U.no.160/2006

On the basis of Articles 110 and 112 of the Constitution of the Republic of Macedonia and Article 70 of the Book of Procedures of the Constitutional Court of the Republic of Macedonia (»Official Gazette of the Republic of Macedonia«, no.70/1992), at its session held on 10 January 2007, the Constitutional Court of the Republic of Macedonia made the following

DECISION

1. Article 36-a paragraph 1 in the part: »and the appraised market value of the property« of the Law on Preventing Corruption (»Official Gazette of the Republic of Macedonia«, nos.28/2002 and 46/2004) IS REPEALED.

2. This Decision generates legal effects from the date of its publication in the »Official Gazette of the Republic of Macedonia«.

3. The Constitutional Court of the Republic of Macedonia with its Resolution U.no.160/2006 of 8 November 2006, upon the initiative submitted by Besnik Selmani from Skopje, instigated proceedings for the appraisal of the constitutionality of Article 36-a paragraph 1 in the part: “and the appraised market value of the property” of the Law noted in item 1 of this Decision, since there was a well-founded question as to its concordance with the Constitution.

4. At its session the Court found that under Article 36-a paragraph 1 of the Law, if in the procedure for examination of the property and property status it is not proved that the property has been acquired, that is, increased as the result of regular incomes which have been reported and taxed, the Bureau shall adopt a resolution for taxation taking as the base for taxation the difference between the established regular, reported and taxed incomes of the person and the members of his family and the appraised market value of the property. The thus established base is taxed with a rate of 70% from the difference between the taxed and reported incomes that is the market value of the property.

5. Under Article 8 paragraph 1 line 3 of the Constitution of the Republic of Macedonia, a fundamental value of the constitutional order of the Republic of Macedonia is the rule of law.

Under Article 9 of the Constitution, citizens of the Republic of Macedonia are equal in their freedoms and rights irrespective of their sex, race, colour of skin, national and social origin, political and religious beliefs, property and social status. All citizens are equal before the Constitution and laws.

Pursuant to Article 33 of the Constitution, everyone is obliged to pay tax and other public contributions, as well as to a share in the discharge of public expenditure in a manner defined by law.

Under Article 68 of the Constitution of the Republic of Macedonia, one of the most important competences of the Assembly is the adoption of laws in all spheres of social life and regulation of these relations.

Starting from the such defined competence of the Assembly as a legislative body, and in the direction of realising the fundamental values of the constitutional order among which is the rule of law and respect for the basic principles such as the principle of equality, which values and principles may be questioned with the emergence of corruption as a social evil, the Law on Preventing Corruption has been adopted.

The Law on Preventing Corruption regulates the measures and activities for the prevention of corruption in the performance of the power, public mandates, official duty and policy, measures and activities for the prevention of conflict of interests, measures and activities for the prevention of corruption while performing tasks of public interest of legal entities related to the realisation of public mandates, as well as the measures and activities for the prevention of corruption in trade companies (Article 1 paragraph 1).

Under paragraph 2 Article 1 of the Law, a State Commission for the Prevention of Corruption is set up for the application of the measures and activities of paragraph 1 of this article.

In line with Article 1-a of the Law, corruption, in the sense of this Law, implies the use of the office, public mandate, official duty and position for the realisation of any advantage for oneself or for another person.

Under Article 2 paragraph 1 of the Law, everyone is obliged, in the performance of his/her office, public mandates, official duty and position, to act in line with the Constitution and laws.

Article 2 of this Law defines that no one may misuse his/her office, public mandate, official duty and position to perform or to fail to perform actions which under the law he/she may not, that is, must perform, nor to subordinate the carrying out of a legal action to his/her personal interest, or to somebody else’s interest.

Under paragraph 3 of this article of the Law, no one may be held accountable for corruption except in the cases and conditions defined by this Law, by the Criminal Code and another law, and in a procedure stipulated by law.

Article 7 defines the meaning of the terms used in this Law.

Thus, under paragraph 1 of this article in the Law, the provisions for the meaning of the terms from the Criminal Code shall apply to establish the meaning of the terms elected or appointed civil servant, as well as other official, juridical person, responsible person in a juridical person, and person performing tasks of public interest.

Under paragraph 2 Article 7 in the Law, the term advantage implies any sort of benefit, privilege or advantage, for oneself or for somebody else.

Under paragraph 3 Article 7 in the Law, family means the spouse, the children, the parents, brothers and sisters, the foster-parent or the foster-child with whom the person of Paragraph 1 of this Article lives in a family.

Under Article 34 paragraph 1 of the Law, elected or appointed public official, an official or responsible person in a public enterprise or another legal person managing a state capital is obliged to report any increase in his/her property, that is, the property of a member of his family, such as the building of a house or other facilities, purchase of immovable properties, securities, automobile or other movable objects in a value that exceeds the amount of twenty average salaries realised in the preceding three-month period.

Paragraph 2 of this Article of the Law defines that a contract or another document that is the basis for the management with the property, as well as a document about the manner of realised payment are enclosed with the report that is submitted to the State Commission and the Public Revenues Bureau.

Pursuant to Article 35 of the Law, the questionnaire, the statements and the report referred to in Articles 33 and 34 are considered to be official documents and are kept as an official secret, unless otherwise decided by the State Commission.

Under the contested Article 36-a paragraph 1 of the Law, if in the procedure for investigation of the property and property status it is not proved that the property has been acquired, that is, increased as the result of regular incomes, which have been reported and taxed, the Bureau shall adopt a resolution for taxation taking as a base for taxation the difference between the established regular, reported and taxed incomes of the person and the members of his/her family and the evaluated market value of the property. Thus, the established base is taxed with a rate of 70% from the difference between the taxed and reported incomes, that is, the market value of the property.

Paragraph 2 of this article of the Law defines that in case it is established that the property has been increased disproportionately, the Public Revenues Bureau shall file criminal charges against the person with the competent public prosecutor’s office, and under paragraph 3 of this article, the Public Revenues Bureau informs the State Commission of the undertaken actions of paragraphs 1 and 2 of this article.

The noted law creates conditions for exclusion or limitation of the possibility for misuse of official position of the persons for personal goals, that is, the social status that certain person has at a certain period not to pose a basis that will enable him/her to enjoy various favours for himself/herself or for somebody else.

More specifically, the noted law basically defines measures and activities with which the use of the office, that is, the performance of the power and the entrusted public mandates should be prevented. For the realisation of these objectives Articles 33 and 34 envisage an obligation for an elected or appointed functionary, official and responsible persons to report his/her property status as well as an obligation for these persons to report changes in their property status in the course of their term of office and of their families.

The reporting of the property status is made within 30 days from the date of the election, and the appointment, that is, following the termination of the office by filling in the questionnaires that are submitted to the State Commission for Preventing Corruption and to the Public Revenues Bureau.

In case during the public office there has been an increase in his/her property or the property of the members of his/her family with whom he/she lives in a family, the elected or appointed functionary, that is, the persons defined by law are obliged to report the changes.

From the noted legal provisions it arises that one of the basic obligations of an elected or appointed functionary, official or responsible person managing state capital is the obligation to report his/her property and the property of the members of his/her family with whom he/she lives in a family, with a view to establishing the property status of these persons on the date they took on the duty and enables its following until the moment of the termination of the duty.

On the basis of the thus established situation, that is, review of the property status, further relevant knowledge may be extracted in view of whether during the performance of the duty the property of certain person has been disproportionately increased.

In case the elected or appointed functionary and other persons specifically defined in the Law fail to act in line with the law, that is, fail to observe the specifically defined legal obligations, the Public Revenues Bureau may initiate a procedure for examination of the property status of these persons with a view to establishing whether there are grounds to adopt a resolution for taxation of the property that has not been reported or has been disproportionately increased in view of the regular incomes in the form of salaries, dividends and other revenues.

In case the Public Revenues Bureau establishes that the property has been increased disproportionately, it files criminal charges with the competent prosecutor’s office and informs the State Commission for the Prevention of Corruption thereof.

The manner of taxation of the income from the citizens is regulated by the Law on Personal Income Tax (“Official Gazette of the Republic of Macedonia”, nos. 80/1993, 3/1994, 70/1994, 44/2002, 96/2004 and 120/2005).

Article 3 of this Law defines that the income that is subject to taxation is consisted of the following types of income realised in the country and abroad: 1) personal incomes; 2) incomes from agricultural activity; 3) incomes from an independent activity; 4) incomes from property and property rights; 5) incomes from copyright and rights to industrial property; 6) incomes from capital; 7) capital gains; 8) gains from lottery games and other prize games; 9) other incomes.

Paragraph 2 of this article of the Law defines that all incomes of paragraph 1 of this article that are realised in money, securities, in kind or some other type are subject to taxation.

From the essence of the noted provisions of the Law it arises that if the body for public revenues (the Public Revenues Bureau) in the procedure for examination of the property finds that a person manages property or means bigger than the taxed ones, or that they derive from an income to which no tax has been determined or has not been sufficiently determined, in such a case it adopts a resolution for determination of a tax taking as a base the difference between the value of the property and the proved amount of the funds for its acquisition.

Starting from the essence of Article 94-d of the Law on Personal Income Tax, at the same time comparing the contested provision of a part of Article 36-a of the Law on Preventing Corruption, it derives that the Law on Personal Income Tax takes as the base for the calculation of the tax the difference between the value of the property and the proved amount of funds for its acquisition, while the contested provision of the Law on Preventing Corruption takes as the base for taxation the difference between the established regular reported and taxed incomes of the person and the members of his/her family and the evaluated market value of the property.

From the stated it arises that the resolutions regarding the taxation of the unreported or disproportionately increased property envisaged in the Law on Preventing Corruption have as their base the Law on Personal Income with the exception of the provisions of Article 94-d of the Law on Personal Income Tax and the contested Article 36-a of the Law on Preventing Corruption.

Analysing the challenged part of Article 36-a in the Law, the Court found that this legal provision in the challenged part “and the evaluated market value of the property” creates uncertainty with the citizens which is in contradiction with the principle of the rule of law, as well as the principle of equality of citizens.

Hence, it derives that the value of the property is not established according to the value in the time it was acquired, but according to the value of the property at the moment of examining the property status of the persons of Article 34 of the Law and under the rules of market value, namely the evaluation depends on the time when the property status of the persons of Article 34 of the Law is examined.

Starting from the noted, certain property will have a different value depending on the time of determination of the value of its acquisition, that is, the value of the property from the time of acquisition shall be different from the market value in the moment of evaluating that property.

When it comes to a case that is noted in the initiative for the building of a facility in different parts of the city, pursuant to the contested provision of the Law its value would be different which will depend on the part of the city in which that facility is located and its value will be determined according to the market rules, and not according to, for instance, the building, that is, real value of the facility at the time of its creation.

Given the noted, the Court found that the formulation of the contested provision in the part: “and the evaluated market value” is not in accordance with the principle of legal safety of citizens, since it brings the citizens in mutual inequality, that is, inequality of the persons noted in Article 34 of the Law, which are brought in a situation to pay tax, in the sense of the contested Article 36-a of the Law, which makes the part of the challenged provision in disagreement with the principle of the rule of law as defined in Article 8 paragraph 1 line 3 as the fundamental value of the constitutional order of the Republic of Macedonia and Article 9 of the Constitution.

6. On the basis of what has been stated, the Court decided as in item 1 of the present Decision.

7. The Court passed the present decision with the majority of the votes in the following composition: the President of the Court Mr Mahmut Jusufi, and the judges: Dr Trendafil Ivanovski, Mrs Vera Markova, Mr Branko Naumoski, Dr Bajram Polozani, Mr Igor Spirovski, and Dr Zoran Sulejmanov.