Tax-free amount – massive lawsuits against the Treasury?
Will the failure to increase the tax-free amount result in an avalanche of compensation to the tune of more than PLN 11 billion?
As of November 30, 2016, the provision of Art. 27 paragraph. 1 of the Law of July 26, 1991 on personal income tax in terms, in that it does not provide a mechanism for adjusting the tax-reducing amount to guarantee at least the minimum subsistence. The forfeiture is a direct result of the Constitutional Court’s October 28, 2015 ruling on K 21/14. In very simple terms, the Court questioned the constitutionality of the existing regulation providing for a tax-free amount, pointing to the inadequacy of such a solution to modern economic realities and its lack of flexibility. For the purposes of journalism, it can be assumed that, in the Court’s view, it is unconstitutional to keep the tax-free amount below the ceiling necessary for basic subsistence, which is PLN 6168 for a person living in a family and PLN 7608 for a person farming alone. Meanwhile, the challenged provision of Art. 27 paragraph. 1 pdof (personal income tax) provides for a tax-free amount in the amount of PLN 3091.
Lapidarly speaking, with the current tax thresholds, the difference between the current state and the constitutional minimum is:
a. for persons in the family: (PLN 6168 x 0.18) – (PLN 3091 x o.18) = PLN 1110.24 – PLN 556.38 = PLN 446.14
b. for single persons: (7608 x 0.18) – (3091 PLN x o.18) = 1369.44 – 556.38 PLN = 813.06 PLN
The scope judgment issued by the Court is, by definition, an augury for the legislature to carry out such legislative actions that will achieve a state of constitutionality in a given matter. A specific sanction for the passivity of the legislature is the loss of the validity of the provision to the extent indicated by the Court. Since there is no information from the Ministry of Finance that this issue would be settled before 2018, it is important to consider what will happen if the Court’s ruling is not implemented by the end of November 2016.
From a citizen’s point of view, it is important to consider whether compensation for the so-called “civilian” is involved. legislative omission. The only provision that could form the basis of the demand is Art. 417 (1) § 4 of the Civil Code: “If the damage was caused by the failure to issue a normative act, the obligation to issue of which is provided by law, the unlawfulness of the failure to issue this act shall be established by the court hearing the case for compensation for damage.”
Rather, linguistic interpretation indicates that this is a situation where the legislature’s duty to act derives from the law. However, there are interpretations that concede the possibility of formulating claims against the Treasury, even when the obligation to enact legislation stems from a CT ruling that has deferred its effects under Art. 190 para. 3 of the Constitution. Therefore, the chances of success of lawsuits for compensation in the amount of PLN 446.15 (family members) or PLN 813.96 (single people) cannot be ruled out. Figures on the MF website show that 25,839,964 people settled their PIT in 2015. Even if one were to conservatively assume that they all function in families, the total compensation claims would amount to PLN 11,528,49,477!
Of course, the Court did not impose that the tax-free amount be retained as such, pointing to a number of alternative instruments. However, if the legislature remains passive, the issue will be irrelevant since the essential constitutional goal has not been achieved.
Of course, it is also questionable whether the courts will consider the claims of all citizens, or only those who actually have the income to live on a minimum level. However, since the tax-free amount mechanism applies indivisibly to everyone today, this is the starting point to be taken for further consideration.
Time will tell if this is purely juridical fiction or a real issue for many, many law firms.