30. 11. 2023
When is a fine unconstitutional and when does the administrative authority (not) violate the procedural rights of the parties?
The Supreme Administrative Court recently dismissed the plaintiff's cassation complaint concerning a fine imposed on an individual for failure to report exempt income. The obligation of a personal income taxpayer to notify the tax authority of the receipt of income that is exempt from the said tax and that exceeds CZK 5,000,000 arises from the Income Tax Act (further details regarding this obligation can be found HERE).
With regard to the applicant's objection to the unconstitutionality of the fine imposed, the SAC referred to the principle of proportionality (reasonableness), stressing that the penalty for an administrative offence must not be of a liquidating nature (i.e. it must not disproportionately affect the individual's financial circumstances). The judgment also shows that the fine under review is not contrary to the constitutional order, since it is set as a percentage of the unreported income, thus taking into account the applicant's financial situation.
At the same time, the SAC considers it essential that the law gives room for an individual assessment of the personal and financial circumstances of the perpetrator of the administrative offence, thus avoiding the devastating effects of the fine. This is achieved through the total or partial remission of the fine, for a reason which can be justified in the circumstances of the case.
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Author: Anh Dao Vu, Eva Kahle
Author: Eva Kahle - Tax Manager
15. 11. 2023