CYIL vol. 10 (2019)

KATEŘINA ŠIMÁČKOVÁ CYIL 10 ȍ2019Ȏ the period for which they are in gainful employment. The consequence of the mentioned legal regulation is a significant difference in the status of the two groups of taxpayers, because those to which the tax relief applies will have tax on the taxable income lower by CZK 24,840 per year regardless of the received old-age pension. In the case of income from employment, this means that with respect to the tax rate their annual income corresponding to the gross wage in the amount of CZK 123,582, or the so-called super-gross wage in the amount of CZK 165,600 47 , certainly not an insignificant amount, is not taxed. The criterion on which this classification is based is purely formal and the law also creates procedural ways in which individuals can continue to maintain both advantages. In case of those who still do not receive an old-age pension, it is a postponement of the beginning of receiving it so that it occurred after 1 January of the respective tax period. Such persons, however, retain the right to apply retrospectively for the payment of a pension without the subsequent application of that claim having any effect on applying for tax relief. In the case of those who already receive it, the payments are suspended for a period including the specified date. These facts clearly do not allow naming any legitimate reason for that one of the defined groups of taxpayers receiving an old-age pension should have a significant tax advantage in the respective tax, while the other one should have such advantage. On the other hand, classification under the two groups has an arbitrary nature. For this reason, according to the Constitutional Court, its inconsistency with the constitutionally guaranteed principle of equality can be noted. Further, the Constitutional Court concludes that the reasoning according to which the purpose of tax relief can be fulfilled also through an old-age pension has a legitimate basis. The oldest function of the pension system is a protective function, providing people with material security in the event of old age, when they can no longer provide their own resources for their livelihoods. This is in a way, a function similar to that fulfilled (though not necessarily exclusively) by tax relief for all taxpayers by eliminating the taxation of a certain minimum amount serving to provide the necessities of life, for which the effect of the taxation would be unreasonably burdensome in the opinion of the legislature. Therefore, if the contested statutory provision pursues the limiting of tax benefit when its purpose is already secured by an old-age pension, that purpose can generally be considered a legitimate interest which can justify the arising inequality. In order for this measure to succeed, it would have to be proportionate at the same time, which is a conclusion which cannot be agreed with. The reason is very crucial (extreme) differences in the amount of allocated old-age pension, which in case of lower ones prevents the payment of them from fulfilling the above-mentioned purpose in a way comparable to the tax relief for a taxpayer in the amount of CZK 24,840 per year. Therefore, this provision has been found to be inconsistent even with the constitutionally guaranteed right to the equal protection of property and the principle of equality in taxation. 48 Four dissenting judges 49 pointed out that the contested legal regulation was one of the measures aimed at increasing the state budget revenues and streamlining public budgets expenses, or reducing the deficits of the public budgets, and that the contested provisions cannot be considered in isolation, but as part of the whole set of measures which was supposed to help in fulfilling the mentioned purpose. The very different amount of old-age pensions is not a consequence of the contested regulation but of the overall pension policy.

47 Section 6 (12) of the Income Tax Act. 48 Thus, Article 11 (1) and (5) of the Charter of Fundamental Rights and Freedoms. 49 Vlasta Formánková, Ivana Janů, Vladimír Kůrka, and Vladimír Sládeček.

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