Article 7 - Respect for private and family life
Article 47 - Right to an effective remedy and to a fair trial
Article 51 - Field of application
Key facts of the case:
Reference for a preliminary ruling — Taxation — Personal Income Tax — Inadmissibility of the request for a preliminary ruling.
Joined Cases C-469/18 and C-470/18.
Outcome of the case:
In view of the foregoing considerations, I propose that the Court of Justice should declare that it lacks jurisdiction to answer the question of the Hof van Cassatie (Court of Cassation, Belgium).
3) The matter at issue is therefore the application of the Charter of Fundamental Rights of the European Union (‘the Charter’) — Article 47 of the Charter in this case — in the context of income tax assessment. This matter goes beyond the much-discussed ( 2 )Åkerberg Fransson judgment from 2013. ( 3 ) In that judgment, the Court ruled that criminal proceedings regarding VAT fraud serve to ‘implement … Union law’ within the meaning of Article 51(1) of the Charter. It is now necessary to examine whether the assessment of income tax serves to implement Union law if evidence that was obtained during a pre-trial investigation initiated due to suspicion of VAT fraud is used.
15) By orders of 28 June 2018, the Hof van cassatie (Court of Cassation) referred the following question to the Court of Justice for a preliminary ruling: ‘Should Article 47 of the Charter, in cases of value added tax, be interpreted as precluding in all circumstances the use of evidence obtained in violation of the right to respect for private life as guaranteed by Article 7 of the Charter, or does it leave room for a national regulation under which the court which has to decide whether such a piece of evidence can be used as the basis for a VAT assessment has to make an evaluation such as the one set out above under paragraph 4 of this judgment (see point 7 above)?’
22) The Court of Justice may therefore reformulate the question referred such that it asks whether Article 47 of the Charter should be interpreted as precluding in all circumstances the use, in an income tax assessment, of evidence obtained in violation of Article 7 of the Charter during a pre-trial investigation initiated due to suspicion of VAT fraud, or does it allow an interpretation according to which the court which has to decide whether such evidence may be used for an income tax assessment must carry out an evaluation on a case-by-case basis.
24) However, pursuant to Article 267(1)(a) TFEU, the Court of Justice has jurisdiction to give preliminary rulings concerning the interpretation of EU law. It is questionable in this respect, however, whether the Charter is relevant from a temporal (point 25 et seq.) and material perspective (point 30 et seq.).
25) It is firstly necessary to clarify whether the Charter, which entered into force on 1 December 2009, is temporally applicable to an alleged breach of procedure in 1998.
26) On the one hand, in the Sabou case, which also pertains to the field of direct taxation, the Court of Justice ruled that the Charter is not applicable because the mutual assistance procedure which led to the additional notice of assessment that was the subject matter of that dispute had ended before the Charter entered into force. ( 6 )
27) On the other hand, the Åkerberg Fransson case, for instance, also concerned notices of assessment from the period before 1 December 2009. However, the criminal law judge had to take the ne bis in idem principle into account in his decision in that case. That period fell within the temporal scope of the Charter.
28) The situation in the present case is similar. Even if the gathering of evidence took place in 1998, the question regarding the use of the evidence arises for the national court at the time of its decision and therefore after the entry into force of the Charter.
29) Whereas — as in the Sabou case referred to in point 26 — the process of informing the taxpayer of the request for assistance and any participation in the formulation of the request is completed when the mutual assistance procedure ends, any prohibition on the gathering of evidence remains important for the evaluation regarding a prohibition on the use of evidence. As a result, the Charter is temporally applicable in the present case.
30) The scope of the Charter is defined in Article 51 thereof. Pursuant to the first sentence of the first paragraph of that provision, the Charter is addressed to the Member States only when they are implementing Union law.
31) In this respect the Court has already observed that it has no power to examine the compatibility with the Charter of national legislation lying outside the scope of European Union law. ( 7 )
32) Several parties to the proceedings have doubts regarding the jurisdiction of the Court of Justice on account of the Charter not being applicable. Both Belgium and the Commission take the view that the Court of Justice lacks jurisdiction because the issuing of income tax assessments does not serve to implement Union law. Even the Hof van cassatie (Court of Cassation) observes that the present case ‘concerns income taxes, which are not governed by EU law’. ( 8 )
33) In order nevertheless to substantiate the applicability of the Charter, two connecting factors come into consideration in the present case: in addition to mutual assistance (point 34 et seq.), this is primarily the harmonisation of VAT under EU law (point 38 et seq.) in the present case.
34) Firstly, there could be implementation of Union law within the meaning of Article 51(1) of the Charter if the evidence had been obtained by means of mutual assistance pursuant to Directive 77/799 (‘the Mutual Assistance Directive’). ( 9 )
41) If the legal instruments contested in the main proceedings were notices of VAT assessment, implementation of Union law within the meaning of Article 51(1) of the Charter could be assumed. The reason for this is that, on the one hand, the Court of Justice has ruled that it follows from Articles 2, 250(1) and 273 of Directive 2006/112 (the VAT Directive) ( 16 ) and Article 4(3) TEU that every Member State is under an obligation to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory. ( 17 ) An adjustment of VAT after an abusive practice has been found constitutes implementation of EU law, for the purposes of Article 51(1) of the Charter. ( 18 )
42) On the other hand, even if Union law does not contain any provisions regarding either fiscal criminal law or administrative sanctions, sanctions that are intended to ensure that the correct amount of VAT is collected and to counter fraud pursuant to Article 325 TFEU serve to ‘implement … Union law’ within the meaning of Article 51(1) of the Charter. ( 19 )
44) However, the evidence that was used for the assessment of income tax was not gathered by for instance the tax authorities in the context of their own investigations. In fact, it originates from criminal investigations that were opened following a report made by the Belgian Special Tax Inspectorate in connection with VAT carousel fraud. Such gathering of evidence in the context of criminal investigations could constitute implementation of Union law within the meaning of Article 51(1) of the Charter.
46) However, in Åkerberg Fransson, the Court ruled, in relation to criminal court proceedings for VAT-related offences, that not only tax penalties but also criminal proceedings for tax evasion owing to the provision of false information concerning VAT constitute implementation of European Union law for the purposes of Article 51(1) of the Charter. ( 22 ) The Court stated that, in view of the obligations arising from the VAT Directive, Article 4(3) TEU and Article 325 TFEU, the fact that the national legislation on sanctions and procedural rules had not been adopted to transpose the VAT Directive was irrelevant. ( 23 )
49) However, the precise time to which this refers is not entirely clear from the case-law. On the one hand, the relevant time could be the official notification given by the competent authority of an allegation that a criminal offence has been committed. ( 26 ) However, not all legal regimes make provision for such an official notification of the opening of a preliminary investigation. If the preliminary investigation is terminated, an accused is sometimes completely unaware that he had been the subject of a preliminary investigation. Were such an official notification to be used as the basis, the determination of the point from which the fundamental rights under the Charter are to apply would lie in the hands of the investigating authorities.
55) However, does it now follow from the case-law of the Court of Justice since Åkerberg Fransson that a Member State also implements Union law within the meaning of Article 51(1) of the Charter if evidence that had previously been gathered during a pre-trial investigation due to VAT fraud is used for an income tax assessment?
56) According to the settled case-law of the Court of Justice, the concept of ‘implementing Union law’, as referred to in Article 51(1) of the Charter, presupposes a degree of connection between the measure of EU law and the national measure at issue which goes beyond the matters covered being closely related or one of those matters having an indirect impact on the other. ( 28 )
57) According to the case-law of the Court of Justice, in order to determine whether a Member State implements EU law for the purposes of Article 51(1) of the Charter, some of the points to be determined are whether the national legislation in question is intended to implement a provision of EU law; the nature of that legislation and whether it pursues objectives other than those covered by EU law, even if it is capable of indirectly affecting EU law; and also whether there are specific rules of EU law on the matter or capable of affecting it. ( 29 )
64) Thirdly, with the exception of the secondary law referred to in point 39, EU law does not contain any specific rules for the field of income tax. It would be neither reasonably foreseeable nor functionally necessary for indirect effects that VAT law may have on income tax law to be sufficient for the assumption of implementation of Union law within the meaning of Article 51(1) of the Charter.
66) As a result, there is therefore no implementation of Union law within the meaning of Article 51(1) of the Charter if evidence obtained during a preliminary investigation due to VAT-related offences is used for an income tax assessment.
68) In summary, it can be stated that the Charter is not materially applicable. The Court of Justice therefore does not have jurisdiction to give the preliminary rulings.
69) In the event that the Court of Justice nevertheless accepts its jurisdiction and assumes implementation of Union law in the assessment of income tax, the Hof van cassatie (Court of Cassation) essentially asks, in substance, whether Article 47 of the Charter precludes the use of unlawfully obtained evidence or permits an evaluation by the national court. In particular, in this connection the Hof van cassatie (Court of Cassation) asks for clarification of the relevant passages in the WebMindLicenses judgment. ( 33 )
70) The WebMindLicenses judgment concerned the requirement that the evidence on which a decision implementing EU law (in casu, the assessment of VAT) is founded has not been obtained and used in breach of the rights guaranteed by EU law and, especially, by the Charter. ( 34 )
76) Nor is violation of fundamental rights apparent. Article 47 of the Charter does not entail an automatic prohibition on the use of evidence.
77) Even before the Charter entered into force, and applying the case-law of the European Court of Human Rights, ( 38 ) the Court of Justice ruled that it cannot be excluded as a matter of principle and in the abstract that unlawfully obtained evidence may be admitted, but rather it is for the national courts to assess the evidence they have obtained. ( 39 )
79) In a case such as the present case, the national court’s evaluation on a case-by-case basis will have to take account primarily of which provision has been infringed and what the nature of that infringement is. To this end, it will be necessary to consider that a Belgian judge was present at the seizure of evidence by the Luxembourg judge, meaning that there may ‘only’ be an infringement of the Benelux Treaty, which does not automatically constitute an infringement of Article 7 of the Charter.
80) In conclusion, Article 47 of the Charter does not preclude a national provision pursuant to which a national court that must decide whether a piece of evidence that was obtained in violation of EU law during a preliminary investigation due to VAT-related offences may be used for the assessment of income tax must carry out an evaluation, taking account primarily of the nature of the infringement.