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ECtHR / Application no. 49570/11 / Judgment

Gáll v Hungary
Deciding body type
European Court of Human Rights
Deciding body
European Court of Human Rights
Type
Decision
Decision date
25/06/2013

Carta dos Direitos Fundamentais da UE

Title IV: Solidarity

Article 34 - Social security and social assistance

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  • ECtHR / Application no. 49570/11 / Judgment
    Key facts of the case:
    1. The applicant was born in 1954 and lives in Szolnok.
    2. The applicant, a civil servant for more than thirty years, had been in the service of the Hungarian Tax Authority. On 31 March 2011 she was dismissed, with effect from 1 June 2011. Her dismissal was part of a wave of similar measures throughout the entire civil service.
    3. On dismissal, the applicant was statutorily entitled to two months’ salary for April and May 2011, during which time she was exempted from working. In addition, she was to receive severance pay amounting to twelve months’ salary in application of section 19(2) of Act no. XXIII of 1992 on the Status of Civil Servants (see paragraph 8 below).
    These benefits were subsequently taxed at 98% in their part exceeding 3,500,000 Hungarian forints (HUF)[1]. The exceeding part was HUF 3,903,529[2], the tax amounting to HUF 3,825,458[3]. This represented an overall tax burden of approximately 60% on the entirety of the severance, as opposed to the general personal income tax rate of 16% in the relevant period.
     
    The tax amount in question was never disbursed to the applicant, but was withheld by the employer and directly transferred to the tax authority on 8 June 2011.
     
    Results (sanctions) and key consequences of the case:
     
    The Court unanimously
    1. Declares the complaints under Article 1 of Protocol No. 1, read alone and in conjunction with Article 14 of the Convention, admissible and the remainder of the application inadmissible;
    2. Holds that there has been a violation of Article 1 of Protocol No. 1;
    3. Holds that there is no need to examine separately the complaint under Article 1 of Protocol No. 1 read in conjunction with Article 14 of the Convention;
    4. Holds
    (a)  that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:
     
    (i)  EUR 16,000 (sixteen thousand euros), plus any tax that may be chargeable, in respect of pecuniary and non-pecuniary damage;
     
    (ii)  EUR 900 (nine hundred euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;
     
    (b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
    1. Dismisses the remainder of the applicant’s claim for just satisfaction.
  • Paragraphs referring to EU Charter

     

    19. The Charter of Fundamental Rights of the European Union provides as follows:

    Article 34 - Social security and social assistance: “1. The Union recognises and respects the entitlement to social security benefits and social services providing protection in cases such as maternity, illness, industrial accidents, dependency or old age, and in the case of loss of employment, in accordance with the rules laid down by Community law and national laws and practices.”

    The European Court of Justice held in Case C-499/08 Andersen v Region Syddanmark, [2010] ECR I-09343 as follows: “29. The aim pursued by the severance allowance of protecting workers with many years of service in an undertaking and helping them to find new employment falls within the category of legitimate employment policy and labour market objectives provided for in Article 6(1) of Directive 2000/78.”

    European Commission Recommendation of 30 April 2009 on remuneration policies in the financial services sector (2009/384/EC) provides as follows:

    “1. Excessive risk-taking in the financial services industry and in particular in banks and investment firms has contributed to the failure of financial undertakings and to systemic problems in the Member States and globally....

    5. Creating appropriate incentives within the remuneration system itself should reduce the burden on risk management and increase the likelihood that these systems become effective. Therefore, there is a need to establish principles on sound remuneration policies.”

    In the case Michel Bourgès-Maunoury, Marie-Louise Heintz v Direction des services fiscaux d’Eure-et-Loir concerning the compatibility with European Union primary law of a national provision on the procedure for calculating a wealth tax, Advocate General Cruz Villalón reiterated that the principle that rules governing tax law and the exercise of fiscal power must not have confiscatory effects is a “well-known and widely-recognised idea” (Case C‑558/10, Michel Bourgès‑Maunoury, Marie-Louise Heintz v. Direction des services fiscaux d’Eure-et-Loir 12 Dec 2011, OJ C-46, 12, Opinion of AG Villalón).

    ...

    38. Furthermore, severance cannot be simply regarded as a pecuniary asset; given its social function, the entitlement to severance allowance must be rather seen as a socially important measure intended for workers who have been made redundant and who wish to remain in the labour market. The European Court of Justice considered this – although in a different context – to be an important policy goal in the European Union (see paragraph 19 above).

    ...

    69. As regards the personal burden which the applicant sustained on account of the impugned measure, the Court notes that she had to suffer a substantial deprivation of income in a period of considerable personal difficulty, namely that of unemployment. The Court would observe in this context that Article 34 of the Charter of Fundamental Rights of the European Union (see paragraph 19 above) endorses benefits providing protection in the case of loss of employment, and that according to the European Court of Justice, the aim pursued by severance – that is, helping dismissed employees find new employment – belongs within legitimate employment policy goals (see paragraph 19 above). For the Court, it is quite plausible that the element that she was subjected to the impugned measure while unemployed, together with the unexpected and swift nature of the change of the tax regime which made any preparation virtually impossible for those concerned, exposed the applicant to substantial personal hardships.