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On the indirect establishment of the tax base

Case No. 45/01-12/03-15/03-24/03

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF PARAGRAPH 2 OF ARTICLE 5, ARTICLE 271, ITEM 4 OF PARAGRAPH 7 (WORDING OF 8 OCTOBER 2002) OF ARTICLE 29, ITEM 1 OF PARAGRAPH 2 (WORDING OF 26 JUNE 2001) OF ARTICLE 56 OF THE REPUBLIC OF LITHUANIA’S LAW ON TAX ADMINISTRATION WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND ON THE COMPLIANCE OF ITEM 2 OF THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 1073) “ON THE INDIRECT ESTABLISHMENT OF THE TAX BASE” OF 3 SEPTEMBER 1998, ALSO OF THE CHAPTER “CASES OF THE INDIRECT ESTABLISHMENT OF THE TAX BASE” AND THE CHAPTER “METHODS OF THE INDIRECT ESTABLISHMENT OF THE TAX BASE” OF THE METHODS OF THE INDIRECT ESTABLISHMENT OF THE TAX BASE WHICH WERE CONFIRMED BY THE SAID GOVERNMENT RESOLUTION WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND PARAGRAPH 2 OF ARTICLE 5 OF THE REPUBLIC OF LITHUANIA’S LAW ON TAX ADMINISTRATION

 

17 November 2003

Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Egidijus Jarašiūnas, Egidijus Kūris, Kęstutis Lapinskas, Zenonas Namavičius, Augustinas Normantas, Jonas Prapiestis, Vytautas Sinkevičius, and Stasys Stačiokas

The court reporter—Daiva Pitrėnaitė

Vilija Račkauskienė, chief specialist of the Law Department of the Office of the Seimas, Audrius Kasinskas, a consultant to the Legal Department of the Office of the Seimas, acting as the representatives of the Seimas of the Republic of Lithuania, a party concerned, and Paulius Majauskas, Head of the Tax Administration Division of the Tax Department of the Ministry of Finance of the Republic of Lithuania, acting as the representative of the Government of the Republic of Lithuania, a party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 30 October 2003, in its public hearing, considered case No. 45/01-12/03-15/03-24/03 subsequent to these petitions:

1) the 27 July 2001 petition of the Supreme Administrative Court of Lithuania, a petitioner, requesting an investigation into whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Republic of Lithuania’s Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania, also whether the chapters “Cases of the Indirect Establishment of the Tax Base” and “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania and Paragraph 2 of Article 5 of the Republic of Lithuania’s Law on Tax Administration;

2) the 30 January 2003 petition of the Panevėžys City Local Court, a petitioner, requesting an investigation into whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Republic of Lithuania’s Law on Tax Administration and the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” entrenched in the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania;

3) the 20 February 2003 petition of the Vilnius Regional Administrative Court, a petitioner, requesting an investigation into whether the provisions of Item 1 of Paragraph 2 of Article 56 of the Republic of Lithuania’s Law on Tax Administration that the term of 20 days of filing the complaint is counted starting from the fifth working day after sending the decision of the tax administrator or his official on the confirmation of the verification act by registered mail are not in conflict, as to their content, with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution of the Republic of Lithuania and Article 29 of the Constitution of the Republic of Lithuania;

4) the 6 March 2003 petition of the Vilnius Regional Administrative Court, a petitioner, requesting an investigation into whether the provision of Item 4 of Paragraph 7 of Article 29 of the Republic of Lithuania’s Law on Tax Administration that tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000 is not in conflict with the principle of the equality of all persons before the law which is entrenched in Paragraph 1 of Article 29 of the Constitution of the Republic of Lithuania and the principles of a state under the rule of law and justice which are consolidated in the Constitution.

By the Constitutional Court’s decision of 25 March 2003, the 27 July 2001 and 6 March 2003 petitions of the Supreme Administrative Court of Lithuania were joined into one case and it was given reference No. 45/01-12/03-15/03. By the Constitutional Court’s decision of 6 August 2003, the 30 January 2003 petition of the Panevėžys City Local Court was joined with Case No. 45/01-12/03-15/03 and the case was given reference No. 45/01-12/03-15/03-24/03.

The Constitutional Court

has established:

I

1. The Supreme Administrative Court of Lithuania, a petitioner, was considering an administrative case. The said court suspended the consideration of the case by its ruling and applied to the Constitutional Court with the petition requesting an investigation into whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration (Official Gazette Valstybės žinios, 1998, No. 68-1978) was not in conflict with Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania, also whether the chapters “Cases of the Indirect Establishment of the Tax Base” and “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 (Official Gazette Valstybės žinios, 1998, No. 79-2235) were not in conflict with Paragraph 2 of Article 5 of the Republic of Lithuania’s Law on Tax Administration and Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania.

2. The Panevėžys City Local Court, a petitioner, was considering a criminal case. The said court suspended the consideration of the case by its ruling and applied to the Constitutional Court with the petition requesting an investigation into whether the provision “the methods of the indirect establishment of tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration and the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” entrenched in the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 were not in conflict with Paragraph 3 of Article 127 of the Constitution.

3. The Vilnius Regional Administrative Court, a petitioner, was considering an administrative case. The said court suspended the consideration of the case by its ruling and applied to the Constitutional Court with the petition requesting an investigation into whether the provisions of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration that the term of 20 days of filing the complaint is counted starting from the fifth working day after sending the decision of the tax administrator or his official on the confirmation of the verification act by registered mail were not in conflict, as to their content, with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution and Article 29 of the Constitution.

4. The Vilnius Regional Administrative Court, a petitioner, was considering an administrative case. The said court suspended the consideration of the case by its ruling and applied to the Constitutional Court with the petition requesting an investigation into whether the provision of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration (Official Gazette Valstybės žinios, 2002, No. 101-4497) that tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000 was not in conflict with the principle of the equality of all people before the law which is entrenched in Paragraph 1 of Article 29 of the Constitution and the principles of a state under the rule of law and justice which are consolidated in the Constitution.

II

1. The petition of the Supreme Administrative Court of Lithuania, a petitioner, is based on the following arguments.

1.1. Paragraph 3 of Article 127 of the Constitution provides that taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania. Paragraph 2 of Article 5 of the Law on Tax Administration provides that the manner of imposition of a certain tax shall be established only by a respective tax law or a resolution of the Government of the Republic of Lithuania adopted on the grounds of the said law, or another legal act adopted on the grounds of the said law or resolution. Under the notion of manner of tax imposition entrenched in Article 2 of the Law on Tax Administration, the establishment of the tax base is categorised as the part of tax structure regulated by law. Article 271 of the Law on Tax Administration regulates a situation when it is impossible to establish the tax base according to the common procedure. In such a case the tax administrator is granted the right of an indirect establishment of the tax base, while the methods of the implementation of this right are confirmed by the Government or by its authorised institution.

In the opinion of the petitioner, the tax base must be established only by law. The petitioner doubts as to whether the aforesaid provision of Article 271 of the Law on Tax Administration, which grants the Government the right to confirm the methods of the indirect establishment of the tax base, is not in conflict with Paragraph 3 of Article 127 of the Constitution.

1.2. On 3 September 1998, the Government, pursuant to Article 271 of the Law on Tax Administration, adopted the Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” in which it established cases of the indirect establishment of the tax base and the methods of the indirect establishment of the tax base. The petitioner doubts as to whether the Government, after it had established the cases and methods of the indirect establishment of the tax base, did not violate Paragraph 3 of Article 127 of the Constitution which provides that taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania, and the provision of Paragraph 2 of Article 5 of the Law on Tax Administration that the manner of imposition of a certain tax shall be established only by a respective tax law.

2. The arguments of the Panevėžys City Local Court, a petitioner, are grounded on the following arguments.

2.1. The provision of Article 271 of the Law on tax Administration that the methods of the indirect establishment of tax base shall be confirmed by the Government or by its authorised institution grants the right to the Government to establish the tax base. In the opinion of the petitioner, the elements of the structure of the tax, among which there is the tax base as well, must be established by law. The petitioner doubts as to the compliance of the said provision of the Law on Tax Administration with Paragraph 3 of Article 127 of the Constitution which provides that taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania.

2.2. By its Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998, the Government established the cases of the indirect establishment of the tax base and the methods of the indirect establishment of the tax base. Since the tax base can only be established by law, the Government, while adopting the said resolution, violated, in the opinion of the petitioner, the provision of Paragraph 3 of Article 127 of the Constitution that taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania.

3. The petition of the Vilnius Regional Administrative Court, a petitioner, concerning the compliance of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration is grounded on these arguments.

The provisions of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration linking the beginning of the calculation of the term from the fifth working day after sending the decision of the tax administrator or his official on the confirmation of the verification act by registered mail means that the calculation of the term is started before the person receives (is handed in) the decision, during which the person can file a complaint against the said decision. Thus, the right of the person to make use of the 20-day term to file a complaint becomes limited, since this term can expire, even though the decision of the tax administrator, perhaps, has not been delivered to the person.

4. The petition of the Vilnius Regional Administrative Court, a petitioner, concerning the compliance of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration with the Constitution is grounded on these arguments.

Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration provides that tax arrears are recognised as hopeless provided the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax). In the opinion of the petitioner, the taxpayer whose tax arrears accumulated after 1 January 2000 is discriminated against, as the said norm establishes different conditions of recognition of tax arrears as hopeless, when one takes account of the time of the appearance of the tax arrears. The petitioner doubts whether the provision of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration that tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000 is not in conflict with Paragraph 1 of Article 29 of the Constitution in which the principle of the equality of all persons before the law, the court, and other state institutions and officials is entrenched, and with the constitutional principles of a state under the rule of law and justice.

III

In the course of the preparation of the case for the Constitutional Court hearing, written explanations were received from the representatives of the Seimas, a party concerned, who were Audrius Kasinskas, a consultant to the Legal Department of the Office of the Seimas, Vilija Račkauskienė, chief specialist of the Law Department of the Office of the Seimas, and the representative of the Government, a party concerned, who was Paulius Majauskas, Head of the Tax Administration Division of the Tax Department of the Ministry of Finance.

1. In her explanations concerning the petition of the Supreme Administrative Court of Lithuania, a petitioner, V. Račkauskienė, a representative of the Seimas, a party concerned, maintains that Paragraph 2 of Article 5 of the Law on Tax Administration provides that the manner of imposition of a certain tax shall be established only by a respective tax law or a resolution of the Government of the Republic of Lithuania adopted on the grounds of the said law, or another legal act adopted on the grounds of the said law or resolution. The object of a concrete tax is established by corresponding tax laws. According to the representative of the party concerned, since various methods of establishment of the tax base, tariffs and preferences, as well as rules of taxation of types of income are different, in certain cases taxpayers can resort to actions with the purpose to get tax profit, e.g. to decrease the payable tax sum or to evade the tax altogether.

According to V. Račkauskienė, by means of the provision of Article 271 of the Law on Tax Administration that in cases when it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator, while taking account of the facts, circumstances and other available information, has the right to indirectly establish the tax base and choose methods of establishment of the tax base, which are approved by the Government or its authorised institution seeking to ensure that at the time of verification of every taxpayer one could determine the actual essence of the activity of the taxpayer and the actual amount of the tax liability if the taxpayer distorts the actual economic essence of its activities. By this legal provision, one seeks to improve the control over tax payments, to induce the honest paying of taxes and limit the opportunities to pay taxes in a dishonest manner and thus to seek tax profit.

According to the representative of the party concerned, taxes can only be established by law, however, in order that taxes would be paid and collected appropriately, one has also to regulate the procedure of their payment. Thus, legal regulation of taxes means not only the establishment of taxes by means of laws, but also the procedure of the implementation of these laws, which could be regulated through substatutory acts as well.

According to V. Račkauskienė, on 3 September 1998, the Government, while implementing the right granted to it by the legislature, adopted the Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” in which it established the methods of the indirect establishment of the tax base. The representative of the party concerned notes that this government resolution changes neither the internal structure of the tax, nor the elements of the structure, but it merely regulates the right of the tax administrator to indirectly establish the tax base and ways of the implementation of this right. The bases of the establishment of the tax base are established in every law on a respective tax, however, if there is a situation when it is impossible to establish the tax base, the tax administrator is granted the right to indirectly establish the tax base. V. Račkauskienė also notes that under Paragraph 2 of Article 6 of the Law on Tax Administration, the Government has the right, while implementing tax laws, to establish corresponding methods and rules, which ensure administration of taxes.

In the opinion of the representative of the party concerned, Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution, while the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration.

In her explanations concerning the petition of the Panevėžys City Local Court, a petitioner, V. Račkauskienė, a representative of the Seimas, a party concerned, points out that the explanations and arguments concerning the petition of the Supreme Administrative Court of Lithuania requesting an investigation into whether Article 271 of the Law on Tax Administration is not in conflict with the Constitution and whether the chapters “Cases of the Indirect Establishment of the Tax Base” and “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration, should be considered explanations also as regards the petition of the Panevėžys City Local Court.

In her explanations concerning the petition of the Vilnius Regional Administrative Court, a petitioner, requesting an investigation into whether Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration with Paragraph 1 of Article 29 of the Constitution and the constitutional principles of a state under the rule of law and justice, the representative of the party concerned, the Seimas, V. Račkauskienė maintains that the provision of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration defines two criteria under which tax arrears are recognised as hopeless: one of them is a concrete term of its accumulation, i.e. the arrears accumulated prior to 1 January 2000, while another criterion is that under this provision the arrears will be hopeless only when the appropriations manager funded from the State Budget or municipal budget has not performed his financial liabilities to the taxpayer who is in tax arrears to the State Budget or municipal budget.

V. Račkauskienė asserts that the said mandatory requirements are established in the provision of the Law on Tax Administration in regard of tax arrears but not the taxpayer, therefore, whatever be the legal situation of the taxpayer, the tax arrears must be applied in regard of all taxpayers without exceptions, who are in arrears, which accumulated on such basis. Thus, according to the representative of the party concerned, the provision of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration does not discriminate certain taxpayers in regard to the other, as the conditions of recognition of arrears as hopeless indicated in this provision are equally applied to all taxpayers.

V. Račkauskienė draws one’s attention to the fact that in the case under consideration the regulation of the public relations linked with recognition of arrears as hopeless according to the impugned provision appeared due to objective reasons: there appeared a situation when due to the funds not provided for in the budget the state remained in debt to the taxpayer, while the latter, having not received the planned sums, remained in arrears to the state. Thus, the legal regulation when tax arrears of a certain type, which corresponded to the requirements of the law (when one takes account of the time of their accumulations and the manner of accumulation) might be recognised as hopeless could be regarded either as a result of imprecise planning in managing state finances and preparing the budget, or as a consequence of the difficult economic situation, but not as the granting of exceptional rights or the creation of special conditions for certain tax payers with regard to the other. According to the representative of the party concerned, the impugned provision of the Law on Tax Administration does not grant privileges to taxpayers, whose tax arrears accumulated prior to 1 January 2000.

V. Račkauskienė asserts that on the basis of the principle of justice, taxes are established according to general objective rules, which are recognised just and reasonable by the majority of the society, however, according to another aspect of justice, it is required that in case of taxation one take into consideration the solvency of the payer, i.e. his capacity of payment.

V. Račkauskienė maintains that Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration is not in conflict with the principle of the equality of all persons before the law, which is entrenched in Paragraph 1 of Article 29 of the Constitution and with the principles of a state under the rule of law and justice which are consolidated in the Constitution.

2. In his explanations concerning the petitions of the petitioners—the Supreme Administrative Court of Lithuania and the Panevėžys City Local Court—P. Majauskas, the representative of the Government, a party concerned, points out that it is established in Article 127 of the Constitution that it is permitted to introduce new taxes only by passing a respective law. P. Majauskas is of the opinion that the Government, while following the provisions of Article 271 of the Law on Tax Administration, virtually does not establish new taxes and their base, but particularises the procedure of implementation of the duties commissioned to the tax administrator, i.e. it establishes in what manner one has to perform the duty to calculate taxes to be paid by the taxpayer in cases when it is impossible to calculate them according to the common and routine procedure of determination of the tax.

According to P. Majauskas, Paragraph 3 of Article 127 of the Constitution provides that taxes can be introduced only by passing a respective law, meanwhile, the methods of indirect establishment of the tax base may be applied in the course of determination of the amount of corresponding taxes which must be paid by a concrete taxpayer in concrete circumstances (in cases when it is impossible to calculate the tax according to the routine procedure established in the tax law). P. Majauskas asserts that when one follows the Methods of the Indirect Establishment of the Tax Base which are confirmed by the Government, no new taxes are introduced; by means of the said methods, the procedure of the calculation of taxes already introduced by law is established in regard of a concrete taxpayer under concrete circumstances.

In his explanations the representative of the party concerned also notes that the Government had the right to confirm the methods of indirect establishment of the tax base, since the Seimas granted to it such a right by Article 271 of the Law on Tax Administration.

P. Majauskas asserts that the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration.

3. In the explanations concerning the petition of the Vilnius Regional Administrative Court, a petitioner, requesting an investigation into the compliance of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution and Article 29 of the Constitution, A. Kasinskas and V. Račkauskienė, the representatives of the Seimas, a party concerned, maintain that the provisions of Paragraph 2 of Article 56 of the Law on Tax Administration do not limit the right of the person to file complaints against the actions of the tax administrator (or his official), i.e. the person can file a complaint against any act which, in his opinion, is unjust and unlawful (such a right of his is entrenched in Paragraph 1 of Article 54 of the Law on Tax Administration). At every stage of the consideration of a dispute in the course of verification of the taxpayer the latter has the right to be heard, to present his written remarks or evidence regarding the inspected matter (Articles 27 and 54 of the Law on Tax Administration), i.e. the taxpayer may take an active participation and to receive in time all information concerning the verification carried out by the tax administrator as well as for the results of the verification.

The representatives of the party concerned note that Paragraph 2 of Article 56 of the Law on Tax Administration establish certain conditions under which the complaint filed with the central tax administrator will be considered: the complaint must be filed within the due term and exhaustive information must be presented about the taxpayer who has filed the complaint as well about the act complained against. In the opinion of the representatives, the presence of such conditions should not be regarded as a limitation on the right to file a complaint.

A. Kasinskas and V. Račkauskienė maintain that the expectations of the person to be duly and appropriately informed in regard of the decisions adopted by a state institution (in this case—the tax administrator) about an adopted act that concerns him are should be regarded as reasonable and legitimate. By informing a person appropriately and in time about the adopted act, legal certainty and legal security are guaranteed, the trust of the person in the state and law are ensured.

The representatives of the party concerned note that constitutional principles cannot be assessed in isolation from one another. The principles of a state under the rule of law, legitimate expectations and of justice are closely related and may be analysed and applied only in the context of each other. Therefore, A. Kasinskas and V. Račkauskienė do not think that there are grounds to assert that the corresponding legal norm is in conflict with the Constitution only on the basis of a fact that the legal regulation established in a certain legal norm is not in line with the expectations of an individual subject of legal relations (even if these expectations are totally legitimate and reasonable). In the opinion of the representatives, it is impermissible to raise the interests of an individual person above those of society or the state, which in this case are represented by the tax administrator.

A. Kasinskas and V. Račkauskienė assert that in the course of the establishment of a term for filing a complaint against a certain act, the establishment of the moment of the calculation of the beginning of this term is one of essential questions. They underline that the best and, from the legal point of view, the most correct option is to begin to calculate the term from the moment the act is handed in to the addressee. Such a norm is entrenched in Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration. However, if the normative regulation confined itself only to it, one would not evade problems of the application of the norm: the taxpayer, while having regard for his interests only, would be able to simply avoid to receive (get) the decision on the confirmation of the verification act. In such a case, the legislature, without refusing the main provision that the person must be informed appropriately and in time, must resort to measures in order to protect the public interest, by including special norms into the law, designed for the purpose of ensuring appropriate execution of the norms of the law. According to the representatives, to achieve this objective, on the grounds of the criterion of reasonableness, an a priori term is established, during which it is reasonably expected to believe that the addressee will receive the information addressed to him about an adopted decision (the representatives note that under the norms of postal dispatches sent in the territory of the Republic of Lithuania the maximum delivery term of a postal dispatch is 4 working days, thus, the term established by the legislature is even longer). The establishment of such a term cannot be treated as violation of the constitutional principles of an open, just, and harmonious civil society and state under the rule of law.

The representatives of the party concerned note that in cases when the taxpayer can reasonably prove that there were certain circumstances of utmost importance due to which the decision on the confirmation of the verification act really was not and could not be handed in to him within the term (5 working days) established in the law, the term of the filing of the complaint must be renewed pursuant to Article 571 of the Law on Tax Administration. Therefore, in the opinion of A. Kasinskas and V. Račkauskienė, the provisions of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration are not in conflict with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution.

As regards the compliance of the impugned provision with Article 29 of the Constitution, A. Kasinskas and V. Račkauskienė assert that, while deciding the issue of the equality of all persons before the law, one ought to pay attention to such provisions of the impugned law in which the equal rights and duties of all taxpayers without exceptions are consolidated. Article 3 of the Law on Tax Administration provides that “in applying tax laws, all taxpayers shall be held equal on the basis of the conditions established by these laws”. Paragraph 1 of Article 54 of the Law on Tax Administration provides that the taxpayer may dispute every action of the tax administrator or his official regarding him and the consequences of the action. This norm is also equally applied to all taxpayers.

A. Kasinskas and V. Račkauskienė note that the impugned legal norm establishes two possible moments of the beginning of the calculation of the 20-day term, thus, in the course of the application of this norm a question might arise whether the taxpayers to whom the decision on the confirmation of the verification act is sent by registered mail are not discriminated against in regard with those who are not handed in such a decision. In the opinion of the representatives, these two groups of taxpayers are not in an equal situation, however, it is doubtful if it is possible to regard such disparity of the legal situation as inequality or discrimination within the meaning of Article 29 of the Constitution. They draw one’s attention to the fact that not any disparity of the situation is regarded as discrimination, but only such which is objectively groundless.

The representatives of the party concerned also note that the two possible variants of the beginning of the calculation of the term cannot be regarded as alternatives having the same meaning. One should assess the provision that the term is begun to be calculated from the handing in of the decision on the confirmation of the verification act should be regarded as the main norm. The second part of the provision wherein the norm is established that in case of the sending of the registered mail, the term is begun to be calculated on the fifth day after the sending should be regarded as a facultative one, providing an exceptional procedure of the beginning of the calculation of the term. The representatives assert that this becomes clear both from an analysis of the formulation of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration and from the practice of the application of this legal norm: as a rule, the taxpayer in whose regard the decision has been adopted participates in the course of the verification from the very beginning, he gives his remarks and specifications (under procedure established in Article 27 of the Law on Tax Administration). Having adopted a decision on the confirmation of the verification act, one attempts to hand in this decision to the taxpayer in person: the decision is sent by registered mail only in cases when one fails to find the taxpayer and hand in the decision to him. In case the special legal norm were absent, the taxpayer might be able to purposefully evade to receive the decision adopted in his regard. Thus, he would evade to carry out this decision, therefore, he would infringe the interests of the entire society.

A. Kasinskas and V. Račkauskienė note that in itself the constitutional principle of the equality of persons does not deny the fact that it is permitted to establish different legal regulation in regard to certain categories of persons who are in different situations. While considering the articles of the impugned law, it is clear that it does not establish different legal situations of subjects (in this case—taxpayers) unreasonably. However, while taking account of the fact how a concrete person perceives the limits of his legal situation, how he makes use of the granted opportunities, it is evident that there might appear a situation when the person, due to his ignorance or conscious evasion (or due to other circumstances) does not make use of his rights properly and in time. In the opinion of the representatives of the party concerned, there are no grounds for assertion that in cases of the application of the impugned norms of the law persons would be discriminated against or that they would have unequal rights. Thus, in the opinion of the representatives, the impugned provision is not in conflict with Article 29 of the Constitution.

IV

In the course of the preparation of the case for the judicial consideration, written explanations were received from D. Grybauskaitė, Minister of Finance of the Republic of Lithuania, V. Latvienė, Head of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania, M. Vidutienė, Acting Chairperson of the Tax Disputes Commission under the Government of the Republic of Lithuania, A. Čepas, Director of the Institute of Law, A. Trumpa, President of the Lithuanian Free Market Institute, and R. Vainienė, Vice-President of the same institute, Dr. A. Miškinis, Head of the Department of Finance and Tax Law of the Law University of Lithuania, and Assoc. Prof. Dr. B. Sudavičius who works at the Department of Constitutional and Administrative Law of the Faculty of Law, Vilnius University.

V

At the Constitutional Court hearing, V. Račkauskienė and A. Kasinskas, the representatives of the Seimas, a party concerned, and P. Majauskas, the representative of the Government, a party concerned, virtually reiterated the arguments set forth in their written explanations.

The Constitutional Court

holds that:

I

1. The petitioners—the Supreme Administrative Court of Lithuania and the Panevėžys City Local Court—request an investigation into whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

2. The Supreme Administrative Court of Lithuania, a petitioner, requests an investigation into whether the chapters “Cases of the Indirect Establishment of the Tax Base” and “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration.

3. The Panevėžys City Local Court, a petitioner, requests an investigation into whether the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” entrenched in the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution.

4. The Vilnius Regional Administrative Court, a petitioner, requests an investigation into whether the provision “tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000” of Item 4 of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration is not in conflict with the principle of the equality of all persons before the law which is entrenched in Paragraph 1 of Article 29 of the Constitution and the constitutional principles of a state under the rule of law and justice.

5. The Vilnius Regional Administrative Court, a petitioner, requests an investigation into whether the provisions of Item 1 of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration that the term of 20 days of filing the complaint is counted starting from the fifth working day after sending the decision of the tax administrator or his official on the confirmation of the verification act by registered mail are not in conflict, as to their content, with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution and Article 29 of the Constitution.

II

1. Article 127 of the Constitution provides:

The budgetary system of the Republic of Lithuania shall consist of the independent State Budget of the Republic of Lithuania as well as the independent municipal budgets.

State Budget revenues shall be accrued from taxes, compulsory payments, levies, revenues from State-owned property, and other income.

Taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania.”

2. While construing the content of Paragraph 3 of Article 127 of the Constitution, the Constitutional Court noted that it is established therein as to by what form of a legal act taxes must be established: taxes can be established only by law (the Constitutional Court’s rulings of 15 March 1996, 10 July 1997, and 9 October 1998).

Under Item 15 of Article 67 of the Constitution, only the Seimas establishes state taxes and other obligatory payments (the Constitutional Court’s rulings of 26 April 2001 and 3 June 2002).

3. Taxes are obligatory and gratuitous payments, established by law, of respective amount by legal and natural persons at the set time to the state (municipal) budget. Taxes are one of the main sources of revenues of the state as well as municipal budgets.

By establishing taxes, one attempts to receive revenues to perform state (municipal) functions and to meet the public needs of society and the state. In addition, by means of taxes economic and social processes are regulated, useful economic efforts are induced, and priorities of economic development are supported.

The provisions of Article 127 of the Constitution which consolidate the budgetary system of Lithuania and indicating the sources of formation of state (municipal) budgets’ revenues, also consolidates a constitutional duty to pay taxes.

In its ruling of 10 July 1997, the Constitutional Court noted that provided taxes are not paid or paid overdue the state (municipal) budget does not receive revenues, the budget deficit increases, possibilities for the state (municipality) to implement its tasks and accomplish its functions become limited or even deprived of. Furthermore, at the time when part of subjects of economic activity do not pay taxes, the other subjects—conscientious taxpayers—find themselves at a disadvantage, and thereby the essential principles of free market based on fair competition are violated.

Tax relations are obligatory legal relations between the state and the taxpayer. Under the Constitution, taxes, as a monetary obligation before the state, may be established only, as it has been mentioned, by means of a law adopted by the Seimas (Item 15 of Article 67 and Paragraph 3 of Article 127 of the Constitution). However, in order that taxes might be properly paid and collected, it is not enough merely to establish taxes as an obligation before the state. It is also necessary to regulate the procedure of their payment, which, inter alia, would include procedures of tax administration, methods of calculation of taxes etc. Thus, legal regulation of tax relations is not only establishment of taxes by means of laws but also establishment of the procedure of the implementation of tax laws.

4. Tax relations are a matter of regulation by public law. Tax relations are legal relations of a commanding character between the taxpayer and institutions of the executive power of the state. The decisions (orders) adopted by the latter are obligatory to taxpayers. In its ruling of 10 July 1997, the Constitutional Court held that one does not negotiate taxes. Alongside, it needs to be noted that the relations between taxpayers and the officials administering taxes must be based not only on effective implementation of commanding instructions but also on a real opportunity of the taxpayer to defend his legitimate interests. In a state under the rule of law guarantees are established, which protect taxpayers against unreasonable demands by state institutions. From the legal guarantees of the protection of taxpayers’ rights, one should mention, inter alia, the legislative establishment of taxes and defence of violated rights, including their judicial defence, which are entrenched in the Constitution.

5. In the course of the regulation of tax relations it is important to distinguish which relations, under the Constitution, are regulated only by law, and which may also be regulated through substatutory acts. In its ruling of 15 March 2000, the Constitutional Court held that such essential elements of the tax as the object of the tax, subjects of tax relations, their rights and duties, tax rates (tariffs), term of payment, exceptions and preferences must be provided for by law. It means that the Constitution does not require that one establish the procedure of implementation of tax laws only by law: under the Constitution, the procedure of implementation of tax laws as well as the procedure of calculation of a concrete tax may be established not only by means of laws but also by means of substatutory acts.

It also needs to be noted that in the substatutory legal acts establishing the procedure of implementation of tax laws, thus, including the procedure of calculation of taxes, there may be no legal norms providing for a different legal regulation from that established by law and which would compete with the norms of the law.

6. Article 29 of the Constitution provides:

All persons shall be equal before the law, the court, and other State institutions and officials.

The human being may not have his rights restricted, nor may he be granted any privileges on the grounds of gender, race, nationality, language, origin, social status, beliefs, convictions, or views.”

7. The principle of the equality of all persons before the law, the court, and other state institutions and officials is enshrined in Article 29 of the Constitution. In its rulings the Constitutional Court has noted more than once that this principle must be followed also while passing and implementing laws, as well as while administering justice. This principle obligates one to legally assess homogeneous facts in the same manner and prohibits any arbitrary assessment of essentially homogeneous facts in a varied manner.

In Paragraph 1 of Article 29 of the Constitution, the formal equality of all persons is established. In its ruling of 28 February 1996, the Constitutional Court held that the constitutional principle of the equality of persons should be applied not only to natural but legal persons as well.

The principle of the equality of all persons established in Article 29 of the Constitution also includes the prohibition on discrimination and privileges. In its ruling of 4 July 2003, the Constitutional Court held that discrimination is most often understood as restriction of human rights according to gender, race, nationality, language, origin, social status, religion, convictions, opinions or other indications, however, differentiated legal regulation when it is applied to certain groups of persons which are distinguished by the same signs, and in case one strives for positive and socially meaningful goals, is not regarded as discrimination or privileges. This means that the principle of the equality of all persons before the law does not deny the fact that the law can establish different legal regulation in regard of certain categories of persons that are in different situations.

In its ruling of 6 May 1997, the Constitutional Court held that, as a rule, discrimination is understood as a change of a situation of a person or group of persons with respect to other persons without any objective justification. However, in certain cases, providing there exists a sufficiently reasoned and grounded cause, it is possible to establish by law the legal status for different groups of subjects and to consolidate certain particularities of the legal situation. This means that the constitutional principle of people’s equality does not deny the possibility for a different treatment of people according to their status.

It needs to be noted that the constitutional principle of the equality of all persons before the law would be violated when a certain group of people for which the legal norm is established, if compared to other addressees of the same legal norm, were treated differently, even though there are not any differences in the character and extent between these groups that such an uneven treatment would be objectively justified (the Constitutional Court’s ruling of 20 November 1996).

8. The principle of a state under the rule of law is entrenched in the Constitution. The Constitutional Court has held more than once that the constitutional principle of a state under the rule of law is a universal principle upon which the entire legal system of Lithuania and the Constitution itself are based. The Constitution is an integral act, thus, the content of the principle of a state under the rule of law can be detected in various provisions of the Constitution and should be construed inseparably from the striving for an open, just and harmonious civil society. Along with the other requirements, the constitutional principle of a state under the rule of law also implies that human rights and freedoms must be ensured, that one must pay heed to natural justice, that all institutions implementing state authority must act on the basis of law and in compliance with law, that the Constitution has the supreme legal power and that all legal acts must be in compliance with the Constitution.

Inseparable elements of the principle of a state under the rule of law are the protection of legitimate expectations, legal certainty and legal security. In case the protection of legitimate expectations, legal certainty and legal security were not ensured, the confidence of the person in the state and law would not be ensured (the Constitutional Court’s ruling of 25 November 2002).

An inseparable element of the content of the principle of a state under the rule of law as well as a necessary condition of administration of justice is the right of the person to apply to court (the Constitutional Court’s ruling of 17 March 2003). Paragraph 1 of Article 30 of the Constitution provides that the person whose constitutional rights or freedoms are violated shall have the right to apply to court.

The constitutional principle of a state under the rule of law is inseparable from the principle of justice. In its ruling of 22 December 1995, the Constitutional Court held that one of the main objectives of law as means to regulate social life is justice. Justice is one of basic moral values, as well as that of basic foundations of state governed by law. Justice may be implemented by ensuring a certain equilibrium of interests, by escaping fortuity and arbitrariness, instability of social life and conflict of interests. Thus, the principle of a state under the rule of law that is entrenched in the Constitution is inseparable from the imperative of justice and vice versa.

III

On the compliance of the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration with Paragraph 3 of Article 127 of the Constitution.

1. It has been mentioned that the petitioners—the Supreme Administrative Court of Lithuania and the Panevėžys City Local Court—request an investigation into whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

2. Article 271 of the Law on Tax Administration provides: “If it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator, while taking account of the facts, circumstances and other available information, has the right to indirectly establish the tax base and choose methods of establishment of the tax base. The methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution.”

3. It needs to be noted that the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is inseparable from another provision of this article which is established in the first sentence of this article: “If it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base.”

Thus, the investigation of the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration, which is impugned by the petitioners—the Supreme Administrative Court of Lithuania and the Panevėžys City Local Court—is inseparable from the investigation of the provision “if it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base” which is established in Article 271 of the Law on Tax Administration.

4. While deciding whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration, which is impugned by the petitioners—the Supreme Administrative Court of Lithuania and the Panevėžys City Local Court—is not in conflict with the Constitution, it is necessary to investigate the content of the notions “tax base”, “tax base established by law”, “tax base established under procedure established by the tax law” and “indirectly established tax base” which are employed in tax laws.

5. Article 2 of the Law on Tax Administration in which the basic concepts employed in the tax law are given defines the notion “tax base” as follows: “tax base is a taxable object evaluated in terms of a monetary sum according to the procedure established by a tax law, to which an established amount (tariff) of tax is applied”.

Thus, the notion “tax base” defined in Article 2 of the Law on Tax Administration includes these elements: (1) tax base is a taxable object to which an established amount (tariff) of tax is applied; (2) this taxable object must be evaluated in terms of a monetary sum according to the procedure established by a tax law.

It needs to be noted that what comes under taxation, the taxable object and the amount (tariff) of the tax must, under the Constitution, be established only by law. The taxable object and the amount (tariff) of the tax may not be established by a legal act of lower power.

The words “tax base” are also employed while defining another notion, “manner of tax imposition”, given in Article 2 of the Law on Tax Administration. Under Article 2 of the Law on Tax Administration, “manner of tax imposition includes the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest, and regulations for tax payment and exaction, established by the tax law”.

The formulation “tax base <…> established by the tax law” in the notion “manner of tax imposition” means that the tax base must be established by law.

6. The notion “tax base” is also employed in certain laws establishing corresponding taxes. For instance, under Article 5 of the Law on the Inherited Property Tax the base of this tax is the taxable value of the inherited property, which is calculated under procedure established by the Government; Article 4 of the Law on Gaming Tax provides that the base of the gaming tax shall be: (1) in operating bingo, totalisator and wagering, the sum of the income obtained from which the actual winnings that have been paid out have been subtracted; (2) in operating machine gaming and table games, an established sum for the equipment (gaming machine, roulette, card or dice table); Paragraph 1 of Article 4, titled “Tax Base”, of the Law on Profit Tax provides that the Lithuanian unit tax base is the income earned within the Republic of Lithuania and in foreign states, whose source is in the Republic of Lithuania as well as outside the Republic of Lithuania; under Paragraph 1 of Article 3, titled “Tax Base”, of the Law on the Oil and Natural Gas Tax, “the oil and natural gas tax shall be calculated on the average price of a ton of extracted oil or natural gas on the spot of extraction during the previous taxation period”.

It needs to be noted that in the laws establishing corresponding taxes the notion “tax base” reflects the taxable object. The nature of a corresponding tax can determine the fact that the law establishing such a tax may describe the taxable object by employing various notions. For instance, the Law on Value-Added Tax defines the taxable object by employing the notion “the taxable amount which is the base for calculation of VAT” (Article 15); in the Law on Residents’ Income Tax the taxable object is expressed by the notion “taxable income” (Article 16); in the Law on Goods’ Turnover Tax the taxable object is defined while employing the notion “taxable value” (Article 4). It has been mentioned that in the Law on the Inherited Property Tax, the Law on Profit Tax as well as other laws the taxable object is defined while employing the notion “tax base”.

It is clear from the content of the notion “tax base” defined in Article 2 of the Law on Tax Administration as well as from the formulation “tax base <…> established by the tax law” in the notion “manner of tax imposition” defined in this article that the taxable object must be established by law and that it is evaluated in terms of a sum of money. It is the taxable object established by a tax law, which is evaluated in terms of a sum of money, that is the tax base. Thus, the notion “tax base” is one of the notions reflecting the taxable object; sometimes the notion “tax base” is used as a synonym to the notion “taxable object”.

It needs to be noted that the Law on Tax Administration does not establish concrete taxable objects: they are established in the laws introducing corresponding taxes and are the same (common) to all payers of this tax. Therefore, the notion “taxable object” employed in Article 2 of the Law on Tax Administration in which, as mentioned before, the main concepts employed in the law are defined, is a general one.

The notion “tax base” defined in Article 2 of the Law on Tax Administration is also a general one: this notion expresses the taxable object established in a law introducing a corresponding tax, which is evaluated in terms of a sum of money and which is the same (common) to all taxpayers of the tax; it does not reflect from what concrete tax base (its amount) a concrete taxpayer must pay the tax.

Taking account of the fact that in the notion “tax base” defined in Article 2 of the Law on Tax Administration it is established that the tax base is a taxable object evaluated in terms of a monetary sum, that in the notion “manner of tax imposition” defined in this law it is established that the manner of tax imposition includes, inter alia, “tax base <…> established by the tax law”, also of the fact that in the laws establishing corresponding taxes the notion “tax base” reflects the taxable object evaluated in terms of a monetary sum, which is the same (common) to all payers of this tax, the conclusion should be drawn that, if a law establishing a concrete tax establishes a taxable object and also how it must be evaluated in terms of a sum of money, it should be held that the tax base has been established by law.

7. It has been mentioned that the following provision has been established in Article 271 of the Law on Tax Administration: “If it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator, while taking account of the facts, circumstances and other available information, has the right to indirectly establish the tax base and choose methods of establishment of the tax base.” Thus, under Article 271 of the Law on Tax Administration, the tax base can be established in two ways: first, under procedure provided for in the tax law, i.e. directly; second, indirectly—the tax base can be established in this way only when it is impossible to establish it under procedure provided for in the tax law, i.e. when it is impossible to establish it directly.

8. It needs to be noted that the notions “tax base established by law” and “tax base established under procedure established by law” are not identical, their contents are independent and they are linked with different legal situations.

9. The notion “tax base established by law” reflects a requirement to establish, by law, the taxable object (tax base) which is evaluated in terms of a monetary sum; a taxable object (tax base) is the same (common) to all payers of this tax. It has been mentioned that, on the basis of the definitions given in Article 2 of the Law on Tax Administration, the conclusion should be drawn that, if a law establishes a taxable object and how it must be evaluated in terms of a sum of money, it should be held that the tax base has been established by law.

10. The content of the notion “tax base established under procedure established by law” is different, this notion is linked with a different legal situation.

While regulating tax relations it is not enough to establish the taxable object (tax base) as well as other essential tax elements by law. It is also necessary to establish as to how (i.e. under what rules) a concrete taxable object (tax base) is established (calculated). It is only according to this concrete taxable object (tax base) evaluated in terms of a sum of money that it is possible to calculate the amount of the tax that a concrete taxpayer must pay.

Taxes must be calculated conscientiously, on the basis of tax laws (Paragraph 1 of Article 261 of the Law on Tax Administration). It is established in tax laws that tax calculation must be based on the documents that have legal power, that reflect economic operations, economic events and financial activity, as well as on other documents having legal power, permitting the determination of the amount of a concrete taxable object (tax base). The accounting, its organisation and management are regulated by the Republic of Lithuania’s Law on Accounting (with subsequent amendments and supplements), which was adopted by the Seimas on 6 November 2001, and other legal acts.

The establishment of the tax base under procedure established by law means that while establishing a concrete taxable object (tax base) for which the tax rate (tariff) must be applied, one must follow the law establishing a corresponding tax, that the calculation of the tax must be based on the documents with the legal importance, that the taxpayer must submit a tax declaration to the tax administrator, that in the tax declaration there must be the amount of the tax which must be paid to the state (municipal) budget and funds, that the taxpayer who does not have the necessary documents in order to calculate the tax, has the duty to prepare them within the time pointed out by the tax administrator. The establishment of the tax base under procedure established by law, while taking account of the nature of the tax, can also include other elements (requirements) established by law.

Thus, the notion “to establish the tax base under procedure established by law” virtually means the calculation of a concrete tax base under procedure established by law.

The notion “establishment of the tax base under procedure established by law” is linked with the legal situation when a concrete tax base is established (calculated), i.e. a concrete taxable object is established (it is evaluated in terms of money), to which the tax rate (tariff) established by law is applied, i.e. it is established what concrete tax base (its amount) is from which a concrete taxpayer must pay the tax. This legal situation is a corresponding situation of the implementation (application) of a respective tax law, when the amount of a concrete tax is established (calculated) which has to be paid by a concrete taxpayer.

11. Due to various reasons there also may appear a situation when the taxpayer does not submit the tax declaration to the tax administrator, or enters wrong data into the tax declaration about his property, income, profit, property of his enterprise or about the use thereof, when the taxpayer does not submit accounting documents, registers, or submits not all of them, when the taxpayer does not have the documents necessary to calculate the tax etc. Even in such cases taxes must be calculated and paid. In order to calculate the amount of a concrete tax that must be paid by a concrete taxpayer, a concrete taxable object must be established, this object must be evaluated in terms of a monetary sum, i.e. the amount of a concrete tax base must be established (calculated). In a state under the rule of law a legal situation is impermissible, when, after a tax has been established by law, one does not provide for how a concrete tax base (its amount) is established (calculated) in cases when it is impossible to establish (calculate) a concrete tax base (its amount) directly.

12. The legislature, while paying heed to the Constitution, can regulate in a varied manner how a concrete tax base (its amount) must be established (calculated) in cases when it is impossible to establish (calculate) it directly.

The legislature can also establish the provision “if it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base” in the law.

13. It needs to be noted that in the provision “has the right to indirectly establish the tax base” of Article 271 of the Law on Tax Administration the words “has the right” cannot be construed as establishing the right of the tax administrator in cases when it is impossible to establish (calculate) the tax base directly, to choose or establish (calculate) it indirectly.

According to Article 1 of the Law on Tax Administration, this law shall establish the rights and duties of the tax administrator, the procedure of tax computation and payment, the manner of tax exaction and sums linked thereto as well as the dispute settlement procedure. In the notion “tax” defined in Article 2 of the same law it is established that the tax denotes monetary obligation owed by the taxpayer established within the tax law, the notion “tax administration” defined in Article 2 of the same law provides that tax administration is the implementation of the rights and obligations of the tax administrator, as well as calculation, payment and exaction of the tax. Under Item 2 of Paragraph 1 of Article 16 of the said law, the tax administrator shall control computation of tax payments into the state (municipal) budget and funds, payment thereof, exact taxes that have not been paid in time. Article 262 of the same law provides that taxes must be calculated conscientiously, it shall be prohibited to violate the obligation established by law by means of abuse, and that in case of abuse the tax administrator, by establishing the tax base, shall restore the distorted or hidden circumstances.

Thus, also the legal regulation in the said norms of the Law on Tax Administration permits one to state that in case it is impossible to establish (calculate) the tax base directly under procedure established by the tax law, the tax administrator not only has the right but also he is obligated to establish (calculate) the tax base indirectly.

14. Taking account of the arguments set forth, it should be concluded that the provision “if it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

15. While deciding whether the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution, one should take account of the fact that the indirect establishment of the tax base is linked with the legal situation when one has to establish (calculate) as to what concrete amount is from which a concrete taxpayer must pay the tax of the taxable object (tax base). Thus, the indirect establishment (calculation) of the tax base is linked with the application of a corresponding tax law, and this is one of the elements of application of a corresponding tax law.

16. Under the impugned provision of the law, the Government or its authorised institution has the right and a duty to confirm methods of the indirect establishment of the tax base. The formula “to confirm the methods of the indirect establishment of the tax base” means that the Government or its authorised institution must establish corresponding ways by which it would be possible to establish (calculate) corresponding ways as to what concrete amount is from which the tax of the taxable object (tax base) must be calculated and paid if it is impossible to establish (calculate) the base of a concrete tax indirectly, i.e. under procedure established by law. The confirmation of the methods of the indirect establishment (calculation) of the tax base virtually means confirmation of certain rules of calculation of the tax that must be paid by a concrete taxpayer. The impugned provision of the law cannot be interpreted as establishing the right of the Government or its authorised institution to establish the same (common) taxable object (tax base) for all taxpayers: the taxable object (tax base) can be established only by a tax law.

In its ruling of 15 March 2000, the Constitutional Court held that the procedure of implementation of tax laws, the methods of the calculation of the payment of actual taxes may also be regulated by substatutory legal acts.

Only when one perceives it this way, the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

17. Taking account of the arguments set forth, it should be concluded that the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

IV

On the compliance of the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” entrenched in the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 with Paragraph 3 of Article 127 of the Constitution.

1. The Panevėžys City Local Court, a petitioner, requests an investigation into whether the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” entrenched in the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution.

2. The petitioner does not point out in which item of the government resolution the impugned provision is set down, the compliance of which with the Constitution is challenged by him. The provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” is set forth in Item 2 of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998.

Subsequent to the petition of the Panevėžys City Local Court, a petitioner, the Constitutional Court will investigate whether Item 2 of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution.

3. Paragraph 3 of Article 127 of the Constitution provides that “taxes, other contributions to the budgets, and levies shall be established by means of laws of the Republic of Lithuania”.

It has been mentioned that it is pointed out by what form of a legal act taxes must be established: this can only be done by law; it has also been mentioned that such essential elements of the tax as the object of the tax, subjects of tax relations, their rights and duties, tax rates (tariffs), term of payment, exceptions and preferences must be provided for by law, while the procedure of implementation of the tax law, including the procedure of calculation of a concrete payable tax, may also be established by means of substatutory acts.

4. It has been mentioned that the indirect establishment of the tax base is linked with the legal situation when one has to establish (calculate) as to what concrete amount is from which a concrete taxpayer must pay the tax of the taxable object (tax base), also that the indirect establishment (calculation) of the tax base is linked with the application of a corresponding tax law. It has been held in this ruling of the Constitutional Court that the provision “if it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base” and the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 of the Law on Tax Administration are not in conflict with Paragraph 3 of Article 127 of the Constitution.

5. Taking account of the fact that the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” of Item 2 of the Methods of the Indirect Establishment of the Tax Base is the same as that established in Article 271 of the Law on Tax Administration, and of the fact that the said provision of Article 271 of the Law on Tax Administration, as held in this ruling of the Constitutional Court, is not in conflict with Paragraph 3 of Article 127 of the Constitution, the conclusion should be drawn that Item 2 of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with Paragraph 3 of Article 127 of the Constitution.

V

On the compliance of the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 with Paragraph 3 of Article 127 of the Constitution and the provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Law on Tax Administration.

1. The Chapter “Cases of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is set forth as follows:

4. The tax base shall be established indirectly if

4.1. the taxpayer does not present the tax declaration, an account confirmed by the established procedure or another document (hereinafter referred to as the tax declaration) about the property, income and profit of his enterprise;

4.2. the taxpayer enters into the declaration wrong (unreliable, contradictory) data about the property, income, profit of his enterprise and use thereof;

4.3. the taxpayer or person clearing the tax does not present accounting documents, registers or presents not all of them because

4.3.1. accounting is not conducted or conducted without following requirements established in the laws and other legal acts of the Republic of Lithuania;

4.3.2. accounting documents and registers have not been preserved;

4.3.3. accounting documents and registers are hidden;

4.4. accounting documents and registers

4.4.1. have been falsified;

4.4.2. have been drawn up by persons who conduct commercial-economic activities by unlawfully using the name of the enterprise;

4.4.3. do not reflect the actual content of the accomplished economic operations;

4.5. the value of the property acquired by the taxpayer or his expenses are bigger than the income declared during the corresponding period;

4.6. there are other reasons due to which it is impossible to establish the tax base and which are not indicated in Items 4.1–4.5 (in this case the methods of the indirect establishment of the tax base are applied under procedure established of the Minister of Finance).”

2. The Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is set forth as follows:

Methods of the Indirect Establishment of the Tax Base

7. The tax administrator, while taking account of the facts, circumstances and other available information, in the cases pointed out in Item 4, has the right to decide whether it is expedient to indirectly establish the tax base and choose the methods of the establishment of the tax base.

8. There shall be the following methods of indirect establishment of the tax base:

8.1. comparative. This method shall be applicable if the taxpayer fails to submit the tax declaration to the tax administrator, however, the tax administrator has different declarations of the same conducted economic-commercial activities by the same taxpayer.

The tax base of the verified period shall be calculated under the financial indicators of the same period. If it is impossible to establish the financial indicators of the verified period, one should base himself on the financial indicators of the declared period;

8.2. analogy. This method shall be applicable if

8.2.1. the taxpayer does not submit to the tax administrator the tax declaration and the tax administrator does not have any other tax declarations about the same economic-commercial activity by the same taxpayer;

8.2.2 the financial indicators in the declaration submitted by the taxpayer are sufficiently different from the financial indicators in the declarations from persons conducting the same economic-commercial activity;

By establishing the tax base according to the method of analogy, in order to establish and compare the financial indicators of tax declarations, a taxpayer(s) is/are chosen who conduct(s) the same economic-commercial activity and who has/have an analogous turnover, who is/are in a similar geographical situation and who has/have a similar number of employees.

The tax base shall be the financial indicators of the taxpayer within the verified period, which are determined by making comparison to the financial indicators in tax declarations of persons who conduct the same economic-commercial activity, or the difference received upon comparison of the financial indicators;

8.3. expenses. This method shall be applicable if the official of the tax administrator can establish personal expenses of the taxpayer and his family. The determined personal expenses of the taxpayer and his family are compared to the declared income. The tax base shall be the difference in the personal expenses of the taxpayer and the declared income;

8.4. net value. While applying this method, the amount of the value of property acquired by the taxpayer and the amount of the declared income of the taxpayer are compared. The tax base shall be the difference in the sum of the value of the acquired property, subsistence expenses, non-taxable income and financial liabilities, and the declared income;

8.5. account capital. This method is applied when all or almost all income (revenues) of the taxpayer get into bank or other finance institutions’ accounts.

Subsequent to the documents received from banks and other finance institution as well as other available documents, the income of the taxpayer is calculated, and from it the expenses and non-taxable income which are documented are subtracted. The tax base shall be the difference in the received result and the declared income;

8.6. precise information. This method is applied if the official of the tax administrator receives concrete information about the income and expenses of the taxpayer, which have not been declared under established procedure. The tax base shall be the established amount of non-declared income or expenses;

8.7. economic models. While applying this method, one makes use of various calculations (gross profit, net profit, mark-up, prime cost, trade price, realisation income), which are conducted on the basis of observation or any other available information. To perform these calculations, one makes use of business data on the basis of which the scale of the activities of the taxpayer are established. There may be such data:

business expenses;

communal expenses;

size of the premises of the enterprise;

facilities used for economic-commercial activity;

data about the number of clients within the chosen period;

average purchase scale.

On the basis of the above calculations, the tax base is established.

9. The tax base is established indirectly, while taking account of the changes in the circumstances of the activities of the taxpayer, as well as in the situation of the market and inflation.”

3. It has been mentioned that the Supreme Administrative Court of Lithuania, a petitioner, grounds its doubts as to the constitutionality of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 on the fact that that under Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration the tax base can be established by law, and that the legislature cannot consolidate the right of the Government to establish methods of the indirect establishment of the tax base.

4. While deciding whether the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution and Paragraph 2 of Article 5 of the Law on Tax Administration, one has to elucidate as to what relations are regulated by the Methods of the Indirect Establishment of the Tax Base which were confirmed by the said government resolution.

5. It is established in the Chapter “General Provisions” of the Methods of the Indirect Establishment of the Tax Base confirmed by the government resolution of 3 September 1998 that this legal act regulates the indirect establishment of the tax base. The same chapter also contains a provision that the tax base is established indirectly in cases when it is impossible to establish it under procedure established by tax laws, as well as a provision that after the tax base is established indirectly, the amount of the tax is calculated and the tax is exacted under procedure established by tax laws.

6. The cases of the indirect establishment of the tax base established in the Chapter “Cases of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are linked with the legal situation when it is impossible to establish (calculate) the amount of a concrete tax base due to the fact that the taxpayer does not present any documents on the grounds of which one might establish from what amount of the tax base a concrete tax must be calculated and paid, or these documents are falsified, or they do not reflect the actual content of the performed economic and financial operations, etc.

The list of the indirect establishment of the tax base is not a final one: under Subitem 4.6 the tax base can also be established indirectly also in cases when “there are other reasons when it is impossible to establish the tax base according to the procedure established in the tax law”.

Thus, by the legal regulation established in the Chapter “Cases of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 the provision “if it is impossible to establish the tax base under procedure provided for in the tax law” of Article 271 of the Law on Tax Administration is detailed and particularised. The cases of the indirect establishment of the tax base show when the situation can be considered to be such under which it is impossible to establish the tax base under procedure provided for in the tax law.

7. It needs to be noted that although the statement of the said case in itself does not mean that alongside one holds that there is such a legal situation that it is impossible to establish (calculate) the tax base directly, and that one must apply the methods of the indirect establishment of the tax base. As mentioned before, the provision “the tax base is established indirectly only if it is impossible to establish it under the procedure established in tax laws” is set forth in the Chapter “General Provisions” of the Methods of the Indirect Establishment of the Tax Base (Item 2) confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998. This provision means that even when there is a case indicated, one must always assess and decide whether due to this it is really impossible to establish the tax base directly, i.e. under procedure established by law. Only when it is impossible to establish (calculate) the tax base directly, it can be established (calculated) indirectly.

8. The methods of the indirect establishment of the tax base established in the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are designed in order to establish (calculate) a concrete tax base (its amount), from which a concrete tax must be paid. As mentioned before, these methods may be applied only when it is impossible to establish (calculate) the tax base under procedure established by law, i.e. it is impossible to establish it due to the fact that the taxpayer has not submitted the documents on the grounds of which it would be possible to establish (calculate) a concrete tax base (its amount) from which a concrete taxpayer must pay a concrete tax, or these documents have been falsified, or they do not reflect the actual content of the accomplished economic and financial operations, etc.

9. Thus, by the legal norms established in the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base confirmed by the government resolution of 3 September 1998 it is regulated in what cases and how a concrete tax base (its amount) is indirectly established (calculated), from which a concrete taxpayer must pay the tax, when it is impossible to establish (calculate) a concrete tax base (its amount) under procedure established by law, i.e. directly.

The consolidation of the methods of the indirect establishment (calculation) of the tax base is linked with the application of a corresponding tax law and is one of elements of the application of a corresponding tax law. The confirmation of the methods of the indirect establishment (calculation) of the tax base virtually means confirmation of certain rules of calculation of the tax which must be paid by a concrete taxpayer.

10. It has been mentioned that Paragraph 3 of Article 127 of the Constitution provides that taxes shall be established by law. While construing the content of this constitutional provision, the Constitutional Court has held that such essential elements of the tax as the object of the tax, subjects of tax relations, their rights and duties, tax rates (tariffs), term of payment, exceptions and preferences must be provided for by law. The procedure by which one calculates as to what tax must be paid by a concrete taxpayer may also be established by a substatutory legal act.

It has also been mentioned that the tax base is established by law when in the law establishing a corresponding tax the taxable object is established (this object is the same (common) to all payers of this tax), and that also how it must be evaluated in terms of a sum of money.

It has been held in this ruling of the Constitutional Court that the provision “if it is impossible to establish the tax base under procedure provided for in the tax law, the tax administrator <…> has the right to indirectly establish the tax base and choose methods of establishment of the tax base” of Article 271 of the Law on Tax Administration is not in conflict with Paragraph 3 of Article 127 of the Constitution.

11. Taking account of the arguments set forth, it should be concluded that the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution.

12. It has been mentioned that the Supreme Administrative Court of Lithuania, a petitioner, requests an investigation into whether the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with the provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Law on Tax Administration, which, in the opinion of the petitioner, should be construed inseparably from the provision that the tax base may only be established by law, which is consolidated in the notion “manner of tax imposition” defined in Article 2 of the Law on Tax Administration.

13. Paragraph 2 of Article 5 of the Law on Tax Administration provides: “The manner of imposition of a certain tax shall be established only by a respective tax law or a resolution of the Government of the Republic of Lithuania adopted on the grounds of the said law, or another legal act adopted on the grounds of the said law or resolution.”

Taking account of the fact that in Paragraph 2 of Article 5 of the Law on Tax Administration the notion “manner of tax imposition” is used, this paragraph, therefore, is directly linked with Article 2 of the Law on Tax Administration, in which the notion “manner of tax imposition” is defined.

As mentioned before, the notion “manner of tax imposition” is defined in Article 2 of the Law on Tax Administration as follows: “manner of tax imposition includes the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest, tax payments as well as exaction rules, established by the tax law”.

The formulation “tax base <…> established by the tax law” of the notion “manner of tax imposition” means that the tax base must be established by law.

14. It needs to be noted that the notion “manner of tax imposition” is defined legally imprecisely in Article 2 of the Law on Tax Administration. The word “manner” (Lith. tvarka) is understood as “a well-established manner of action or behaviour” (Lietuvių kalbos žodynas (A Dictionary of Lithuanian), vol. 17, Vilnius: Mokslo ir enciklopedijų leidykla, 1996, p. 219). In its ruling of 6 October 1999, the Constitutional Court held that the notion “established manner” means only establishment of certain procedures. Thus, while defining the notion “manner of tax imposition” in the Law on Tax Administration, one ought to establish as to how one must act and behave so that the taxpayer might be taxed, i.e. that one might calculate as to what tax amount the taxpayer must pay. Meanwhile, the definition of the notion “manner of tax imposition” not only defines the manner of tax imposition, but also such elements, which, as a rule, cannot be categorised as the manner of tax imposition: the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest are not elements of a manner of tax imposition. It needs to be noted that the elements which generally cannot be categorised as the manner of tax imposition constitute the basic content of the notion “manner of tax imposition” defined in Article 2 of the Law on Tax Administration.

It is evident that the notion “manner of tax imposition” is defined in an expansive manner. Due to this there occurs confusion of the terms employed in the Law on Tax Administration, preconditions are created to interpret the legal regulation established in the law in a varied manner, legal ambiguity and uncertainty occur including, also, the fact as to which competence in the tax sphere is established for the Seimas, and which—for the Government. The legal regulation when the content employed in legal acts does not correspond to the common meaning of the notion is legally deficient.

15. The provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Law on Tax Administration is linked with the notion “manner of tax imposition” defined in Article 2 of the Law on Tax Administration as regards the established requirement to establish the tax base by law, therefore, in the course of the investigation of the compliance of the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 with the provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Law on Tax Administration, the content of this provision will be construed while taking account of the content of the notion “manner of tax imposition” defined in Article 2 of the Law on Tax Administration.

16. Paragraph 2 of Article 5 of the Law on Tax Administration provides that the manner of imposition of a certain tax shall be established only by a respective tax law or a resolution of the Government of the Republic of Lithuania adopted on the grounds of the said law, or another legal act adopted on the grounds of the said law or resolution. Taking account of the fact that the notion “manner of tax imposition” defined in Article 2 of the Law on Tax Administration also includes the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest, the conclusion should be drawn that under Paragraph 2 of Article 5 of the Law on Tax Administration tax elements can be established not only by a tax law but also by a resolution of the Government adopted on the grounds of the said law, or another legal act adopted on the grounds of the said law or resolution, i.e. by a legal act of lower power than a law.

17. It needs to be noted that Paragraph 3 of Article 127 of the Constitution implies that such essential elements of the tax as the object of the tax, subjects of tax relations, their rights and duties, tax rates (tariffs), term of payment, exceptions and preferences must be provided for by law (the Constitutional Court’s ruling of 15 March 2000). Taking account of the fact that tax relations are obligatory legal relations between the state and the taxpayer, that in the course of the payment of taxes part of property of natural and legal persons become property of the state, then the essential tax elements are also penalties and interest established for the taxpayers—these tax elements (while taking account of Article 23 of the Constitution) must also be established by law.

After the provision was established in Paragraph 2 of Article 5 of the Law on Tax Administration under which also the aforesaid essential tax elements can be established by means of a government resolution or another legal act adopted on the grounds of the tax law or the government resolution, thus, by means of a legal act of lower power than that of a law, Paragraph 3 of Article 127 of the Constitution is disregarded.

18. Taking account of the arguments set forth, the conclusion should be drawn that Paragraph 2 of Article 5 of the Law on Tax Administration, relating it with the content of the notion “manner of tax imposition” as presented in Paragraph 2 of Article 5 of the Law on Tax Administration, to the extent that the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest can be established not by means of a law, but a resolution of the Government of the Republic of Lithuania or by means of another legal act adopted on the grounds thereof, is in conflict with Paragraph 3 of Article 127 of the Constitution.

19. According to the construction of Paragraph 2 of Article 5 of the Law on Tax Administration, while taking account of the content of the notion “manner of tax imposition” defined in Paragraph 2 of Article 5 of the Law on Tax Administration, the tax base must be established by law. As mentioned before, the notion “tax base established by law” reflects a requirement to establish, by law, the taxable object (tax base) which is evaluated in terms of a monetary sum, that this taxable object must be established in a corresponding law establishing a respective tax, and that this taxable object is the same (common) to all payers of this tax. It has also been mentioned that if the taxable object is established by law as well as how it must be evaluated in terms of a sum of money, it must be held that the tax base has been established by law.

It has been held in this ruling of the Constitutional Court that by the legal norms consolidated in the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 it is regulated how a concrete tax base (its amount) is indirectly established (calculated), from which a concrete taxpayer must pay the tax, that the establishment (determination) of the methods of the indirect establishment (calculation) of the tax base is linked with the application of a respective tax law, that the confirmation of the methods of the indirect establishment (calculation) of the tax base virtually means confirmation of certain rules of the tax payable by a concrete taxpayer.

20. It has been held in this ruling of the Constitutional Court that the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with Paragraph 3 of Article 127 of the Constitution. Having held that, one is also to hold that the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Government Resolution (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with the provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Law on Tax Administration.

VI

On the compliance of the provision “tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000” of Item 4 of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration with Paragraph 1 of Article 29 of the Constitution and the constitutional principles of a state under the rule of law and justice.

1. The Vilnius Regional Administrative Court, a petitioner, requests an investigation into whether the provision “tax arrears are recognised as hopeless only if they accumulated prior to 1 January 2000” of Item 4 of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration is not in conflict with the principle of the equality of all persons before the law which is entrenched in Paragraph 1 of Article 29 of the Constitution and the constitutional principles of a state under the rule of law and justice.

Under Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration, “the tax arrears of the taxpayer (person clearing the tax) are recognised as hopeless, which are impossible to exact due to objective reasons, when it is inexpedient to exact them from the social and/or economic standpoint, i.e. the tax arrears are recognised as hopeless provided there are the following grounds: <…> (4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax). The tax arrears for the state and municipal budget as well as state monetary funds are decreased in the sum of the default of financial liabilities provided the appropriations manager is funded from the State Budget (state monetary funds), or the tax arrears for municipal budgets are decreased in the sum of the default of financial liabilities provided the appropriations manager is funded from the municipal budget. The procedure for equalisation of tax income shall be established by law.”

Thus, the provision impugned by the petitioner is established in the first sentence of Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration, which is set forth as follows: “4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)”.

It needs to be noted that the provision pointed out by the petitioner is inseparable from another provision of Item 4 of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration, which is also established in the first sentence thereof: “provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)”. It is also clear that Item 4 of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration is inseparable from the provision “the tax arrears are recognised as hopeless provided there are the following grounds” established in the first sentence of Paragraph 7 of Article 29 of the same law.

Therefore, the Constitutional Court will investigate the compliance of the provision “the tax arrears are recognised as hopeless provided there are the following grounds: <…> (4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)” of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration with Paragraph 1 of Article 29 of the Constitution and the constitutional principles of a state under the rule of law and justice.

3. It has been mentioned that in Article 29 of the Constitution the principle of the equality of all persons before the law, the court and other state institutions and officials, that this principle also includes the prohibition on discrimination and privileges, that differentiated legal regulation which is applied to groups of persons distinguished by certain same features, if one thus strives for positive and socially meaningful objectives, is not considered to be discrimination or privileges. It has also been mentioned that the principle of the equality of all persons before the law does not deny the fact that the law may establish different legal regulation with respect to categories of persons that are in different situations, also that the constitutional principle of the equality of all persons before the law would be violated when a certain group of people for which the legal norm is established, if compared to other addressees of the same legal norm, were treated differently, even though there are not any differences in the character and extent between these groups that such an uneven treatment might be objectively justified.

4. It needs to be noted that the legislature, enjoying the powers, under the Constitution, to impose taxes, also enjoys constitutional powers to regulate exaction of taxes, thus, also to establish the grounds under which certain tax arrears can be refused to be exacted from the taxpayer. The Constitution does not contain any legal norms obligating the legislature to establish certain grounds under which certain tax arrears might be refused to be exacted. According to the Constitution, in this area the legislature enjoys discretion. However, in all cases the legislature must pay heed to requirements of the Constitution as well as the principles of a state under the rule of law and justice.

5. Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration provides for the grounds under which tax arrears are recognised as hopeless. One of such grounds is established in Item 4 of Paragraph 7 of Article 29 of the Law on Tax Administration, under which tax arrears are recognised as hopeless provided “4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)”.

Paragraph 8 of the Law on Tax Administration provides that if tax arrears are recognised as hopeless, the said tax arrears are held to be expired and are written off from the budget revenues accounting documents.

6. Under the impugned provision of Paragraph 7 of Article 29 of the Law on Tax Administration, the tax arrears of all taxpayers (persons clearing the tax) are recognised as hopeless which accumulated prior to 1 January 2000, to whom the appropriations manager had not performed financial liabilities. Under the impugned legislative provision all taxpayers (persons clearing the tax), if they conform to the conditions pointed out in the impugned provision, are treated in the same manner. By the legal regulation established in the impugned legislative provision one seeks to attain positive and socially meaningful objectives: corresponding taxpayers are exempted from the duty to pay part of the tax to the state budget and state monetary funds as well as the municipal budget, since the exaction of the unpaid part of the tax, when the appropriations manager has not fulfilled the financial obligations to the said taxpayer, is inexpedient from the social and/or economic standpoint.

The legal regulation established in the impugned legislative provision is not one establishing privileges for a certain group of taxpayers (persons clearing the tax) or discriminating it: while seeking, as mentioned before, to attain positive and socially meaningful objectives, the impugned legislative provision establishes differentiated legal regulation, which is applied to a group of persons distinguished by the same features.

7. Taking account of the arguments set forth, it should be concluded that the provision “the tax arrears are recognised as hopeless provided there are the following grounds: <…> (4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)” of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration is in compliance with Article 29 of the Constitution.

8. Having held that the provision “the tax arrears are recognised as hopeless provided there are the following grounds: <…> (4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)” of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Law on Tax Administration is in compliance with Article 29 of the Constitution, on the grounds of the same arguments one is also to hold that the said provision does not violate the constitutional principles of a state under the rule of law and of justice.

VII

On the compliance of the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration with Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration provides:

The central tax administrator shall consider the complaint only if:

1) it has been filed in writing within 20 days after the taxpayer (person clearing the tax) was handed in the decision of the tax administrator or his official on the confirmation of the verification act, while if the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending;

2) it contains the name, surname (name) of the taxpayer (person clearing the tax), address; the decision complained against concerning the confirmation of the verification act, the date of its drawing up, the circumstances upon which the claimant bases his claim, and evidence confirming that; there is the claim if the claimant; the documents are attached to the complaint, which ground the claim of the claimant, and the complaint contains the signature.”

2. The Vilnius Regional Administrative Court, a petitioner, requests an investigation into whether the provisions of Item 1 of Paragraph 2 of Article 56 of the Law on Tax Administration that the term of 20 days of filing the complaint is counted starting from the fifth working day after sending the decision of the tax administrator or his official on the confirmation of the verification act by registered mail are not in conflict, as to their content, with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution and Article 29 of the Constitution. Thus, the petitioner requests an investigation into whether the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with the principles of an open, just, and harmonious civil society and state under the rule of law which are entrenched in the Preamble to the Constitution and Article 29 of the Constitution.

3. The Preamble to the Constitution declares striving for an open, just, harmonious civil society and a state under the rule of law. The Constitution is an integral act. The values and strivings entrenched in the Constitution are expressed in its norms and principles (the Constitutional Court’s ruling of 11 July 2002). Thus, the striving for an open, just, harmonious civil society and a state under the rule of law should be construed inseparably from the other norms and principles of the Constitution, the principle of a state under the rule of law among them (the Constitutional Court’s rulings of 19 September 2002 and 17 March 2003).

It has been mentioned that the constitutional principle of a state under the rule of law is a universal principle upon which the entire legal system of Lithuania and the Constitution itself are based. This constitutional principle also embodies the strivings for an open, just, harmonious civil society and a state under the rule of law entrenched in the Preamble to the Constitution (the Constitutional Court’s ruling of 19 September 2002).

Therefore, the Constitutional Court will investigate whether the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with the constitutional principle of a state under the rule of law.

4. While deciding whether the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with the constitutional principle of a state under the rule of law, the fact is of essential importance that payment of taxes is a constitutional duty, that this duty must be performed in time, while the tax disputes that arise must be settled within the shortest time possible.

5. In the context of the case at issue, attention should be paid to the fact that under Paragraph 7 (wording of 26 June 2001) of Article 27 of the Law on Tax Administration, “the taxpayer (person clearing the tax) may, within 20 days of notification under signature, while in his absence within 25 days of sending the letter by registered mail, submit his written remarks and replications together with additional evidence supporting them to the tax administrator as regards the verification act”; under Paragraph 2 of Article 29 of the same law, “the unpaid sums of taxes established by the tax administrator at the time of the verification and the calculated interest must be paid within 20 calendar days, while the fines—within the term established in Article 52 of this Law. The date shall be started to be calculated from the day that the taxpayer (person clearing the tax) was handed in the decision of the tax administrator on the confirmation of the verification act, while if this decision was sent by registered mail the term shall be counted starting from the fifth working day after the sending.”

Thus, an alternative has been established in the Law on Tax Administration: the decision of the tax administrator can be handed in to the taxpayer in person or sent to him by registered mail. When the decision is handed in to the taxpayer in person, the 20-day term for filing a complaint is calculated from the next day, while in cases when the decision is sent by registered mail, the 20-day term for filing a complaint is counted from the fifth day of its sending.

6. In the context of the case at issue, it should be noted that, under the Republic of Lithuania’s Law on the Declaration of the Place of Residence, residents of this country must declare their place of residence (Article 4). Under this law, the purposes of the declaration are “collection and accumulation of data concerning places of residence of persons, while seeking to carry out public tasks, to better administration, to implement <…> other programmes related with the person, his place of residence and welfare, ensuring that the data about the place of residence of the person be submitted only to a single institution collecting these data” (Article 2). Paragraph 1 of Article 3 of this law provides that the declaration of the place of residence is submission of the data comprising the address of the place of residence to the declaration institution, while Paragraph 2 thereof defines the notion of the declaration of the place of residence: this is the main place where the person actually resides most often and with which he is linked most. The law also obligates to declare persons about the change of the place of residence.

By legislative regulation of declaration of the place of residence, one seeks to create an opportunity for state (municipal) institutions to duly inform the residents about decisions taken in their regard; on the other hand, declaration of the place of residence is a necessary pre-condition in the course of ensuring the right of persons to be duly informed about decisions taken by state (municipal) institutions in their regard. Thus, by the Law on the Declaration of the Place of Residence one also attempts to create an opportunity for the tax administrator to duly inform the taxpayers about decisions on the confirmation of the verification act, taken by the tax administrator or his official.

In this context, one has to mention the fact that Paragraph 7 (wording of 26 June 2001) of Article 54 of the Law on Tax Administration provides that “the taxpayer or his representative must inform the central tax administrator considering the tax dispute about the change of his address at the time of the process of this dispute. In the absence of such a notification, the decision of the central tax administrator and other information shall be sent to the last address known by the central tax administrator and it shall be considered delivered, although the address of the taxpayer has changed”. It also needs to be mentioned that Article 77 of the Republic of Lithuania’s Law on the Proceedings of Administrative Cases establishes a duty of to inform about the change of the address during the proceedings of a case: the participants in the proceedings and representatives must inform the court of the change of the address during the proceedings of the case. Where there has been no appropriate notification, the summons shall be sent to the address last known to the court or to the address of the officially declared place of residence or to the headquarters and shall be considered delivered even though the addressee might not be residing at the address or might have changed his headquarters.

7. In the context of the case at issue one is also to note that under Paragraph 2 of Article 6 of the Republic of Lithuania’s Postal Law, the public post, while providing universal postal services and taking into consideration the needs of users of postal services, ensures that, inter alia, universal postal services should be provided continuously save the cases depending on the irresistible force (force majeure), without discrimination, under the same conditions to all users of postal services, each working day, not less than five working days per week, in the entire territory of the country. The notion of universal postal services includes also delivery of registered correspondence.

8. It has been mentioned that a duty to pay taxes stems from the Constitution. Under the Law on Tax Administration, in order to administer the record of taxpayers, a general taxpayers’ register is created, therefore, the person to whom an obligation is established by a tax law to pay a tax, must register himself as a taxpayer and inform about the changed or newly occurred data, thus, also about the change of the place of residence.

9. While deciding whether the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with the Constitution, one must take account of the fact that the Law on Tax Administration establishes legal guarantees of the protection and defence of the rights of the taxpayer. For instance, Paragraph 1 of Article 54 (wording of 26 June 2001) of the Law on Tax Administration provides that the taxpayer may dispute every action of the tax administrator or his official regarding him and the consequences of this action, Paragraph 4 thereof provides that during every stage of a tax dispute investigation the taxpayer shall have the right to be heard, Paragraph 5 thereof provides that at the time of the investigation of the tax dispute the tax administrator must seek to attain a mutual agreement to apply the tax law in the same manner, also that the indetermination occurred due to the content of tax legal acts must be interpreted in the interest of the taxpayer, Paragraph 8 thereof provides that for the taxpayer, who failed to file a complaint within the term established by law due to reasons which are recognised by the tax administrator or the Tax Dispute Commission as valid, this term, upon a decision by the central tax administrator or the Tax Dispute Commission, may be renewed, also, that an application concerning renewal of the overdue term is submitted and considered according to the procedure established in the law.

Paragraph 9 of Article 54 of the Law on Tax Administration also provides for an opportunity to appeal against a refusal to renew the overdue term: “The decision of the central tax administrator or the Tax Dispute Commission whereby an application on the renewal of the term is dismissed, may be appealed against under procedure established in the Law on the Proceedings of Administrative Cases.”

10. The legislature, while regulating tax relations, also may and must establish terms of the payment of taxes, consideration of disputes, as well as of submission of complaints concerning decisions adopted by tax administrators. These terms must be reasonable, rational, ensuring an opportunity to inform the taxpayers properly and in time about decisions of tax administrators adopted in their regard, so that taxes might be calculated and paid in time, and that the taxpayer could have an opportunity to make use of protection of his rights in time.

It has been mentioned that it is established in the impugned legislative provision that the term is calculated from the fifth day of sending the letter by registered mail. Taking account of the fact that persons must declare their place of residence, also of the fact that the taxpayer, while having a constitutional duty to pay taxes conscientiously, must have an interest himself that taxes be calculated correctly and that he could make use of protection of his rights, also of the fact that in the course of the verification of the tax calculation, the taxpayer must co-operate with the tax administrator, provide him with the information, therefore, there are no grounds to maintain that the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is in conflict with the constitutional principle of a state under the rule of law.

11. Taking account of the arguments set forth, it should be concluded that the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with the constitutional principle of a state under the rule of law.

12. While deciding whether the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with Article 29 of the Constitution, attention should be paid to the fact that the Law on Tax Administration does not point out in what cases the decision of the tax administrator or his official on the confirmation of the verification act is handed in to the taxpayer in person, and in what cases this decision is sent by registered mail. Also, it is not established to which persons the decision must be handed in person, and to which it must be sent by registered mail. Thus, both ways of informing are of equal value, they are alternative ways and ensure the official information to the taxpayer about a decision of the tax administrator or his official concerning the confirmation of the verification act, and they both can be applied to all taxpayers.

13. It must also be noted that the legal regulation whereby alternative ways of delivering of a decision of the tax administrator or his official does not deny the right of the taxpayer to choose the way of informing him, which is more acceptable to him.

It has been said that both these ways of informing are of equal value and can be equally applied to all taxpayers. Thus, there are no legal grounds to maintain that by such legal regulation taxpayers are distinguished in certain groups, that they are discriminated against or granted privileges.

14. Taking account of the arguments set forth, it should be concluded that the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Law on Tax Administration is not in conflict with Article 29 of the Constitution.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

1. To recognise that Paragraph 2 of Article 5 of the Republic of Lithuania’s Law on Tax Administration to the extent that the taxpayer, tax base, tax amounts (tariffs), tax preferences, penalties and interest can be established not by means of a law, but a resolution of the Government of the Republic of Lithuania or by means of another legal act adopted on the grounds thereof, is in conflict with Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania.

2. To recognise that the provision “the methods of the indirect establishment of the tax base shall be confirmed by the Government or by its authorised institution” of Article 271 (wording of 2 July 1998) of the Republic of Lithuania’s Law on Tax Administration is not in conflict with the Constitution of the Republic of Lithuania.

3. To recognise that the provision “the tax arrears are recognised as hopeless provided there are the following grounds: <…> (4) the tax arrears of the taxpayer (person clearing the tax) for the State Budget and state monetary funds as well as municipal budgets accumulated prior to 1 January 2000, provided the appropriations manager had not performed financial liabilities to a certain taxpayer (person clearing the tax)” of Paragraph 7 (wording of 8 October 2002) of Article 29 of the Republic of Lithuania’s Law on Tax Administration is not in conflict with Article 29 of the Constitution of the Republic of Lithuania.

4. To recognise that the provision “the central tax administrator shall consider the complaint only if: (1) it has been filed in writing within 20 days after [to] the taxpayer (person clearing the tax) <…> the decision is sent by registered mail—the term shall be counted starting from the fifth working day after the sending” of Paragraph 2 (wording of 26 June 2001) of Article 56 of the Republic of Lithuania’s Law on Tax Administration is not in conflict with the Constitution of the Republic of Lithuania.

5. To recognise that Item 2 of the Methods of the Indirect Establishment of the Tax Base confirmed by the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 is not in conflict with the Constitution of the Republic of Lithuania.

6. To recognise that the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with the Constitution of the Republic of Lithuania.

7. To recognise that the Chapter “Cases of the Indirect Establishment of the Tax Base” and the Chapter “Methods of the Indirect Establishment of the Tax Base” of the Methods of the Indirect Establishment of the Tax Base which were confirmed by the Resolution of the Government of the Republic of Lithuania (No. 1073) “On the Indirect Establishment of the Tax Base” of 3 September 1998 are not in conflict with the provision “the manner of imposition of a certain tax shall be established only by a respective tax law” of Paragraph 2 of Article 5 of the Republic of Lithuania’s Law on Tax Administration.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is pronounced in the name of the Republic of Lithuania.

Justices of the Constitutional Court:                                                  Armanas Abramavičius

Egidijus Jarašiūnas

Egidijus Kūris

Kęstutis Lapinskas

Zenonas Namavičius

Augustinas Normantas

Jonas Prapiestis

Vytautas Sinkevičius

Stasys Stačiokas