawn, the withdrawal affects the very right as this might occur only if the legal guarantee's impact is capable of affecting the fundamental right to an extent to make it declarative. The lawmaker has provided plenty of legal guarantees: legal assistance, free judicial representation, rights and obligations in proceedings, possibilities for out of court or amicable settlement, etc. The abolition of Art. 44, para 1, item 5 of the VAT Act found compensatory legal tools that along with the other types of guarantees will make the exercise of the right to defense real regardless of the property status of the right to defense holder. Hence the unsoundness of the assertion that the right to defense is curtailed to an extent the Constitution will not tolerate and that this curtailment violates the underlying principles of the state committed to the rule of law.
Art. 371 of Council Directive 2006/112/ЕС allows the Member States which, at 1 January 1978, exempted the transactions, to continue to exempt those transactions, including the supply of services by members of the liberal professions. Arts. 375-390 of the Directive allow definitive derogations for States which acceded to the Community after 1 January 1978 so they may continue to exempt transactions, inter alia, the supply of services by members of the liberal professions. The introduction of special measures will be until the adoption of general rules, that is, the two types of derogations are put on a temporary basis. When Bulgaria signed the Treaty concerning the Accession to the European Union she did not submit a request for derogation for exemption from VAT for judicial representation. Neither did Bulgaria submit a request for such derogation at a later stage in pursuance to Art. 395 of the Directive. Therefore it is useless to debate whether Bulgaria may cite the fact that judicial representation had been exempted from VAT prior to the very date of its accession to the EU. What is essential is that the absence of derogation makes it binding upon Bulgaria to apply VAT to judicial representation in pretrial, trial, administrative and arbitration procedures.
Premising on its key reason that § 12 of the Act Amending the VAT Act was approved in a Constitution-conformant procedure and that it reflects political and economic appropriate concerns and does not affect the right to defense beyond the limit that the Constitution admits and that is determined by the underlying principles of the state committed to the rule of law, the Constitutional Court agreed that § 12 of the Act Amending the VAT Act was not at variance with Art. 56 of the Constitution.
II. On the claim of noncompliance with Art. 30, para 4 and Art. 122, para 1 of the Constitution
Art. 30, para 4 of the Constitution reading that ,, everyone shall be entitled to legal counsel from the moment of detention or from the moment of being charged” and Art. 122, para 1 of the Constitution reading that ,, citizens and legal entities shall have the right to legal counsel at all stages of a trial” are concrete manifestations of the right to defense under Art. 56, sentence one of the Constitution. The assertion that § 12 of the Act Amending the VAT Act disagrees with Art. 30, para 4 and Art. 122, para 1 of the Constitution is based on their bearing to Art. 56 of the Constitution. If the judicial representation is not dissonant with the fundamental and universal right to defense, the Court resorted to the same rationale to judge that the legal texts that treat the concrete materialization of the said right were not unconstitutional either.
III. On the claim of noncompliance with Art. 60, para 1 of the Constitution
Art. 60, para 1 of the Constitution reads thus: ,, Citizens shall pay taxes and duties established by law proportionately to their income and property.” The challenge is based on the understanding that Art. 60, para 1 of the Constitution pertains to direct and indirect taxes. Premising on the legal nature of the VAT as an indirect tax the Court presumed that the VAT has no direct bearing to the citizens' income and property. As it is the consumers who bear the economic burden that the VAT is by the increase of the price of goods or services, it is impossible to introduce an indicator in terms of income and property. Therefore the phrase ,, proportionately to their income and property” in Art. 60, para 1 of the Constitution is inapplicable. Within the scope of its legislating authority the National Assembly weighs the indirect tax burden and codifies political and economic features as appropriate.
Given these statements the Constitutional Court pronounced § 12 of the Act Amending the VAT Act to be consistent with Art. 60, para 1 of the Constitution.
IV. On the claim of noncompliance with Art. 6, para 2 of the Constitution
The fathers of the Constitution introduced in its Art. 6, para 2 the fundamental principle of our legal system – the principle of the equality of citizens before the law in addition to the ban on discrimination for reasons that are listed, property status being among these. It is this discrimination characteristic that plays in the challenge of the constitutionality of judicial representation, vis-à-vis Art. 6, para 2 of the Constitution.
The principle of equality stands for equality before the law. That the law provides for differentiation with regard to one and the same right or obligation is not tantamount to a violation of the Constitution principle. Differentiation is based on a certain criterion which is met by all entities in the respective group. That differentiation accounts for the strict and fair enforcement of equality to a greater extent and codifies it. The recognition of objective and subjective differences that call for singular legal arrangements if equality before the law is to be achieved needs differentiation. The issue of the choice of criterion in the differentiation of the groups of players is an issue of social, economic and political appropriateness and the criterion must be codified or deduced from the relevant legal arrangements. The obligation to register under the VAT Act is based on an economic criterion that is codified and that does not infringe on the equality before the law. For that reason the Constitutional Court did not find § 12 of the Act Amending the VAT Act to be inconsistent with Art. 6, para 2 of the Constitution.
Председател: Евгени Танчев