What is The Constitutional Court found No 162 / 2014 Coll.?

The Constitutional Court found No 162 / 2014 Coll., on the application for annulment of Section 35ba paragraph 1 (a) of Act No. 586 / 1992 Coll., on Income Tax, as amended — Findings of the Constitutional Court of 10 July 2014 sp. zn..

Is The Constitutional Court found No 162 / 2014 Coll. still valid?

Yes, The Constitutional Court found No 162 / 2014 Coll. is still valid and effective.

The Constitutional Court found No 162 / 2014 Coll.

Q: When it became The Constitutional Court found No 162 / 2014 Coll. effectiveness?

The Constitutional Court found No 162 / 2014 Coll. became effective date not available.

Findings of the Constitutional Court of 10 July 2014 sp. zn.

Valid

I. II. II./a II./b II./c II./d II./e II./f II./g II./h III. IV. „§ 35ba V. V./a V./b V./c V./d VI.

162

FIND

The Constitutional Court

On behalf of the Republic

The Constitutional Court decided under sp. zn. Pl. ÚS 31 / 13 on 10 July 2014 in plenary composed of the President of the Court of Paul Rychetský (Judge) and Judges Louis David, Jaroslav Fenyk, Jan Filip, Vlasta Formánková, Ivana Jana, Vladimir Króřka, Jan Musil, Vladimir Sládeček, Radovan Suchánek, Kateřina Šimáková, Vojtěch Šimíček, Milady Tomková and Jiří Zemánek, on the proposal of the Senate of the Parliament of the Czech Republic, represented by Prof. JUDr. Aleš Gerloch, in the text of Law No. 500 / 2012 Sc. "; does not decrease in the tax on 1 January from the retirement pension of the Czech Republic,"

as follows:

Paragraph 35ba (1) (a) of Act No. 586 / 1992 Coll., on Income Taxes, as amended by Act No. 500 / 2012 Coll., is deleted in words "; the tax is not reduced in the case of a taxpayer who, on 1 January of the tax period, receives an old-age pension from a pension insurance or foreign compulsory insurance of the same kind 'the date of the declaration of the finding in the Collection of Laws.

Reasons

I.

Summary of the proposal

1. On 12 June 2013, the Constitutional Court received a proposal from a group of 19 senators of the Senate of the Parliament of the Czech Republic, for which Senator JUDr. Miroslav Antl (hereinafter "the appellant ') is acting on the abolition of the provisions of Paragraph 35ba (1) (a) of Act No. 586 / 1992 Coll., on income taxes, as amended by Act No. 500 / 2012 Coll., in words; the tax is not reduced for a taxpayer who, on 1 January, receives an old pension pension pension or foreign compulsory insurance of the same kind" (hereinafter "the contested provision'). According to the appellant, this provision, whereby the persons listed therein are not subject to a tax credit on the income of natural persons to the taxpayer (i.e. a reduction in that tax obligation) of CZK 24 840, is contrary to Articles 1, 3 (1), 11 (1) and (5) and 26 of the Charter of Fundamental Rights and Freedoms (hereinafter referred to as" the Charter ') and Article 26 of the International Covenant on Civil and Political Rights (hereinafter referred to as "the Pact').

2. The appellant considers the measure to be unduly discriminatory because it places persons who, in addition to an old-age pension, have other income within the meaning of Act No. 586 / 1992 Coll., on income taxes, as amended, in a disadvantaged position compared to other taxpayers of that tax who do not receive an old-age pension. Although it agrees that the imposition of taxes within the meaning of Article 11 (5) of the Charter constitutes a legitimate interference with property law, this legitimacy is not only given to the public interest in collecting funds for the provision of various public goods, but also to the requirement to distribute the tax burden equally. In this regard, however, the contested provision will not stand in the light of the criteria set out by the Constitutional Court in its case law on the review of the constitutionality of the tax legislation [namely, in the judgment of 21 April 2009, Pl. ÚS 29 / 08 (N 89 / 53 SbNU 125; 181 / 2009 Coll.)], from the aspects of extreme disproportionality (the so-called choking effect) and non-accesoric and accesoric equality.

3. As regards the first of these aspects, extreme discrimination is intended to show the contested provision by calling into question the basic meaning of the taxpayer tax rebate, which is the exemption of a certain minimum of life (albeit not strictly within the meaning of Act No. 110 / 2006 Coll., on Life and Existing Minimum, as amended) from taxation. The principle thus defined corresponds to the requirements resulting from the case-law of the Constitutional Court or the case-law of the Supreme Courts of other States (in particular the German Federal Constitutional Court), according to which the substance of the property which is subject to the tax must not be affected by the tax legislation itself. Until now, the legislator has always been respected. Although the explanatory note to Act No 500 / 2012 Coll., on the amendment of tax, insurance and other laws in connection with the reduction of public budget deficits, which added the contested provision to the Income Tax Act, advocates the admissibility of the contested measure precisely by guaranteeing the minimum of living for old-age pensioners by means of an untaxed old-age pension, such justification cannot, according to the appellant, be sustained. In fact, the persons concerned are deprived of part of the income from their gainful activities, that is to say, income which has no substantive link to their paid old-age pension at the same time, for which they have fulfilled the legal conditions. The appellant does not argue that the so-called choking effect must be reflected in the same way for all taxpayers concerned (i.e. those who are simultaneously old-age pensioners); However, it is sufficient that the unconstitutional nature of the contested provision is given to potential effects on the situation of some of these persons. Indeed, a significant proportion of old-age pensioners are employed precisely because of the need to supplement their income or compensate for the standard of living reductions that would have occurred if they had abandoned their economic activities.

4. The discrimination in question is also enhanced by a time factor, as 1 January of the relevant calendar year is decisive for applying the tax discount. On the contrary, it is irrelevant what is the situation during the rest of the calendar year, which, according to the appellant, constitutes an unequal position of the taxpayers concerned, inter alia, as compared to the other statutory tax rebates referred to in § 35ba (1) (b) to (f) of the Income Tax Act applicable after each calendar month in which the conditions have been met. As a result, even an old-age pensioner, who was employed only a few months a year, loses the possibility of deducting the entire tax rebate and not merely the possibility of deducting it in proportion to the number of months in which he worked.

5. The inconsistency of the contested arrangements is also found by the appellant with the principle of non-Accesorial Equality within the meaning of Article 1 of the Charter (in conjunction with Article 26 of the Pact), since the legislator has put the beneficiaries of an old-age pension at a disadvantage by the contested measure. No matter how much income the taxpayer has for a calendar year, he has lost up to CZK 24,840 a year. He did so arbitrarily, without any reasonable justification. The current legislation on old-age pensions is not only built on the exclusion of cohesive income from gainful activity with an old-age pension, but rather on their priori compatibility. This can be seen from Section 34 (4) of Act No. 155 / 1995 Coll., on Pension Insurance, as amended, which supports this confluence by increasing the percentage rate of old-age pension. On the contrary, there is no law prohibiting such coexistence (unlike previous legislation). Thus, the age for entitlement to an old-age pension is neither a reason for termination of employment nor a reason for the cessation of self-employment, nor is there any reason for which old-age pensioners should be in a worse position than other taxpayers for tax purposes. The contested provision is, for these reasons, incompatible. In fact, while the Pension Insurance Act rewards the simultaneous pursuit of a gainful activity in receipt of an old-age pension, the Income Tax Act penalises the same situation.

6. For the purposes of the comparison, the appellant points out that the former legislation limited the entitlement to an old-age pension when dealing with a gainful activity, depending on the income of the person concerned, or depending on the form in which the gainful activity was carried out (cf. Section 37 of the Pension Insurance Act, as effective in the various periods before 1 January 2010). Even the contested legislation could be constitutional if the conditions for the pursuit of a gainful activity and its coexistence with an old-age pension were set in a complementary manner. However, in a situation where the Pension Insurance Act does not in any way restrict the pursuit of a gainful activity (e.g. by limiting the amount of the pension), it cannot be considered legitimate that the coexistence in question penalise the Income Tax Act through higher taxation.

7. The contested legislation effectively increases the tax burden on workers of old-age pensioners, but the selection of the target group of this measure is arbitrary, irrational and illegitimate. This conclusion is made by the appellant's reasoning as to what is actually the subject of tax in this case. As a general rule, it is accepted that the tax constitutes a general burden which obliges all domestic persons according to their income, assets and purchasing power to finance the general tasks of the State. However, in the case of the contested provision, the tax is actually not on income from the gainful activity, but on the fact that the taxpayer is the beneficiary of an old-age pension. In other words, in reality, income from gainful activity is not subject to tax, but is affected by the fact that the taxpayer is an elderly pensioner. Thus, a certain personal situation of the taxpayer in conjunction with income from the gainful activity is taxed. Such a tax criterion is considered unacceptable by the appellant, and its irrationality is already due to the fact that the only way to avoid the higher tax burden in question is to abandon the pursuit of a gainful activity. If the right to work, or the right to acquire the means of living for work within the meaning of Article 26 (1) of the Charter, is a constitutional right, then it is not possible for the legislator to "motivate old-age pensioners to leave a gainful activity. It can be assumed that it is precisely the higher rate of taxation that will justify leaving a number of them gainful activities.

8. Finally, the appellant considers that there has also been a breach of the principle of Accesorial Equality, namely an infringement of Article 3 (1) in conjunction with Articles 11 (1) and (5) and Article 26 of the Charter. First of all, discrimination in fundamental rights and freedoms is prohibited for a number of reasons, including another status, including the status of an old-age pensioner. It is Article 11 of the Charter that is a breach of the fundamental right as a result of the discriminatory conclusion in question, since the same level of protection is not given to old-age pensioners of their earnings (assets) compared to other persons employed. The appellant is aware that, even in the case of constitutionally guaranteed equality, it is not absolute equality, but relative equality, and therefore that there may also be some reasonable differences in the status of categories of persons under Article 3 (1) of the Charter. In the present case, however, the choice of distinction criterion is illegitimate because of its irrationality, as a result of which both the illegitimate and the resulting inequality in terms of the different level of interference with ownership of the individual taxpayers. Only circumstances relating to the gainful activity as such, such as income from dependent activities, entrepreneurship, leasing of property, etc. But there is no rational link between retirement and income tax.

II.

Proceedings before the Constitutional Court

9. The Constitutional Court pursuant to Article 69 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, sent the proposal to the Chamber of Deputies and to the Senate of the Parliament of the Czech Republic as parties to the proceedings and to the Government and the Ombudsman, who are entitled to intervene as interveners. On the basis of Article 48 (2) of the Law on the Constitutional Court, the Ministry of Labour and Social Affairs and the Ministry of Finance have also been requested to comment.

10. By order of 31 October 2013, sp. zn. I. ÚS 2340 / 13, the First Chamber of the Constitutional Court suspended the proceedings concerning the constitutional complaint of the complainant Ing. Marie Adáková against the decision of the Central Bohemian Finance Office of 31 May 2013 No 2430469 / 13 / 2122-20300-203234 (operative part I), with which the application for annulment of Paragraph 35ba (1) (a) of Act No 586 / 1992 Coll., on income taxes, as amended, in the sentence for the middle-class is not reduced for a taxpayer who, on 1 January of the tax period, receives an old-age pension pension pension pension pension from or foreign compulsory insurance of the same kind. "At the same time, he referred the proposal to the plenary of the Constitutional Court (operative part II), which, by order of 28 November 2013, sp. zn. This gave the complainant the right to participate in the procedure as an intervener.

11. From the 2012 statistical yearbook on pension insurance and the 2013 pension statistics issued by the Czech Social Security Administration, the Constitutional Court obtained statistical data on the average amount of old-age pensions paid between 1992 and 2012, an overview of the distribution of the population of pensioners according to the amount of pensions in quantity terms since 2001, an overview of the number of pensions paid according to the monthly amount of pensions and an overview of the number of pensioners and average pensions for 2013.

II./a

Observations of the Chamber of Deputies and the Senate

12. The President of the Chamber of Deputies Miroslav Nemcová, in her observations of 17 July 2013 and the President of the Senate Milan Štěch, in their observations of 24 July 2013, summarised the course of the legislative process in both chambers of Parliament.

II./b

Statement by the Government and the Ombudsman

13. Prime Minister Ing. Jiří Rusnok, in his observations of 26 July 2013, informed the Constitutional Court that the Government of the Czech Republic will not exercise its right under § 69 (2) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, and will not enter into this proceedings. A similar communication was received by the Constitutional Court on 2 July 2013 from the then Ombudsman JUDr. Pavel Varvařovský, whose right to enter the proceedings was derived from § 69 (3) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended by Act No. 404 / 2012 Coll.

II./c

Expression of the Ministry of Labour and Social Affairs

14. The Minister for Labour and Social Affairs Ing. František Konáček pointed out in his statement of 9 August 2013 that, in substance, the area of income tax, where the contested provision falls, does not belong to the gesture of his Ministry. For this reason, it was limited to stating that the issue of unrestricted coexistence of old-age income and earnings was already addressed by the Advisory Expert Group of the Minister of Finance and Labour and Social Affairs in 2009 and 2010, which recommended, in its final report on this issue, to address the issue of unlimited coexistence of income and income indirectly, i.e. through the tax system, rather than by expensive and inefficient administrative interventions (e.g. by cutting income according to the level of income). An appropriate adjustment of the income tax system for individuals in the pension sector can be used (without affecting those pensioners for whom the pension is the only income). This output was followed by a programme statement by the then government stating that the government will respect, as far as possible, the conclusions of the Advisory Council on the reform of the pension system. Those recommendations were implemented precisely by the adoption of this law.

15. On some of the arguments put forward by the parties to the proposal to abolish the provision of the Income Tax Act in question, he stated that, as regards comparison with earlier legislation, the adjustments made in the past, which to a greater extent allowed for the adjustment of the amount of the pension in parallel gainful activities, have always been linked to the attempt to set the conditions in relation to the obligation to pay pension insurance premiums and not, therefore, to the payment of income tax or to promote or benefit the gainful activity of pensioners. It is not true that the only way to avoid this higher tax obligation is to put an end to gainful activity. In fact, there is also the possibility to suspend the payment of an old-age pension for the period of such gainful activity, which will result in an increase in the percentage of the old-age pension under Section 34 (2) of the Pension Insurance Act.

II./d

Statement by the Ministry of Finance

16. In its observations of 13 December 2013, the Ministry of Finance stated that the contested provision was adopted as part of a measure aimed at maintaining the deficit of the State budget between 2013 and 2015 below three% of gross domestic product. For this reason, it cannot be assessed in isolation without any correlation with other temporary or permanent measures, which consist primarily of savings on the expenditure side and only to a lesser extent by increasing the revenue side of the budget by increasing taxes. The composition of austerity measures was designed to contribute to the savings of all populations. With two exceptions, the income of old-age pensioners is taxed in the same way as the income of other income taxpayers. First, according to Section 4 (1) (h) of the Income Tax Act, income in the form of a pension benefit up to 36 times the minimum wage per year is exempt from this tax. Second, in the years 2013 to 2015, according to § 35ba (1) (a) of the sentence behind the semicolon of the Income Tax Act for taxpayers who are on 1 January of the relevant tax period recipients of an old-age pension pension from pension insurance or foreign compulsory insurance of the same kind, the income tax on the basic discount of CZK 24 840 is not reduced.

17. In relation to the objection to the principle of accesorial equality, the Ministry of Finance points out to the appellant the above finding, sp. zn. In assessing whether a tax distorts the principle of equality, it is necessary to base the complex burden on a person in respect of the whole of his property and not in isolation after each component of the tax. At the same time, account should be taken of other rules governing the taxation of the income of elderly pensioners. By temporarily limiting the possibility of applying the basic tax rebate, the legislator compensates for the fact that the taxpayer, who is an old-age pensioner, is exempted from one of his income, thereby benefiting from tax over other taxpayers. For this reason, this measure is not a disadvantage but a equalisation of the legal position of a group of entities vis-à-vis others.

18. Although the temporary exclusion of the possibility of applying the basic tax rebate is negative in reducing the taxpayer's income, which is both an old-age pensioner and has additional income, this fact does not mean that the measure would have liquidation effects in relation to those persons. They shall continue to receive at least the income of the old-age pension and shall be subject to taxation if any. Moreover, the measure in question is neither arbitrary nor irrational. The sense of the existence of a basic tax rebate lies in the non-taxation of a certain minimum of life, the function of old-age pensioners being paid an old-age pension which is exempt from income tax. In the case of taxpayers with income in the form of pension benefits, therefore, the function of living minimum is to exempt this benefit from income tax and not a basic tax discount.

19. In conclusion, the Ministry of Finance notes that the use of the time test is customary in tax rules, on an annual basis for the application of this discount, which implies the need to determine on 1 January the tax period as the operative date for the possibility of applying the basic income tax rebate. Similarly, as a power to decide which entities will be subject to the tax, the right to assess from which point the legislators will be able to do so. Moreover, this adjustment is advantageous for a large part of the taxpayers.

II./e

Observation by the intervener

20. By letter dated 6 September 2013, the intervener informed the Constitutional Court that, within the meaning of Article 35 (2) of the Law on the Constitutional Court, it would exercise the rights of the intervener in this proceedings. In its subsequent observations of 1 November 2013, it referred to its arguments contained in the constitutional complaint of 30 July 2013 concerning which proceedings are pending before the Constitutional Court under point I.I. of the ÚS 2340 / 13. It follows from its content that a discount on the taxpayer is not a tax relief favouring a group of persons chosen on the basis of a political key, but a structural element of the tax that introduces an element of tax progression into the tax system based on the concept of equal tax. In the case of low-income people, it is precisely through it that its substantial reduction takes place, which makes it possible to achieve the necessary (even in constitutional law) solidarity between the richer and the poor. Therefore, if this rebate is to be withdrawn in relation to certain taxpayers, there must be legitimate and sufficiently intensive reasons, which cannot be established in the case of the contested provision. Under no circumstances can an old-age pension, that is to say, benefits drawn from a pension scheme which is not taxable income, be regarded as such.

21. The dispute between the contested provision and the constitutional order is seen by the intervener in the fact that a certain pre-determined group of individuals' income tax payers is, without any legitimate reason, withdrawn the right to a tax discount, which generally belongs to all taxpayers without distinction. This undermines the principle of equality in rights and obligations and in the level of constitutional law the second sentence of Article 11 (1), in conjunction with Article 11 (5) of the Charter, is infringed because of the age on which the old-age pension is dependent. At the same time, as a result of the uneven tax burden resulting from the same work, these taxpayers receive a lower wage for the same work than other persons in a comparable position, thereby violating, in a level of constitutional law, the right to a fair remuneration for work under Article 28 of the Charter. The last reason for unconstitutionality is that the intervener sees that individuals who have acquired the right to an old-age pension are being demoted by the legislator from economic activity, or that their economic activity is seen by law as being more interested in activities, in which it is necessary to see a breach of the human dignity of the persons concerned, as well as the right to obtain funds for their living needs by works within the meaning of Article 26 (3) of the Charter.

22. In its observations of 1 November 2013, the intervener also points to the finding of the Constitutional Court of the Czech and Slovak Federal Republic of 8 October 1992 sp. zn. Moreover, the contested legal regulation must also be viewed by the primacy of the fundamental principles of the democratic rule of law. According to the intervener, there is also an anti-constitutional regulation which does not reflect the principle of protection of minorities against the will of the majority [Article 6 of the Constitution of the Czech Republic (hereinafter referred to as "the Constitution ')], so that it is also necessary to consider whether a group of persons constituting a relevant minority is affected by the contested provisions, which does not have the real possibility of achieving the protection of their rights in the competition of political forces (or" no standing up in the representative bodies'), whether it is at a disadvantage in some way, or that the way of forming representative bodies does not allow effective representation of that group. It was the tax rebate that applied to all individuals' income tax payers that was presented as a tool to compensate socially disadvantaged taxpayers for the elimination of tax progression. This sought to justify the measures introduced, and these accompanying aspects were undoubtedly taken into account in the constitutional review of the measures put in place. Therefore, it is not permissible for this compensatory measure to be removed without further delay with a period of several years.

23. In its reply of 3 February 2014, the intervener opposed the statements made by the Ministry of Finance, stressing the nature of the old-age pension as a claim by the State on the basis of the funds paid to the pension scheme for the lifelong income of an individual subject to taxation of income. On its individual arguments, it stated that the so-called choking effect may not occur on a flat basis. It was the legislator who agreed to abolish the tax rebate without any respect for individual differences, and it is therefore up to him to prove that the contested provision of the law will not have a choking effect in any particular case. In this case, the group concerned must only be regarded as a working old-age pensioner, a group with no adequate electoral potential. At the same time, account should be taken of its nature as a social group severely disadvantaged, including in relation to the state and changes of the pension scheme. In this context it also refers to the finding of the Constitutional Court of 23 March 2010 sp. zn. In the context of the argument of the Ministry of Finance, the intervener points out that the old-age pension, at least at its average level, does not reach the value of the basic income tax rebate, which makes it inefficient to fulfil its role. In view of the domestic political and legal culture, no assurance of the alleged temporary nature of the measure introduced by the contested provision can be considered sufficient. Finally, the intervener contested the statement of the Ministry of Labour and Social Affairs concerning the intended legitimate objective of the contested provision.

II./f

Replication of the applicant

24. The appellant reiterated the above observations in its observations of 25 November 2013 and 14 February 2014, in which, in addition to the recap of individual submissions, he repeatedly referred to his application for annulment of the contested provision. He added to the statement by the Ministry of Labour and Social Affairs that his criticism is not that workers are not encouraged or favoured in their professional activities, but that they are overtaxed in comparison with other employees for no legitimate reason. It then considers it absurd to refer to the possibility of asking for a suspension of a pension payment which does not justify why workers should be more taxed. Moreover, such a step is in complete conflict with the explicitly permitted possibility of parallel employment and old-age pension.

25. The plaintiff then disputes the opinion of the Ministry of Finance. First of all, it submits that the proposal to abolish the contested provision of the Income Tax Act on grounds of its discriminatory nature will not stand up to the argument of other provisions of that Act or the legislation on old-age pensions. A different status is given between employees who do not receive an old-age pension with the possibility of applying a tax discount on the one hand and "working old-age pensioners' without this option on the other. The difference is not that they are" pensioners' and "non-pensioners', but that a group of employees cannot claim a tax discount. Another illogical aspect of this statement can be seen in the fact that the Ministry of Finance combines two unrelated facts - that is, that old-age pensioners work and that they receive a tax-free pension at the same time (except for exceptions), as a result of which they would legitimately have to suffer a reduction in their income. The appellant rejects the possibility of such a settlement, arguing in particular with the different character of income from employment and retirement. While income from employment is an immediate reward for the work done, the old-age pension is a claim arising from participation in the continuous pension scheme received by those who have contributed to it throughout their economically active life. Both sources of income are unrelated. In doing so, however the legislature may establish different tax arrangements for individual groups of persons, it must do so in a non-discriminatory manner, i.e. it must not create unjustified differences on the basis of illegitimate and irrational criteria. The appellant continues to believe that there is room for a review by the Constitutional Court of the contested provision from the point of view of a possible" breach of the prohibition of extreme disproportionality in conjunction with the criteria resulting from the constitutional principle of equality... "(sp. zn.

26. The appellant considers that there is a fundamental disparity as a result of the fact that the basic tax rebate depends on the application from the first day of the calendar year. The Ministry of Finance itself gives a number of examples of tax rebates applied on a monthly basis. In conclusion, he summarises that the internal inconsistency of the Ministry of Finance's observations only confirms his conviction of the unconstitutional nature of the contested provision of the Income Tax Act. It is clear that it is simply not possible to defend this provision from the point of view of the requirement to choose a legitimate and rational criterion of differentiation. As regards the intervener's observations, the applicant considers its arguments to be relevant.

II./g

Oral proceedings

27. Within the meaning of Article 44 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, the Constitutional Court ruled in the case without the oral hearing, since further clarification could not be expected from it.

II./h

Amendment of the Judge-Rapporteur

28. The Judge-Rapporteur in the present case was originally appointed by Judge Vladimir Sládeček in accordance with the current schedule of work. Following the adoption on 10 July 2014 of a different proposal by another judge, which is substantially different from that of the Judge-Rapporteur, instead of his motion for a private hearing, Pavel Rychetský, appointed himself as President of the Constitutional Court under Article 55 of the Law on the Constitutional Court, which will draw up the text of the found.

III.

Assessment of the competence and constitutional conformity of the legislative process

29. The Constitutional Court notes that it is competent to discuss the application in question, which was submitted to it by a legitimate appellant [Paragraph 64 (1) (b) of the Law on the Constitutional Court], is admissible and fulfils all legal requirements. He was therefore able to make a substantive review of the contested provision, in accordance with § 68 (2) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended by Act No. 48 / 2002 Coll., first addressed the question of whether it had been adopted and issued in a constitutional manner and within the limits of the constitutional competence provided for.

30. According to Article 68 (2) of Act No 182 / 1993 Coll., on the Constitutional Court, as amended by Act No 48 / 2002 Coll., the assessment of the constitutionality of the law with a constitutional order consists of answering three questions: whether it has been adopted and issued within the limits of the Constitution, whether it has been adopted in a constitutional manner and whether its content is in accordance with constitutional laws and, in the case of other legislation, with the laws. In the case of the contested provision, it is beyond doubt that Parliament was competent to adopt it within the meaning of Article 15 (1) of the Constitution. In addition, the Constitutional Court found from the observations of the parties and other publicly available documents relating to the legislative process the following facts: part of the provisions of § 35ba (1) (a) of the Income Tax Act, which the appellant proposes to abolish, was inserted into that provision by Act No 500 / 2012 Coll., on the amendment of tax, insurance and other laws in connection with the reduction of public budget deficits. The Government submitted this bill (House Press No. 801, 6th Election Period, 2010- 2013) to the Chamber of Deputies on 6 September 2012. The Chamber of Deputies approved it at the third reading on 7 November 2012 at its 47th meeting (Resolution 1354), with 101 of the 195 Members present voting against it, 93 of them opposed and 1 abstention. On 5 December 2012, the Senate discussed and rejected the bill (Senate Document No 442, 8th term of office, 2010- 2012) at its 2nd meeting (Resolution No 32, 9th term of office, 2012- 2014). Of the 67 senators present, 50 voted in favour, 7 opposed and 10 abstained. Subsequently, the Chamber of Deputies insisted on the original bill (Resolution 1444), with the vote in favour of its re-approval on 19 December 2012 at its 49th session of 102 of the 193 Members present and 88 opposed, 3 abstentions. The Act was delivered to the President of the Republic on 19 December 2012. Signed by him on December 21, 2012. His publication in the Collection of Laws took place on 27 December 2012 in the amount of 187 under No. 500 / 2012 Coll., became effective on 1 January 2013.

31. Those findings were considered sufficient by the Constitutional Court to conclude that the provisions of Paragraph 35ba (1) (a) of the Income Tax Act were supplemented by a law in the contested part of the Act, which was adopted in a constitutional manner. It took into account that neither the appellant nor the interveners questioned the constitutionality of the adoption and publication of this law. It therefore did not prevent him from making a substantive assessment of the constitutionality of the contested provision.

IV.

Text and content of the contested provision and other relevant facts

32. Paragraph 35ba of the Income Tax Act is a "collection provision," which defines various types of tax rebates for individuals' income tax payers. That discount means the amount by which the taxpayer will reduce his tax liability. Paragraph 1 (a) of this provision regulates the most general of them, which (with the only exception whose constitutionality is assessed in this procedure) applies in general to all taxpayers of this tax and is CZK 24,840 per year. The exact text of this provision, effective on the date of adoption of this finding, is as follows:

„§ 35ba

Tax rebates for individuals' income tax payers

(1) The taxpayers referred to in Article 2 shall be reduced by:

a) basic discount of CZK 24 840 per taxpayer; the tax shall not be reduced on a taxpayer who, on 1 January, receives an old-age pension from a pension or foreign compulsory insurance of the same type, ';

only a part of it listed behind the semicolon is contested.

33. The assessment of the constitutionality of the contested provision, namely part of the provision of Paragraph 35ba (1) (a) (1) after the semicolon, foresees, first of all, an approximation of the meaning of the legal construction of the tax rebate in question. Part of the legal regulation of the income tax of natural persons is a discount or reduction of the total tax liability for its taxpayers throughout the period of application of the applicable Income Tax Act. Thus, in the field of tax law, there is a certain guarantee that persons who are able to obtain funds for their own life will not be burdened by the State with tax liability in relation to a minimum part of income whose taxation could be unduly burdensome in their circumstances. In the extreme case, even their right to a decent life could be affected, and therefore, in the light of Article 30 (2) of the Charter, according to which everyone in material need has the right to such assistance as is necessary to ensure basic living needs, this intervention would still have to be compensated in the context of social security. Of course, the amount of this amount is not tied to the minimum of living (in terms of the Law on Life and Existing Minority), but is generally higher and depends on the legislator's political decision.

34. The Income Tax Act originally (on 1 January 1993, when it came into effect) in its Section 15 (1) (a) provided for a reduction of the taxable amount of the tax for individuals by an amount of CZK 20 400 per year. This amount gradually increased as a result of individual amendments up to CZK 38 040, in which it remained until 31 December 2005. The problem with the deduction thus set was its effect on the final amount of the income tax on individuals, the rate of which was then determined as progressively sliding. This means that the tax base was not taxed at a single rate, but above a certain amount it was taxed at a higher rate, which could be higher (e.g. in 2005 the annual income from 0 to 109 200 CZK was taxed at a rate of 15%, part of the annual income above CZK 109 200 at 20%, over CZK 218 400 at 25% and over CZK 331 200 at 32%). Since the reduction in the tax base of CZK 38 040 has always affected part of the income taxed at the highest rate, this deduction has had a different effect for individual taxpayers on the amount of their tax liability, since the amount by which their tax was reduced has increased with income [e.g. the annual income of the taxpayer was CZK 100 000, after which the tax base was CZK 61 960, which means that the taxpayer paid only CZK 9 294 instead of CZK 15 000, i.e. CZK 5 706 (i.e. 15% of CZK 38 040) less; On the contrary, if his annual income was CZK 400,000, after carrying out the abovementioned deduction it was the basis of his tax of CZK 361 960, as a result of which the taxpayer paid instead of CZK 88 436 without rounding only CZK 76 263,20, i.e. CZK 12 172,80 (i.e. 32% of CZK 38 040) less). It was in order to eliminate this progressive effect, which resulted in higher income increasing the amount by which the taxpayer paid less in taxes, that Law No 545 / 2005 Coll. amended the Income Tax Act and replaced that deduction by the tax rebate. In the future, the tax base should no longer have been reduced by a single amount to all taxpayers, but the tax levied on them. Everyone could thus claim the same tax advantage in nominal terms, regardless of the amount of income or the amount of the tax base for the calculation of the income tax of individuals (cf. explanatory note to Act No. 545 / 2005 Coll., House Press No. 1040, 4th Election Period, 2002-2006).

35. The reduction of the tax base pursuant to Article 15 (1) (a) of the Income Tax Act was only possible during the period of the legislation in force between 1993 and 2005 if the taxpayer did not receive the same old-age pension pension under the Pension Insurance Act or from foreign compulsory insurance of the same kind (cf. Section 15 (2) of the Income Tax Act). If it was received at a rate less than that in which the deduction could be made, it only reduced the taxable amount by the amount which represented their difference. This means that if the tax base was reduced by CZK 38 040 per tax payer per year and the amount of the old-age pension received by the taxpayer was CZK 30 000 per year, the tax base was reduced only by the difference of CZK 8 040 per year for the taxpayer. That limitation on the reduction of the tax base was only possible provided that the taxpayer was not the beneficiary of an old-age pension at the beginning of the tax period and that that old-age pension was not granted back to the beginning of the tax period (last sentence of Paragraph 15 (2) of the Income Tax Act).

36. Paragraph 35ba was inserted into the Income Tax Act by the already mentioned Act No. 545 / 2005 Coll., which took effect on 1 January 2006. The original amount of the tax rebate on the taxpayer was set at CZK 7,200, which is in principle the amount corresponding to the average level at which the amount of tax was reduced by the reduction of its base. Under this legislation, no discount was granted to taxpayers who received an old-age pension under the Pension Insurance Act or from foreign compulsory insurance of the same type in excess of CZK 38 040. However, if their old-age pension did not exceed that amount, they had a full tax discount (unlike in the past) and not just an adequate part of it. Even in this case, the restriction only applied to taxpayers who were beneficiaries of an old-age pension at the beginning of the tax period and were not granted that old-age pension retroactively to the beginning of the tax period (Section 35ba (2) of the Income Tax Act, effective from 1 January 2006 to 31 December 2007).

37. The substantial increase in tax rebate on the taxpayer from CZK 7,200 to CZK 24,840 occurred with effect from 1 January 2008 by Act No. 261 / 2007 Coll., on stabilization of public budgets, which was also amended by Section 35ba of the Income Tax Act. As a result, paragraph 2 of that provision was repealed, which allowed the newly applied discount to be applied without limitation to taxpayers who were old-age pensioners. These changes were part of a package of fundamental changes in tax law, their purpose being to compensate for the negative effects of a personal income tax, for which a single rate was newly fixed, into the position of persons with lower income, which had been taxed at a lower rate until then (on 31 December 2007 the individual tax rates were 12%, 20%, 25% and 32%). This single rate was set at 15%. In the case of dependent income, however, it has been calculated and calculated from the so-called super-gross wage [that is to say, the taxable income of the dependent activity is increased by the amount corresponding to the social security and contribution to the state employment policy and the general health insurance contributions, which are required under the special legislation to be paid by the employer, cf. Paragraph 6 (13) of the Income Tax Act, in the versions from 1 January 2008 to 31 December 2013, or Section 6 (12) of the same Act from 1 January 2014 to 31 December 2014], resulting in a real value of 20,1% [i.e. 15% of the amount which is 1,34 times the gross wage, i.e. the sum of gross wage and contributions paid by the employer to health (9%) and social insurance (25%)].

38. In the next period, the tax rebate scheme was maintained, only as a result of the amendment made by Act No 346 / 2010 Coll. it was reduced from CZK 24,840 to CZK 23,640 for the 2011 tax period. Another change was then made only by Act No. 500 / 2012 Coll., which supplemented the provisions of § 35ba (1) (a) of the Income Tax Act in the sense that on the basis of it there is no tax reduction on the taxpayer who receives an old-age pension from pension insurance or foreign compulsory insurance of the same kind on 1 January. This provision applies in relation to the tax periods of 2013, 2014 and 2015, and should expire on 31 December 2015 [cf. Article XVII point 2 and Article XXII point c) of Act No 500 / 2012 Coll.].

39. It follows from the contested provision that it is essential for the extent of the taxpayer's tax liability whether he received an old-age pension on 1 January. If it had not been collected on that date and only started to receive it subsequently (e.g. on 1 February), this would not have had any effect on the possibility of applying the tax rebate in question for this tax period. In this context, it should be noted that the person entitled to an old-age pension is not obliged to apply it immediately, but the date on which he does so depends solely on his decision. In addition, the law confers on it the right to apply for this pension retroactively in relation to a period of 5 years (Section 55 (2) of the Pension Insurance Act). If, therefore, it does not do so until during the tax period (i.e. after 1 January) or even after it has expired, the rebate in question will be maintained in its entirety for that tax period. The law provides for nothing else in this case. This means that if a person who has been entitled to an old-age pension on 1 October applies for his or her payment retroactively until 1 February of the following year, he or she will have a full tax credit for that year and receive an old-age pension for the period beginning on 1 October. On the contrary, the person who received it on 1 January of the same year will not be able to apply the tax credit at all. The payment of the old-age pension may also be suspended for the application of the beneficiary. As a general rule, the reason for this step is that the gainful activity of a person who is entitled to an old-age pension but who is not its beneficiary results in an increase in the percentage of the old-age pension. However, suspension of his payment is possible for any other reason.

V.

Own review

40. It follows from the summary of the content of the contested legislation that, in the present case, tax is the subject of a check on the constitutionality, namely the income tax on those natural persons who received an old-age pension on 1 January. However, the appellant does not in any way dispute the existence of a personal income tax itself, as well as the majority of its requirements, the failure to comply with the constitutional rules sees that, contrary to all other taxpayers of that tax, the tax calculated on the basis of a fixed percentage is not reduced by CZK 24 840, representing a tax rebate on the taxpayer. In his view, therefore, the tax thus defined falls in a disproportionate way into their sphere of property and creates a contradiction with the constitutional principle of equality.

V./a

Background to the review of the contested provision

41. The Constitutional Court, when assessing whether an intervention in the fundamental right to own the property took place in accordance with Article 11 (1) of the Charter, normally assesses whether it did so on the basis of the law and within its limits [cf. the finding of 11 October 1995 sp. zn. If these conditions are met, it shall examine whether the measure in question pursues the legitimate (constitutionally and discussed) objective of its limitation and, if so, whether the measure is appropriate to achieve that objective (requirement of suitability), whether it cannot be achieved in another way which would be more appropriate to the fundamental law (requirement of necessity) concerned, and, finally, whether the interest in achieving that objective in a particular legal relationship outweighs the fundamental law (proportionality in the narrower sense).

42. Taxes and charges are a public obligation to pay the State's money (tax and fee obligations). Article 11 (5) of the Charter contains the constitutional authorisation of Parliament to determine the taxes and charges under which, at the same time, the interference in property law which takes place in the context of their designation, assessment and selection [cf. finding of 1 June 2005, sp. zn. IV. ÚS 29 / 05 (N 113 / 37 CollNU 463)]. The tax is imposed in the public interest, namely the acquisition of revenue by the State budget for the purposes associated with the fulfilment of the functions of the State [finding sp. zn. However, as far as the question of the need for a tax is concerned, such an assessment can no longer be made through a judicial interpretation, as it is a question of a political nature, the solution of which is in the sole competence of the legislator. Only Parliament is entitled to decide whether a tax is needed and to what extent, and in this regard it is entitled to take into account various criteria. Thus, the Constitutional Court may only proceed to review this decision in the context of an assessment of proportionality in the narrower sense, which, in the case of taxes (similar to, for example, the setting of an upper limit on financial penalties), is the exclusion of their extreme disproportionality. Intervention into property law must simply not lead to such a fundamental change in the ownership situation of the entity concerned that it would "destroy the substance of the property ', i.e." destroy the property base of the "taxpayer' [cf. the finding of 13 August 2002 sp. zn. ÚS 3 / 02 (N 105 / 27 SbNU 177; 405 / 2002 Sb.)], or that" the boundaries of the public legal financial performance of the individual against the State would have acquired a strangling (choking) effect '[the finding of 18 August 2004 sp. In such a case, non-compliance with the constitutional order shall be established even if this effect is reflected only in part of the taxpayers.

43. The tax obligation must be met not only from the point of view of the exclusion of extreme disproportionality, but also from the constitutional principle of equality, both non-accesoric, resulting from the requirement of the exclusion of arbitrage in the distinction between entities and rights provided for in Article 1 of the Charter and of the Accesoric to the extent defined in Article 3 (1) of the Charter (cf. The content of the principle of equality in rights within the meaning of Article 1 of the Charter has already been dealt with by the Constitutional Court of the Czech and Slovak Federal Republic, which concluded in this context that equality should be understood as a relative category, not absolute. It was subsequently followed by the Constitutional Court in a number of its decisions, which generally admitted a statutory inequality, but only provided that it could be justified on the basis of constitutionally accepted considerations. Such a case is not the case if it is based on a libel (non-accesory inequality) or is the result of a breach of one of the fundamental rights and freedoms (non-acesoric inequality) - cf., for example, the finding of 4 June 1997 sp. zn. Pl.

44. It should be stressed that "not every unequal treatment of different entities can be classified as a breach of the principle of equality, i.e. as unlawful discrimination against one entity compared with other. In order for the infringement to occur, several conditions must be met: various entities in the same or comparable situation are treated differently without having objective and reasonable grounds for the different approach applied" [finding of 21 January 2003 sp. zn.

45. In its established case-law, the Constitutional Court applies a direct discrimination test consisting of answering the following questions in order to assess whether the contested measure has not been treated unequally between the same or comparable individuals or groups: 1. Are they comparable individuals or groups?; 2. Are they treated differently on any of the grounds prohibited? 3. Is the different treatment to the individual concerned liable (by imposing a burden or by denying good)? 4. Is this different treatment justified, i.e. (a) pursues a legitimate interest and (b) is appropriate? [cf. finding of 16 October 2007 sp. zn. It also follows from the case-law of the European Court of Human Rights on non-discrimination that the justification of a certain difference in treatment depends also on its reason. Whereas, for the different treatment on grounds of racial or ethnic origin, sex, sexual orientation, nationality or origin of the child, there is a need for a very strong justification [cf., for example, Case 5335 / 05 Ponomaryov and Others v Bulgaria [2011] ECR 5335 / 05 [2011]; D. H. v Czech Republic (race) or judgment of 16 November 2004 in Case No 29865 / 96 - Ünal Tekeli v Turkey, § 53 (sex)], for other reasons of different treatment, the review by the European Court of Human Rights is less intense. In this context, the fifth step of the direct discrimination test can also be distinguished by the degree of "suspicion 'of the reason for the different treatment, from which the intensity of the review by the Court is then determined (the finding of the sp. zn.

46. The requirements arising from the rule of law pursuant to Article 1 (1) of the Constitution, which generally apply to the creation of legislation, shall apply without further delay, in particular the requirements of certainty and predictability of the law or the principles of legal certainty and the prohibition of retroactivity (cf. The emphasis on the need for a legal definition of a tax or charge to be certain and unambiguous may be justified by the protection of the individual in whose ownership the form is to be affected. The purpose of the tax or charge is primarily to secure the revenue of the State budget, but that is so general that it can justify essentially any tax or charge. It is precisely for this reason that their formalities cannot be inferred but merely determined, that the legislator is entitled to determine them solely, and that its decision must not create a space for double interpretation in which the taxpayer concerned could not establish with certainty whether and to what extent the tax or charge obligation arose. On the contrary, it is hardly conceivable that the formalities in question should be completed by a court or administrative body, which would result in individual taxpayers being penalised for failing to fulfil their tax obligations only because they have taken a different interpretation of an indefinite legal provision than the one to which an additional practice has been drawn. In other words, "the interpretation of the law does not allow taxation of something which does not provide for a tax subject with a desirable degree of certainty '[the finding of 2 December 2008 sp. zn. I. ÚS 1611 / 07 (N 211 / 51 CollNU 639), paragraph 18; also the finding of 6 February 2007 sp. zn. I. ÚS 531 / 05 (N 24 / 44 SbNU 293), paragraph 30, or the finding of the Constitutional Court of the Slovak Republic of 11 July 2012 sp.

47. For the sake of completeness, other (already mentioned) relevant aspects, namely the requirement of the predictability of the law, which foresees, inter alia, that if the legislator decides, in a situation where an individual under the existing law has the possibility to act in a certain way, to regulate this behaviour differently, then it must provide the individual concerned with sufficient time to adapt the new regulation to its behaviour. This necessary timeframe will always depend on specific circumstances, in particular what the legislation concerns, who its addressees are and whether their legitimate expectations are respected. Finally, the legislature itself defined a standard in Article 3 (3) of Act No. 309 / 1999 Coll., on the Collection of Laws and on the Collection of International Treaties, according to which, in the absence of a later regulation, legislation becomes effective on the 15th day following its publication and, if an urgent general interest so requires, an earlier beginning of its effectiveness may exceptionally be established, but at the earliest date of publication.

V./b

The objection of the so-called choking effect

48. On the basis of these grounds, the Constitutional Court examined the appellants' various objections and reached the following conclusions. First, it did not find that the contested scheme had a suffocating or confiscating effect on the taxpayers of the income tax on individuals who are also beneficiaries of an old-age pension in relation to their assets. The taxation of their income at a rate of 15%, though calculated from the so-called super-gross wage, does not seem to interfere with their economic activity in a way that would render it less of its fundamental justification. If its intensified impact can be accepted in cases where the amount of such taxable income is lower, it cannot be overlooked that the persons concerned are simultaneously beneficiaries of an old-age pension. Any extreme cases where, in view of the low amount of this pension, it could be considered that the total amount of the taxpayer's income does not allow his dignified life or even put him in a situation of material emergency are possible in the field of social security. Therefore, the objection in question does not justify the conclusion that the contested provision does not comply with the constitutional right to own the property pursuant to Article 11 (1) of the Charter.

V./c

Assessment of the criterion from which the application of the basic tax rebate is based in view of the objection of non-accesoric inequality

49. Furthermore, the Constitutional Court dealt with the very criterion of whether or not a basic tax discount of CZK 24,840 per year was applied to a particular taxpayer. According to the contested provision, this discount does not apply where the taxpayer was an old-age pensioner on 1 January of the tax period. In this respect, the situation was decisive on that date, and any other time point was irrelevant.

50. Although it may be accepted that the original intention of the promoter of the amendment to the Income Tax Act, which was supplemented by the contested provision, should have been to prevent the taxpayers who are also beneficiaries of the old-age pension from being subject to essentially two comparable tax measures (i.e. the tax rebate on the taxpayer and the exemption of the old-age pension) during the tax period, the contested provision is only partially achieved by that objective. Not only does it affect only part of those taxpayers, but at the same time it seems to allow those taxpayers to adapt their behaviour to maintain their tax rebate as a result of the fulfilment of that time criterion.

51. The inequality between taxpayers who are old-age pensioners in the tax period is already reflected in the fact that those who have this position on 1 January of the tax period always lose the entire basic tax rebate, while those who find themselves in that position at any time later, even on the next day (i.e. on 2 January), have this discount in full. It is irrelevant whether they also receive an old-age pension during the period during which they have worked. The result of this legislation is a significant difference in the status of the two groups of taxpayers, because those in respect of whom the tax discount is applied will have a tax of CZK 24,840 per year, regardless of the old-age pension received. In the case of income from dependent activities, this means that with regard to the tax rate they are not taxed annual income corresponding to the gross wage of CZK 123 582 or the so-called super gross wage of CZK 165 600 (see paragraph 37), i.e. for most people it is certainly not negligible. The criterion on which this distinction is based is purely formal and, moreover, the law creates procedural possibilities for individuals to retain both benefits. In the case of those who have not yet received an old-age pension, it is a postponement of the beginning of his return so that it takes place after 1 January of the relevant tax period. In fact, those persons remain free to apply for a pension retroactively without any additional effect on the application of the tax rebate. In the case of those who are already receiving it, it is likely that its payment will be halted for the period covered by that date.

52. In this situation, the question arises as to what purpose can actually be attributed to the contested provision. It is clear that, as a result of that measure, only part of the taxpayers receiving an old-age pension lose their tax rebate, the distinction of which from other taxpayers is problematic for two reasons. First, there is no reasonable reason why a taxpayer who has received an old-age pension throughout the calendar year should not benefit from the tax in question at all, whereas for him who has only started to receive it since 2 January or later, he should be maintained in full. The criterion on 1 January cannot even be seen in this context as necessary administrative measures for the purpose of withholding tax, since, as is clear from Section 35ba (3) of the Income Tax Act, the possibility of applying the discount in question could be tied to certain months without any technical difficulties. Moreover, the resulting inequality is amplified by the relatively high amount that it is about, which in itself is a reason for which this difference cannot be denied constitutional legal relevance (it is an inequality of extreme). The second reason is that individual taxpayers could have achieved the maintenance of the tax rebate by avoiding retirement on 1 January.

53. These facts clearly do not allow any reasonable reason to be named, for which one of the groups of taxpayers receiving an old-age pension is to have a significant tax advantage during the relevant tax period, while the other does not. On the contrary, the distinction between the two groups is arbitral in nature. The Constitutional Court therefore considers the contested provision to be contrary to the principle of non-Accesorial Equality arising from Article 1 of the Charter.

V./d

Assessment of the contested provision in terms of Accesorial Equality

54. The result of the contested provision is not only the inequality between two groups of taxpayers who receive an old-age pension but also between the members of that group concerned and all other taxpayers of that tax. It should be seen that the Income Tax Act does not guarantee them, in the same or comparable extent, a minimum amount of income for which, in view of its need for a decent life, it is not intended to be taxed. Whereas, in the case of the first mentioned group, the old-age pension is intended to fulfil this function, the amount of which varies between taxpayers, in the case of the second, the tax discount on the taxpayer, which is CZK 24,840 per year for all. Given that the inequality in question would have been given even if the law had laid down as a decisive criterion the collection of an old-age pension at any date of that tax period, the further interpretation for simplification would have been based on the distinction between taxpayers according to whether or not they received an old-age pension during that period.

55. This inequality is due to the fact that, contrary to the tax rebate in question, the amount of the old-age pension for each of its citizens is different, as a result of which part of their income is also different, which is not affected by the tax. The statistics available to the Constitutional Court (see paragraph 11) show that in 2012 the average retirement pension was CZK 10 788 per month, with 10% of the old-age pensioners receiving a pension of less than CZK 8 192. An old-age pension of less than CZK 8,500 received approximately 250,000 out of a total of 1,726 523 pensioners. For 4,858 people, it was even less than CZK 3,000. If it is excluded from the thesis presented by the Ministry of Finance that an old-age pension fulfils a similar function to a tax discount on a taxpayer, that is to say, it guarantees a certain minimum amount that will not be taxed to individual taxpayers, then this thesis applies only if both of these amounts are comparable. It has already been mentioned above that the tax rebate of CZK 24,840 per year corresponds to the tax-free income (gross wage) of CZK 123 582 per year, i.e. approximately CZK 10,300 per month, which is essentially the amount corresponding to the average amount of pension. However, since a significant proportion of old-age pensioners have lower pension rates, they should be considered, in terms of the logic of this comparison, as they are actually subject to a lower tax advantage. For example, if old-age pensioners receive a pension of CZK 8 192 per month (CZK 98 304 per year), this is a comparable situation to that of a taxpayer who is not a beneficiary of an old-age pension and who would have a tax discount of CZK 19 759 per year, i.e. about 20% less than the rebate in question under Section 35ba (1) (a) of the Income Tax Act. In the case that these persons receive a pension of CZK 4,000 (i.e. CZK 48,000 per year, which concerns approximately 15 000 persons), this is a comparable situation with the position of a taxpayer who is not a beneficiary of an old-age pension and who would have a tax discount of CZK 9648 per year, i.e. about 60% less.

56. The figures can be summarised by applying a tax discount of CZK 24,840 per year in relation to a natural person's income tax payer who is not the beneficiary of an old-age pension. In the case of a taxpayer who, however, receives an old-age pension, excludes the application of this rebate, a comparable tax advantage will be derived from the amount of the pension in terms of its purpose. If the pension granted is lower, the income of those persons who are not subject to the tax in question will be lower, which can again be illustrated in the example. For example, if a taxpayer who is not a beneficiary of an old-age pension has a monthly income of CZK 9,000, then with regard to the tax rebate of CZK 24,840 per year (CZK 2,070 per month) no tax will be levied on that income. If a taxpayer who is the beneficiary of an old-age pension and who is not subject to a tax discount as a result of this fact will have an old-age pension of CZK 4,000 and an additional income (for example from the dependent activity he earns) of CZK 5,000 per month, he will be taxed at 15% of the so-called super-gross wage, i.e. 20.1% of the gross wage, which will result in only CZK 9.95 per month's income after tax.

57. It should be added that the latter example shows some inconceptual nature of the measure as the contested legislation, as regards the overall amount of taxation, actually affects those who are among the most vulnerable taxpayers. This situation is all the more undesirable because the fundamental objective of our democratic rule of law must be to preserve human dignity, which is also reflected in the fact that a person is able to take care of himself because of the income he has earned from his own work - that is, by income from employment and income from pension insurance.

58. On the basis of these findings, the Constitutional Court applied in the present case a test of direct discrimination (see paragraph 45), which compared the position of two groups of individuals' income tax payers - the one with a tax rebate in accordance with § 35ba (1) (a) of the Income Tax Act, and the one with which, on the contrary, the old-age pension does not apply. Without the Constitutional Court taking the view that, in the field of tax law, persons engaged in a gainful activity are always in a comparable position to those who receive an old-age pension in addition to that activity, it considers in this particular case that this is the case (step 1). The comparability of their status is given in the light of the aspect that the requirement to retain a certain part of their income in order to ensure their decent life is applied to members of the two groups, unaffected by income tax (see paragraph 33). In addition, it can be concluded that the criterion in question of the distinction (that is to say the old-age pension and not the age, as the intervener claims,) is not prohibited (step 2) and that that distinction is linked to the burden of the old-age pension payers concerned (step 3). The question is therefore whether this distinction is justified (step 4).

59. The consideration that the basic tax rebate may be granted also through an old-age pension has a reasonable basis. Historically, the oldest function of the pension system is precisely the protection function, providing people with material security in the event of old age, when they can no longer provide themselves with the means for their livelihood. This is in its own way a function similar to that of (albeit not necessarily) a tax rebate for all taxpayers by excluding taxation of a certain minimum amount for the provision of living needs, for which the tax effect would, in the view of the legislator, be unduly burdensome. Therefore, if the contested provision follows a tax advantage limitation in cases where the purpose of the contested provision is ensured by an old-age pension, that purpose may, in general, be considered to be a legitimate interest which may justify the existence of an inequality [Step 4 (a)]. However, in order for this measure to be able to pass the test in question, it would also have to be proportionate [Step 4 (b)], which is a conclusion that the Constitutional Court cannot attest. This is precisely because of the fundamental (extreme) differences in the amount of the old-age pensions granted, which, in the case of the lower one, prevent their payment from fulfilling the above purpose in a comparable manner to the tax rebate of CZK 24,840 per year. The result of the contested provision is only that the lower the old-age pension the taxpayers receive, the greater the tax burden on them. The contested provision, therefore, does not, in view of the inadequacy of this inequality, stand in line with the test in question, which is to be considered contrary to Article 3 (1) in conjunction with Article 11 (1) and (5) of the Charter.

60. The Constitutional Court points out that the above conclusions only affect the question of the equality of those groups of individuals' income tax taxpayers, which cannot be inferred from the inconsistency of the current construction of the taxpayer's tax rebate, including its amount, nor from the requirement of the legislator to regulate (increase) the current level of pensions in any way.

61. In conclusion, the contested provision entered into force on 1 January 2013, namely only four days after its publication on 27 December 2012. Although it is technically sufficient for legislation to be in force, it is published in the Collection of Laws, before it is to become effective, materially, that is to say, the view of the constitutional requirement for predictability of legislation must always be taken into account as to what the legislation concerns, who its addressees are and whether it respects their legitimate expectations (cf. point 47). The Constitutional Court takes the view that the rate of taxation is one of the key aspects governing taxpayers' decision-making on where to direct their economic activity, since a decision which, at a certain level of taxation, may be favourable to the level of taxation of another. In general, rapid and unconceptual changes to tax legislation are one of the biggest weaknesses not only in Czech legislation but also in the national economy. Practically making long-term planning impossible for all economic operators. Although a number of subjects can be criticised from an economic point of view, this is obviously not the task of the Constitutional Court. However, the way in which this imconceptuality and the rate of change fell on working pensioners in the case at hand is beginning to raise at least some doubts as to whether, materially speaking, the requirement of predictability of law has actually been fulfilled.

62. A person of retirement age has in principle three options: to enjoy an old-age pension or to enjoy an old-age pension, while remaining economically active or to delay the consumption of an old-age pension and to continue to contribute to the pension system by economic activity. A number of pensioners are working precisely to maintain a decent standard of living, which the state-paid pension - as is apparent from the statistics obtained by the Constitutional Court - would not suffice. A number of aspects are certainly being considered in deciding which of these strategies, with the level of taxation of potential economic activity undoubtedly being among the most important. It is therefore not possible to remain uncritical of the fact that the State has allowed persons of pensionable age to make this choice - bearing in mind a certain legislative setting of conditions - and subsequently changed these conditions with effect only four days later. Thus, in this particular situation, the amendment of the tax legislation to this type of addressee (working old-age pensioners) was no longer a failure to comply with the legal period prescribed by law, without giving rise to an urgent general interest for which that period should not be respected, to intervene in the principles of the democratic rule of law.

VI.

Conclusion

63. Since the contested provision is contrary to Articles 1 and 3 (1), in conjunction with Article 11 (1) and (5) of the Charter, the Constitutional Court, pursuant to Article 70 (1) of Act No 182 / 1993 Coll., on the Constitutional Court, as amended by Act No 48 / 2002 Coll., decided that this provision would be repealed on the date of the publication of this finding in the Collection of Laws. As this cancellation takes place during the tax period, the tax rebate shall be applied to the taxpayer in accordance with Section 35ba (1) (a) of the Income Tax Act to all taxpayers, including those who received an old-age pension from a pension or foreign compulsory insurance of the same kind on 1 January of this year.

President of the Constitutional Court:

JUDr. Rychetský v. r.

Different opinions under Article 14 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, were taken by the judges Vlasta Formánková, Ivan Janů, Vladimir Krárek and Vladimir Sládeček to decide.