Article 34 - Social security and social assistance
1) The case originated in an application (no. 41838/11) against the Republic of Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Hungarian national, Mr R.Sz. (“the applicant”), on 5 July 2011.
3) The applicant complained under Article 1 of Protocol No. 1 – read alone and in conjunction with Article 13 of the Convention – that the imposition of a 98% tax on part of his severance pay constituted an unjustified deprivation of property, with no remedy available. He also invoked Article 14 of the Convention read in conjunction with Article 1 of Protocol No. 1.
6) The applicant had been employed by a State-owned limited company for about eleven years. On 1 July 2010 his employment was terminated by mutual agreement, with effect from 5 October 2010.
7) According to his labour contract, the applicant became entitled, amongst other benefits, to severance pay in the amount of four months’ salary – which was in excess by one month’s salary of that provided by the Labour Code – and to salary for the three months of his notice period. The benefits were reduced by taxes payable at that time and paid to the applicant on 2 July 2010.
The applicant’s benefits were subsequently taxed at 98% in their part exceeding 3,500,000 Hungarian forints (HUF). The exceeding part was HUF 8,130,939, the tax thus amounting to HUF 7,968,320. The amount payable was HUF 4,054,085, regard being had to the fact that the benefits had already been taxed HUF 3,914,235 on payment, on 2 July 2010.
The tax, whose due date was apparently 10 May 2011, was paid on 23 February 2011, that is, according to the rules of the second version (of 30 December 2010 – see paragraph 12) of the legislation outlined below; however, the third version (of 14 May 2011 – see paragraphs 16-17) did not change the applicant’s situation.
59. As regards the personal burden which the applicant sustained on account of the impugned measure, the Court notes that he had to suffer a substantial deprivation of income in a period of presumable considerable personal difficulty, namely subsequent to the loss of employment. The Court would observe in this context that Article 34 of the Charter of Fundamental Rights of the European Union (see paragraph 18 above) endorses benefits providing protection in the case of loss of employment, and that according to the European Court of Justice, the aim pursued by severance pay – that is, helping dismissed employees find new employment – belongs within legitimate employment policy goals (see paragraph 18 above).
Moreover, the Court cannot overlook the fact that the applicant received the benefits in question, reduced by the then applicable taxes, several months before the change in the revenue rules, and might have disposed of it already, unaware that subsequently he would have to surrender this money, almost in its entirety, in the levying of an additional tax. For the Court, this element – that is, the absence of a transitional period within which to adjust himself to the new scheme – is likely to have exposed the applicant to substantial personal hardships. In this connection the Court recalls that taxation at a considerably higher tax rate than that in force when the revenue in question was generated could arguably be regarded as an unreasonable interference with expectations protected by Article 1 of Protocol No. 1 (see M.A. and 34 Others, cited above). The tax complained of was not intended to remedy technical deficiencies of the pre-existing law, nor had the applicant enjoyed the benefit of a windfall in a changeover to a new tax-payment regime (compare and contrast, National etc., cited above, §§ 75 to 83).