Individual Application

The Facts

The applicant, a company engaging in steel production, obtains coking coal and coke-oven gas by itself and uses them in the production process.

Due to the applicant’s consumption of electricity and coal gas, the Municipality requested it to pay electricity and coal gas consumption taxes in accordance with the Law no. 2464 on Municipal Revenues.

Upon the Municipality’s request in question, the applicant submitted declarations to the Municipality on various dates concerning the taxation of electricity and coke-oven gas consumption. The Municipality, in accordance with these declarations, calculated the taxes on electricity and coal gas pertaining to various periods. While some of these amounts were related to electricity consumption, the others were related to coke-oven gas consumption. The applicant paid these amounts to the Municipality on various dates.

The applicant brought actions before the tax court requesting the waiver of its electricity and coal gas consumption tax debts and the reimbursement of the taxes already paid.

The court rejected the cases concerning various periods when the taxes had accrued. Upon the applicant’s appeal, the Council of State upheld the first instance court’s decision. Besides, the applicant’s request for rectification of the decision was dismissed. The applicant subsequently lodged an individual application.

The Applicant’s Allegations

The applicant maintained that although the electricity and coke-oven gas it consumed was generated by itself, electricity and coal gas consumption taxes were collected from it, which was in breach of its right to property.

The Constitutional Court’s Assessment

There is no doubt that the applicant paying electricity and coal gas consumption taxes had an economic interest to be protected under Article 35 of the Constitution and that the impugned taxation process constituted an interference with the applicant’s right to property.

An interference with the right to property through taxation must, first of all, have a certain, accessible and foreseeable legal basis.

Pursuant to the Tax Procedure Law, for a tax to be levied, the amount over which the tax will be calculated must be specified in law and must be predictable. Thus, the taxpayer can predict the interference to be made with his right to property. Therefore, the amount (tax base) taken as a basis in order to calculate the tax is one of the main elements of the tax procedure that must be regulated by law.

Electric energy and coal gas sales price is determined as the tax base in Law no. 2464 and the rates to be applied over this base are set forth therein. According to the Law, there must be a sales price for the calculation of the tax payable. In the present case, as the applicant consumed the electricity and coke-oven gas generated by itself, there was no purchase-sale relationship or a sales price which enabled the calculation of the tax base.

It was stated in the judgment of the Council of State that the subject matter of the dispute was related to the matter as to how the tax base would be calculated for the company that consumed the electric energy generated by itself, and it was clearly acknowledged that there was no legal regulation on this matter.

In addition, in the present application, there is neither a supplier nor a distributor. Therefore, the applicant consuming the energy generated by itself cannot be regarded as a tax-payer. Although according to the Law, the tax collection method is based on the tax liability principle, it is unclear how the tax shall be collected in cases where there is no tax-payer. Such an uncertainty as regards the collection method may result in an administrative sanction against the tax-payer, if no declaration is submitted.

If a financial obligation, with all these aspects, is not sufficiently stipulated in the law, it may lead to administrative or judicial practices interfering with the right to property. In the present case, uncertainty as regards the tax base and the tax collection method, as well as, ongoing administrative practices and judicial interpretations on the matter deprive the applicant of the constitutional guarantees enjoyed by the tax-payers, which is in breach of the original purpose of the principle of the lawfulness of taxes.

It has been concluded that as the essential elements of the consumption taxes on the electricity and coal gas generated by the applicant were neither specified in the law nor were they predictable, the interference with the applicant’s right to property infringed the principle of legality enshrined in the Constitution.         

Consequently, the Constitutional Court found a violation of the applicant’s right to property safeguarded by Article 35 of the Constitution.