Lietuviškai
THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF LITHUANIA
R U L I N G
On the compliance of Item 2 of Part 1 and Part 2
of Article 13 of the Republic of Lithuania Law on
Excises with the Constitution of the Republic of
Lithuania
Vilnius, 9 October 1998
The Constitutional Court of the Republic of Lithuania,
composed of the Judges of the Constitutional Court Egidijus
Jarašiūnas, Kęstutis Lapinskas, Zigmas Levickis, Augustinas
Normantas, Vladas Pavilonis, Jonas Prapiestis, Pranas Vytautas
Rasimavičius, Teodora Staugaitienė, and Juozas Žilys,
with the secretary of the hearing-Daiva Pitrėnaitė,
in the presence of:
the representative of the petitioner-a group of members of
the Seimas of the Republic of Lithuania-Kęstutis Trapikas, a
Seimas member, and Raimondas Šukys, a lawyer authorised by the
latter,
pursuant to Part 1 of Article 102 of the Constitution of
the Republic of Lithuania and Part 1 of Article 1 of the
Republic of Lithuania Law on the Constitutional Court, on 24
September 1998 in its public hearing conducted the
investigation of Case No. 4/98 subsequent to the petition
submitted to the Court by the petitioner-a group of Seimas
members-requesting to investigate if Item 2 of Part 1 and Part
2 of Article 13 of the Republic of Lithuania Law on Excises
were in conformity with Item 15 of Article 67 and Part 3 of
Article 127 of the Constitution of the Republic of Lithuania.
The Constitutional Court
has established:
I
On 9 December 1997, the Seimas passed the Republic of
Lithuania Law "On Amending the Law on Excises". By Article 1 of
the said law the Law on Excises was amended and a new wording
of the law was set forth.
Article 13 of the Law on Excises which is entitled
Concluding Provisions was set forth as follows:
"1. The Government shall establish:
(1) the procedure for calculation and payment of excise
taxes;
(2) the list of taxable goods according to the established
description and coding system of goods, and the excise rates;
(3) the procedure for the attribution of cars to the
category of luxurious cars.
2. The Government, on the basis of Article 3 hereof shall,
by 1 January 1999, establish the list of goods subject to
excise taxes and rates thereof. The list of goods subject to
particular excise taxes beginning from 1999 and rates thereof
shall be approved by the Seimas."
The petitioner-a group of Seimas members-requests in his
petition to investigate whether Item 2 of Part 1 and Part 2 of
Article 13 of the Republic of Lithuania Law on Excises are in
conformity with the provisions Item 15 of Article 67 and Part 3
of Article 127 of the Constitution.
The request is grounded on the fact that under the said
provisions of the Constitution, the right to establish the
rates of excise tax is attributed to the Seimas and to do so is
permitted only by law. Meanwhile, Part 2 of Article 13 of the
disputed law prescribes that until 1 January 1999 the goods
subject to excise taxes and their rates shall be established by
the Government. Thus, in violation of the Constitution, the
right to establish the rates of excise taxes has been delegated
to the Government.
II
The representative of the petitioner K. Trapikas presented
the following additional motives and explanations in writing.
Part 2 of Article 5 of the Law on Excises provides that
the excise tax is an element of the price of goods and thus it
is not stated in the invoices and payment documents. The law
does not give a broader concept of the excise tax, nor does it
elucidate the essence of this tax.
Item 2 of Part 1 of Article 2 of the Republic of Lithuania
Law on Tax Administration indicates that the excise tax is a
type of tax. In this article the concept taxes covers both
taxes and dues.
Excise taxes are one of the main revenue sources for the
accomplishment of State (local government) functions.
Under Article 3 of the Law on Excise Taxes, the object of
excise tax are the groups of goods made in Lithuania as well as
import goods which are listed therein.
The list of the groups of goods has caused a situation
that the portion of excise tax in the national budget has been
increasing constantly, and from 1994, i.e. from the adoption of
the Law on Excise Taxes when this portion constituted 7 per
cent of the national budget increased up to 14.1 per cent by
1997, while the 1998 Law on the Budget which was passed by the
Seimas provides that excise taxes will contribute 18.3 per cent
of the revenues of the national budget. One predicts to collect
24.4 per cent, i.e. a quarter of all state budget revenues,
from excise taxes in 1998.
Item 14 of Article 67 of the Constitution provides: "The
Seimas shall approve the State budget and supervise the
implementation thereof." Part 1 of Article 131 of the
Constitution prescribes: "The draft budget of the State shall
be considered by the Seimas, and shall be approved by law by
the beginning of the new budget year."
Part 2 of Article 127 of the Constitution provides: "State
budget revenues shall be accrued from taxes, compulsory
payments, dues, receipts from State property, and other
income." Under the law on the budget, the revenues and
expenditure are approved by the Seimas in a monetary as well as
percentage expression. Part 3 of Article 127 of the
Constitution points out the form a legal act whereby taxes,
other budgetary payments and dues are to be established:
"Taxes, other budgetary payments, and dues shall be established
by the laws of the Republic of Lithuania." The Government,
taking account of the laws, budgetary payments, dues, and their
size as established by the law, as well as taking into
consideration the results of previous year and the economic
predictions, prepares and submits the draft budget to the
Seimas for its deliberation and approval.
The establishment of taxes, other compulsory budgetary
payments or dues and their size, i.e. rates, in other form than
that of law, as well as delegation of the right to establish
taxes and their rates to the Government, contradicts the
provisions of Part 3 of Article 127 and Item 15 of Article 64
of the Constitution. The Constitution does not provide that the
Seimas is entitled to delegate the powers attributed to it to
other institutions of power and administration. This is
prescribed by Part 1 of Article 5 of the Constitution: "In
Lithuania, the powers of the State shall be exercised by the
Seimas, the President of the Republic and the Government, and
the Judiciary" and by Part 2 thereof: "The scope of powers
shall be defined by the Constitution." After the powers of the
Seimas which are established by the Constitution have been
delegated to the Government, the principles of the balance
(distribution) of competence of the legislative and executive
powers are violated, and, in general, designation, separation
and restriction of the competence of the Seimas and the
Government as established by the Constitution become
meaningless.
In case the Government is granted the right to establish
the size of the rates of excise tax, then, at its discretion,
without making amendments in the law on the budget, it can
unlawfully change, i.e., in case of need, increase the portion
of revenues from excise taxes in the State budget. One has
virtually established an opportunity for the Government to
evade, at its discretion, the norms of the law in case of need:
what, under the Constitution, must be established by laws only,
it becomes possible to establish by governmental acts. This
allows to mitigate the effects and to conceal the causes of the
failure to collect other taxes into the budget. The Government
may evade the control of the maintenance of the budget which is
accomplished by the Seimas, and remain not responsible
politically for not implementing the law on the budget. In case
there are more revenues in the budget, there appears an
opportunity for the Government to dispose of the collected
means outside the procedure which is established by the law on
the budget. The fact that the Government actively uses the
opportunity to increase the rates of excise taxes is proved by
a number of governmental resolutions whereby the rates of
excise taxes have systematically been increased.
The representative of the petitioner maintains that
approval of goods subject to particular excise taxes and rates
thereof is the competence of the Seimas. This is recognised by
the Seimas itself which delegates this right to the Government
only until 1 January 1999.
The representative of the petitioner, controverting the
motives set down in the papers of the minister of finance and
the representative of the party concerned, points out that the
conclusion of the Constitutional Court on the right of the
Government to establish the rates of taxes concerns dues but
not taxes. The notion laws which is used in Article 127 of the
Constitution may not be explained by expanding it, as Item 2 of
Article 67 of the Constitution establishes that the Seimas
shall enact laws. Neither the President of the Republic nor the
Government is entitled to enact them.
III
The representative of the party concerned Leonora Žukienė
presented the following arguments in writing.
In pursuance of Item 15 of Article 67 of the Constitution,
the Seimas establishes State taxes and other obligatory
payments. The Seimas confirmed excise taxes by the law of 12
April 1994 wherein the object of excise taxes, the taxable
value, as well as other provisions related to the application
thereof (the payment procedure, recovery, repayment, sanctions
for not paying of excise taxes etc.), were prescribed. In the
law the Seimas established the main provisions for application
of excise taxes.
Article 127 of the Constitution indicates that taxes,
other budgetary payments, and dues shall be established by the
laws of the Republic of Lithuania. In this case the notion laws
means not only a legal act passed by the Seimas. One has to
comprehend it in a much wider sense.
The legal doctrine recognises that there exist several
methods and rules of interpretation of law. One of them is the
linguistic method, i.e. that of the science of language. This
method is most widely applied. When one applies the linguistic
method, in certain cases the notion laws may be understood as
only a legal act passed by the Seimas, while in other cases it
is used in a more abstract sense and means not only a legal act
passed by the Seimas but also another legal act, for instance,
a governmental resolution. Thus, governmental resolutions may
also establish certain rules, for example:
(1) by the law of 23 June 1994 the Seimas approved the
Republic of Lithuania Law on Stamp Tax. Article 9 thereof
indicated that the Government shall, by 1 November 1994,
establish the rates of stamp tax as well as the procedure for
payment and repayment thereof;
(2) the Seimas established by Article 4 of the Republic of
Lithuania Law on the Road Fund of 18 November 1997 that "the
Government of the Republic of Lithuania shall establish the
procedure for payment of the tax and control thereof, as well
as the rates without violating the marginal rates provided for
in Annex 2 of this Law".
The representative of the party concerned emphasised that
the Parliament delegates certain rights not only to the
Government but also to the local governments. For instance,
Article 29 of the Republic of Lithuania Provisional Law on
Income Tax of Natural Persons provides that "the Councils of
local governments shall have the right either to reduce the
income tax or to exempt from income tax certain private
(personal) enterprises as well as partnerships by compensating
the amount from the local budget".
By the Law "On Amending the Law on Excise Taxes" which has
been appealed against at the Constitutional Court, the Seimas
also obligated the Government to establish the list of goods
subject to excise taxes and rates thereof by 1 January 1999.
On the grounds of these examples, the representative of
the party concerned concluded that, by passing laws, in certain
cases the Seimas delegates certain rights to the Government or
the local governments.
Item 2 of Article 94 of the Constitution stipulates that
"the Government of the Republic of Lithuania shall implement
laws and resolutions of the Seimas concerning the
implementation of laws, as well as the decrees of the President
of the Republic". A conclusion is to be drawn from this that
the Government, in implementing the rights delegated to it by
the Seimas, accomplishes the provisions of the Constitution.
Taking account of the motives set forth, the
representative of the party concerned contends in her paper
that the provisions of Item 2 of Part 1 and Part 2 of Article
13 of the Republic of Lithuania Law on Excises are in
compliance with those of Item 15 of Article 67 and Part 3 of
Article 127 of the Constitution of the Republic of Lithuania.
IV
The minister of finance Algirdas Šemeta explained the
following in writing.
The excise tax has been established as a tax by the Law on
Excise Taxes. The Government, by establishing the list of goods
subject to excise taxes and rates thereof, did not take over
the functions of the Seimas as it was the Seimas and not the
Government that levied excise taxes, after it had passed the
Law on Excise Taxes. Article 3 thereof determines the object of
the tax, i.e. it indicates the goods which are subject to the
excise tax; Part 2 of Article 13 provides that the Government,
on the basis of Article 3 of the said law shall, by 1 January
1999, establish the list of goods subject to excise taxes and
rates thereof. The list of goods subject to particular excise
taxes beginning from 1999 and rates thereof shall be approved
by the Seimas. The disputed provision is in compliance with
Part 3 of Article 127 of the Constitution.
Under Item 2 of Article 94 of the Constitution: "the
Government of the Republic of Lithuania shall implement laws
and resolutions of the Seimas concerning the implementation of
laws". This is also provided for by Item 2 of Article 21 of the
Law on the Government.
The Government, by establishing the list of goods subject
to excise taxes and rates thereof, accomplished the requirement
of the law and did not violate the provision of Item 15 of
Article 67 of the Constitution as it did not levy any new taxes
or payments.
It is pointed out in the paper that an analogous
conclusion was drawn by the Constitutional Court in its 7 March
1996 ruling on the compliance of the Government Resolution No.
1123 of 11 November 1994 with the Constitution, only there one
was dealing with the rates of stamp tax.
V
In the court hearing the representatives of the petitioner
virtually reiterated the arguments set forth in writing.
VI
In the Constitutional Court hearing the specialists
Remigijus Šimašius, a lawyer at the Lithuanian Free Market
Institute, and Rūta Vainienė, a senior expert on finance at the
same Institute, spoke.
The Constitutional Court
holds that:
Taxes are part of the finance system of the State. They
constitute the main part of the State budget. For instance,
from 7 billion Lt of the revenues of the 1998 State budget, 6.5
billion Lt are planned to be collected from tax revenues. In
the budget one accumulates the portion of the national income
which is designated to implement the programmes of public
education, culture, science, health care, social care and
maintenance, as well as environmental protection, to develop
the economy, to maintain the institutions of state power and
state administration as well as for the national defence. By
taxes the socio-economic processes which take place in society
are regulated, useful economic efforts are promoted, the
development priorities of national economy are supported. Thus
taxes are one of the main conditions of existence of the State.
One of the chief principles of paying taxes is that taxes
are obligatory. Various sanctions are provided for evading or
not fulfilling this obligation. On the other hand, in a state
under the rule of law guarantees are established which protect
taxpayers from groundless requirements of state institutions.
As a rule, the main legal guarantees for the protection of the
rights of taxpayers are these:
(1) the establishment in the Constitution that taxes may
be levied only by the law;
(2) protection of the violated rights including their
protection in court.
1. The petitioner-a group of Seimas members-requests to
investigate whether Item 2 of Part 1 and Part 2 of Article 13
of the Republic of Lithuania Law on Excises are in conformity
with the provisions of Item 15 of Article 67 and Part 3 of
Article 127 of the Constitution.
The request is grounded on the fact that under the said
provisions of the Constitution, the right to establish the
rates of excise tax is attributed to the Seimas and to do so is
permitted only by law. Meanwhile, Part 2 of Article 13 of the
disputed law prescribes that until 1 January 1999, the goods
subject to excise taxation and their rates shall be established
by the Government. Thus, in violation of the Constitution, the
right to establish the rates of excise tax has been delegated
to the Government.
The Constitutional Court notes that, while investigating
this request, one has to assess the nature of the excise tax,
and its peculiarities and meaning in the tax system.
1.1. Item 15 of Article 67 of the Constitution provides:
"The Seimas shall establish State taxes and other obligatory
payments." Part 3 of Article 127 of the Constitution
prescribes: "Taxes, other budgetary payments, and dues shall be
established by the laws of the Republic of Lithuania." The
Constitutional Court notes that these norms of the Constitution
not only consolidate the prerogative of the Seimas to levy
taxes but also establish as to in what legal form this
regulation must be accomplished. Thus taxes may be established
only by the law.
In legislation one follows the constitutional provisions
regarding the legal form of tax establishment. For instance,
Article 1 of the Law on Tax Administration of the Republic of
Lithuania provides that this law shall establish the basic
concepts and regulations which must be observed in implementing
the tax laws of the Republic of Lithuania, furnish a list of
taxes applied in the Republic of Lithuania, establish the
rights and duties of the tax administrator, rights and duties
of the taxpayer etc. The concept of the tax is formulated in
Article 2 of the said law: "Tax denotes monetary obligation
owed by the taxpayer to the state, established within the tax
law in order that funds may be obtained to fulfil state (local
government) functions. It is established therein, too, that
monetary obligation is accomplished under the procedure
established by laws." Thus, by these norms the Seimas
implemented its constitutional duty to regulate the tax
relations by the law.
Part 1 of Article 5 of the Law on Tax Administration
establishes the list of taxes of the Republic of Lithuania. By
Item 2 of Part 1 of the said article, among the 16 administered
taxes, the excise tax has been established as well. The said
tax is regulated in detail by the Law on Excise Taxes. This law
provides for the subjects who pay the excise tax, situations
when it is not to be applied, the object of excise tax, i.e.
particular types of goods, as well as taxable turnover, tax
period, payment procedure, recovery, repayment, violation
sanctions etc. Therefore, it is possible to assert that the
essential rules for regulation of the said tax are established
by the Law on Excise Taxes.
1.2. Individual nature is characteristic of excise tax,
i.e. it is imposed on particular goods. It is such linkage
which creates preconditions to regulate the consumption of
respective goods. By this, one also acquires means that are
necessary to meet the needs of society which are funded from
the state budget. For example, under Article 3 of the Law on
Excise Taxes, the following goods are the object of the excise
tax:
(1) non-denatured ethyl alcohol;
(2) smoking tobacco and tobacco products;
(3) coffee, chocolate and food preparations containing
cocoa;
(4) jewellery, gold and silverware, excluding artificial
jewellery and coins;
(5) engine petroleum, kerosene, jet engine fuel, Diesel
fuel;
(6) luxurious cars;
(7) electricity;
(8) publications of erotic or violent nature;
(9) lubricants of all types.
In case these goods are imported, they are also subject to
the excise tax.
There are not many objects of the excise tax. Summarising
their nature, one can conclude that there are, among them,
goods which are harmful to human health, or which are not to be
promoted due to other reasons, as well as luxurious goods or
those yielding greater profit than usual.
One of the peculiarities of the excise tax is that it is
an element of the price of goods. Thus, by the rate of the
excise tax one regulates the price of respective goods. The
excise tax is an indirect tax. It is paid by consumers of
respective goods, i.e. its final payer is the purchaser. The
excise tax is one of the sources of the state budget. As
mentioned, the budget means are utilised for the needs of the
whole society and those of the State. By the excise tax one
also regulates the import of goods, which permits to protect
the interests of manufacturers of this country. By this the aim
of the State which is established in Parts 2 and 3 of Article
46 of the Constitution is sought: to support economic efforts
and initiative which are useful to the community and to
regulate economic activity so that it serves the general
welfare of the people.
1.3. Taxes, the excise tax among them, have their internal
structure. The object of the tax and rate thereof are elements
of this structure among its other elements. Assessing the
disputed legal norms, one has to take into consideration the
reciprocity of these elements.
The law defines that the object of excise tax is certain
goods. It is possible to assert that the object of excise tax
is the most important part of the internal structure of the
said tax, which determines an exceptional nature of this tax.
Therefore, the Law on Excise Taxes presents a final list of the
objects of excise tax. This list may not be interpreted in an
expanded way.
In this case at law, the petitioner does not question the
objects of excise tax but he doubts whether the Seimas was
entitled to delegate the right to the Government to establish
the rates of excise taxes.
The rate of a tax is a norm (in the sense of size) or a
list of norms of established payments for certain goods or
services. The rate of excise tax, if compared to its object, is
more dynamic and more likely to change. By changing the rate by
legal acts, legal conditions are created to promptly react to
market changes and juncture, as well as to establish State
priorities in the area of economy. Thus the rate of excise tax
is a flexible lever of economic regulation.
Assessing whether the Seimas has delegated the Government
its prerogative to established the rates of excise tax, one has
to take account of the fact that every year, when the law on
approving the financial indices of the state budget and those
of the budgets of local governments is passed, by a special
clause a concrete sum of revenues which is to be acquired from
excise taxes is confirmed among other tax revenues. Thus it is
only the Seimas that establishes as to what sum the Government
must collect from excise taxes. The sum defined in the law on
the budget virtually determines certain limits on the rates of
excise taxes. Due to this, in establishing the rates of excise
taxes, the Government may not be independent absolutely.
Rates of taxes are an important element of taxes which in
one or another way is to be recorded in laws. As mentioned, by
the law the excise tax is sufficiently in detail regulated. In
general, due to the peculiarities of this tax, the norm of the
law regarding the right of the Government to particularise the
rates of excise taxes for the objects of the excise tax as
listed in the law is understood. Alongside, the Constitutional
Court draws attention to the fact that the criteria for
establishing excise rates could be defined more precisely by
the law. This would be an important guarantee for the payer of
the excise tax. By the way, such intentions of the legislator
might be perceived in the Law on Excise Taxes. For example,
Part 3 of Article 10 of the Law on Excise Taxes of 12 April
1994 establishes, along with the said commission for the
Government, the commitment of the Seimas to establish the goods
subject to particular excise taxes and rates thereof beginning
from 1997. A similar commitment of the Seimas has been
reiterated beginning from 1999 in Part 2 of Article 13 of the
newly worded Law on Excise Taxes of 9 December 1997.
Taking account of the arguments and motives set forth, one
is to conclude that Item 2 of Part 1 and Part 2 of Article 13
of the Republic of Lithuania Law on Excises are in compliance
with Article 5, Item 15 of Article 67 and Part 3 of Article 127
of the Constitution.
2. The petition virtually disputes the commission to the
Government to establish a list of taxable goods according to
the established description and coding system of goods and the
excise rates which is prescribed by Item 2 of Part 1 of Article
13 of the Law on Excise Taxes. One is to pay attention to the
fact that in the hearing of the Constitutional Court the
representatives of the petitioner recognised that the Seimas
was virtually entitled to give such a commission to the
Government.
It has been held in this ruling of the Constitutional
Court that the excise tax as such has been established by the
Seimas, and this it did by the law. The object of excise tax is
established by Article 3 of the said law. Part 2 of Article 13
of the Law on Excise Taxes merely commissions the Government,
after it has established the list of taxable goods, to specify
particular goods under the established description and coding
system of goods and excise taxes. The codes of goods are
presented under the combined range of goods which is
conventional in Europe. This is more a technical rule allowing
to distinguish and recognise an article according to the common
system of codes. By establishing a special list of goods, the
Government merely observes the law. Such a duty is established
to it by Item 2 of Article 94 of the Constitution which
provides: the Government of the Republic of Lithuania shall
"implement laws and resolutions of the Seimas concerning the
implementation of laws, as well as the decrees of the President
of the Republic".
Conforming to Article 102 of the Constitution of the
Republic of Lithuania and Articles 53, 54, 55 and 56 of the
Republic of Lithuania Law on the Constitutional Court, the
Constitutional Court has passed the following
ruling:
To recognise that Item 2 of Part 1 and Part 2 of Article
13 of the Republic of Lithuania Law on Excises is in compliance
with the Constitution of the Republic of Lithuania.
This Constitutional Court ruling is final and not subject
to appeal.
The ruling is promulgated on behalf of the Republic of
Lithuania.