FIRST SECTION
\nDECISION
\nApplication no. 60633\/16
\nConcetta CACCIATO and Michele CACCIATO
\nagainst Italy<\/p>\n
The European Court of Human Rights (First Section), sitting on 16\u00a0January 2018 as a Chamber composed of:<\/p>\n
Linos-Alexandre Sicilianos, President,
\nKristina Pardalos,
\nGuido Raimondi,
\nKrzysztof Wojtyczek,
\nArmen Harutyunyan,
\nPauliine Koskelo,
\nJovan Ilievski, judges,<\/p>\n
and Abel Campos, Section Registrar,<\/p>\n
Having regard to the above application lodged on 12 October 2016,<\/p>\n
Having deliberated, decides as follows:<\/p>\n
THE FACTS<\/strong><\/p>\n 1.\u00a0\u00a0The applicants, Mrs ConcettaCacciato (\u201cthe first applicant\u201d) and Mr\u00a0Michele Cacciato (\u201cthe second applicant\u201d), are Italian nationals, who were born in 1945 and 1950 respectively and live in Canicatt\u00ec. They were represented before the Court by Mrs G. Paoletti and Mr N. Paoletti, lawyers practising in Rome.<\/p>\n A.\u00a0\u00a0The circumstances of the case<\/strong><\/p>\n 2.\u00a0\u00a0The facts of the case, as submitted by the applicants, may be summarised as follows.<\/p>\n 3.\u00a0\u00a0On 30 November 1999 the Canicatt\u00ec City Council issued a decree authorising the Canicatt\u00ec Municipality to take possession of a plot of land measuring 1,983 square metres for the purposes of building a social housing complex. The land was recorded in the land register as Folio no. 66, parcels nos. 759, 574, 402, 613, 799, 800, 607, 795, 612, 602, and 790. The first applicant was the owner of 398 square metres of the land corresponding to parcels nos. 402, 613, 799, and 800. The second applicant was the owner of the land corresponding to parcels nos. 607, 795, and 612. Both applicants also owned four sixteenths of the land corresponding to parcels nos. 602 and 790.<\/p>\n 4.\u00a0\u00a0On 28 January 2000 the authorities took physical possession of the land.<\/p>\n 5.\u00a0\u00a0On 13 January 2005 the Canicatt\u00ec City Council issued an expropriation order in respect of the land.<\/p>\n 6.\u00a0\u00a0As the determination of the amount of expropriation compensation due to them was not forthcoming, on 23 April 2008 the applicants brought an action before the Palermo Court of Appeal. In addition to compensation for expropriation, they also claimed compensation for the period the land had been lawfully occupied, namely from the date of its initial occupation by the authorities in 2000 to the date on which the expropriation order was issued in 2005.<\/p>\n 7.\u00a0\u00a0By a judgment delivered on 25 June 2014 and filed with the court registry on 12 November 2014, the Palermo Court of Appeal held that the applicants were entitled to expropriation compensation corresponding to the land\u2019s market value, as determined by a court-appointed expert, plus statutory interest from the date of the expropriation to the present date. The court also held that the applicants were entitled to compensation for the period in which the land had been lawfully occupied. The first applicant was awarded a global sum of 111,464.25 euros (EUR) and the second applicant was awarded a global sum of EUR 89,526.25.<\/p>\n 8.\u00a0\u00a0As neither party lodged an appeal on points of law, the judgment of the Palermo Court of Appeal became final.<\/p>\n 9.\u00a0\u00a0The applicants received the payment, by the Canicatt\u00ec Municipality, of a first portion of the sums due to them by way of three instalments: on 15\u00a0April, 26 April and 1 July 2016. Tax had been deducted at source at a rate of 20%.<\/p>\n B.\u00a0\u00a0Relevant domestic law and practice<\/strong><\/p>\n 10.\u00a0\u00a0Law no. 413 of 30 December 1991 (hereinafter \u201cLaw no. 413\/1991\u201d) was created, inter alia, to broaden the tax base and streamline, facilitate and strengthen tax administration.<\/p>\n 11.\u00a0\u00a0The relevant parts of section 11(5) provide that capital gains (plusvalenza) on expropriation compensation paid to individuals not operating a business are taxable under the Consolidated Income Tax Act (TestoUnicodelleImposte sui Redditi).<\/p>\n 12.\u00a0\u00a0As to the practical means of enforcement of the tax, section 11(7) provides that when paying the compensation mentioned in section 11(5), the authorities entrusted with making the payment (entieroganti) must deduct tax at source at a rate of 20% from the entire sum. It is open to the taxpayer to opt for ordinary taxation in his or her annual tax return, in which case the sum deducted at source will be considered as an advance on the final tax payment due.<\/p>\n COMPLAINTS<\/strong><\/p>\n 13.\u00a0\u00a0The applicants complained that they had not received adequate compensation for the expropriation of their land, as the Palermo Court of Appeal had awarded them a sum corresponding to the market value of the land at the time of the expropriation, but had failed to award a sum reflecting an adjustment for inflation, and had awarded a sum covering statutory interest without, however, calculating such interest on the basis of the progressively adjusted capital. This, in their view, ran contrary to the Court\u2019s case-law and, in particular, to the judgment Preite v. Italy (no.\u00a028976\/05, 17 November 2015).<\/p>\n 14.\u00a0\u00a0The applicants further complained that the expropriation compensation awarded to them had been reduced by 20% on account of the amount they had had to pay in taxation. This meant that they had ultimately received an amount considerably inferior to the land\u2019s market value, which, in turn, amounted to a disproportionate interference with their property rights.<\/p>\n 15.\u00a0\u00a0With respect to the taxation provisions in question, the applicants argued that they reflected a legislative expedient to reduce the costs of acquiring land for public purposes by 20%. Relying on Scordino v. Italy (no. 1) [GC] (no. 36813\/97, ECHR 2006\u2011V) and Gigli CostruzioniS.r.l. v.\u00a0Italy (no. 10557\/03, 1 April 2008), they contended that the Court had already found that the levying of the tax amounted to a violation of Article\u00a01\u00a0of Protocol No. 1 when examining the issue jointly with other reductions applied to the property\u2019s market value.<\/p>\n 16.\u00a0\u00a0In support of their claims, the applicants further pointed out, without citing specific cases, that the Court had always included the phrase \u201cplus any tax that may be chargeable\u201d in its just satisfaction awards in cases involving both lawful and unlawful expropriations.<\/p>\n THE LAW<\/strong><\/p>\n 17.\u00a0\u00a0In respect of the above complaints, the applicants relied on Article 1 of Protocol No. 1, which reads as follows:<\/p>\n \u201cEvery natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.<\/p>\n The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.\u201d<\/p>\n A.\u00a0\u00a0As regards the alleged inadequacy of compensation<\/strong><\/p>\n 18.\u00a0\u00a0One part of the applicants\u2019 complaint concerns the alleged inadequacy of the sum determined by the Palermo Court of Appeal as expropriation compensation on account of that court\u2019s failure to include an adjustment for inflation in its award and the way in which it had determined the interest due. The Court notes that the applicants have not lodged an appeal with the Court of Cassation against the judgment of the Court of Appeal. Accordingly, the Court considers that this part of the complaint must be rejected pursuant to Article 35 \u00a7 1 of the Convention for failure to exhaust domestic remedies.<\/p>\n B.\u00a0\u00a0As regards the imposition of tax on compensation<\/strong><\/p>\n 19.\u00a0\u00a0The Court will now turn to the part of the complaint hinging on the tax levied on the expropriation compensation. In this respect, the Court notes that there is no evidence in the case file that the applicants raised their grievance before the domestic courts. However, the Court considers that it is not necessary to rule on this issue conclusively because this part of the complaint is in any event inadmissible for the reasons set out below.<\/p>\n 20.\u00a0\u00a0The Court considers at the outset that the award by the domestic court reflecting expropriation compensation amounted to a \u201cpossession\u201d attracting the guarantees of Article 1 of Protocol No.\u00a01.<\/p>\n 21.\u00a0\u00a0The Court reiterates that, according to its well-established case-law, Article 1 of Protocol No. 1 comprises three distinct rules: the first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property. The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and subjects it to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled, among other things, to control the use of property in accordance with the general interest. The second and third rules, which are concerned with particular instances of interference with the right to peaceful enjoyment of property, are to be construed in the light of the general principle laid down in the first rule (see, among many other authorities, Sporrong and L\u00f6nnroth v. Sweden, 23 September 1982, \u00a7 61, Series A no.\u00a052; James and Others v. the United Kingdom, 21\u00a0February 1986, \u00a7 37, Series A no.\u00a098; and Beyeler v.\u00a0Italy [GC], no. 33202\/96, \u00a7\u00a098, ECHR 2000-I).<\/p>\n 22.\u00a0\u00a0The Court notes at the outset that the impugned tax measure was imposed on the applicants by the Canicatt\u00ec Municipality under Law no.\u00a0413\/1991, which regulates, inter alia, the collection of taxation on expropriation compensation. It would therefore appear to the Court to be the most natural approach to examine the applicants\u2019 complaint from the standpoint of control of the use of property \u201cto secure the payment of taxes\u201d, which falls within the rule in the second paragraph of Article 1 of Protocol No. 1 (see National & Provincial Building Society, Leeds Permanent Building Society and Yorkshire Building Society v. the United Kingdom, 23 October 1997, \u00a7 79, Reports of Judgments and Decisions 1997\u2011VII).<\/p>\n 23.\u00a0\u00a0According to the Court\u2019s well-established case-law (see, among many other authorities, GasusDosier- und F\u00f6rdertechnik GmbH v. the Netherlands, 23 February 1995, \u00a7 62, Series A no. 306\u2011B,and N.K.M. v.\u00a0 Hungary, no. 66529\/11, \u00a7 42, 14 May 2013), an interference, including one resulting from a measure to secure the payment of taxes, must strike a \u201cfair balance\u201d between the demands of the general interests of the community and the requirements of the protection of the individual\u2019s fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph: there must therefore be a reasonable relationship of proportionality between the means employed and the aims pursued. Lastly, the applicant must not bear an individual and excessive burden (see Sporrong and L\u00f6nnroth, cited above, \u00a7\u00a073).<\/p>\n 24.\u00a0\u00a0Furthermore, in determining whether this requirement has been met, it is recognised that a Contracting State, not least when framing and implementing policies in the area of taxation, enjoys a wide margin of appreciation and the Court has consistently held that it will respect the legislature\u2019s assessment in such matters unless it is devoid of reasonable foundation (see GasusDosier- und F\u00f6rdertechnik GmbH, cited above, \u00a7 60; Imbert de Tr\u00e9miolles v. France (dec.), nos. 25834\/05 and 27815\/05 (joined), 4 January 2008; and Arnaud and Others v. France, nos. 36918\/11 and 5\u00a0others, \u00a7 25, 15 January 2015). It is, indeed, primarily for national authorities to decide the type of tax or contributions they wish to levy, since decisions in this area will commonly involve the appreciation of political, economic and social questions which the Convention leaves within the competence of the States parties, the domestic authorities being better placed than the Court in this connection (see N.K.M. v. Hungary, cited above, \u00a7 57).<\/p>\n 25.\u00a0\u00a0Turning to whether a fair balance has been struck in the case at hand, the Court considers at the outset that it was well within the area of discretionary judgment for the Italian legislature to develop substantive tax rules providing for taxation of expropriation compensation. Consequently, the legislation cannot be considered to be arbitrary as such (see Di Belmonte v. Italy, no. 72638\/01, \u00a7 42, 16 March 2010, and, mutatis mutandis, Arnaud and Others, cited above, \u00a7 27). Moreover, choices as to the type and amount of taxation to be levied, but also the related question as to what may be classified as taxable income, fall within those issues that the domestic legislature is certainly better placed than the Court to assess and determine (see, mutatis mutandis, G\u00e1ll v. Hungary, no.\u00a049570\/11, \u00a7 56, 25 June 2013; Bal\u00e1\u017e v. Slovakia (dec.), no. 60243\/00, 16\u00a0September 2003; and Spampinato v. Italy (dec.), no. 69872\/01, 29\u00a0March\u00a02007). The same can be said as regards the choice as to the concrete means of enforcement, namely deduction at source, with the option left to the taxpayer to choose the regular taxation route (see paragraph 12 above). In view of the foregoing, the Court considers that the respondent State should be afforded a particularly wide margin of appreciation in the present case.<\/p>\n 26.\u00a0\u00a0It remains to be ascertained whether the impugned fiscal measure could be viewed as having imposed an unreasonable or disproportionate burden on the applicants.<\/p>\n 27.\u00a0\u00a0The Court considers at the outset that the tax rate applied in the present case, which amounted to 20% of the total expropriation compensation awarded, cannot be considered, from a quantitative standpoint, as prohibitive. Moreover, it cannot be said that the deduction of such an amount had the effect of nullifying or essentially frustrating the award of expropriation compensation made by the Court of Appeal, to the extent of causing the tax burden to acquire a \u201cconfiscatory\u201d nature. Nor did it lead to a paradoxical situation whereby the State took away with one hand \u2013 in this case in taxation \u2013 more that it awarded with the other, in the form of expropriation compensation (see, mutatis mutandis, in the context of the application of court fees, Perdig\u00e3o v. Portugal [GC], no.\u00a024768\/06, \u00a7 72, 16\u00a0November 2010). The Court is, in other words, satisfied that the fiscal measures applied in the present case did not go as far as to impair the very substance of the applicants\u2019 property rights.<\/p>\n 28.\u00a0\u00a0The Court also notes that there is no evidence in the case file \u2013 and in any event it is not argued by the applicants \u2013 that the levying of such a sum fundamentally undermined the applicants\u2019 financial situation. This is one of the factors which the Court has given weight to when gauging whether a fair balance has been struck in a given case (see N.K.M. v.\u00a0Hungary, cited above, \u00a7 42 and the further references cited therein).<\/p>\n 29.\u00a0\u00a0In addition, the Court finds it relevant to point out that the applicants had the choice under the legislation under scrutiny to opt for taxation under the ordinary income tax regime if they so wished, as taxpayers can choose between accepting the 20% deduction applied to the sum obtained, or opt for ordinary taxation, which determines the amount due as tax taking into account the capital gains in combination with other components of their income (see paragraph 12 above).<\/p>\n 30.\u00a0\u00a0As to the applicants\u2019 reliance on the Scordino (No. 1) and Gigli Costruzioni judgments to support their arguments, the Court observes at the outset that those cases concerned awards of expropriation compensation which had been drastically reduced, with the result that they were much lower than the property\u2019s market value, owing to the retrospective application of legislative provisions providing for such reductions (see Scordino (No. 1), cited above, \u00a7\u00a7 47-61 for a summary of the relevant provisions). It was against that specific factual backdrop that the Court concluded that Article 1 of Protocol No. 1 had been breached (see Scordino (No. 1), cited above, \u00a7\u00a7 99-104, and Gigli Costruzioni, cited above, \u00a7\u00a7 38-50). The provisions applied in Scordino (No. 1) and Gigli Costruzioni were declared unconstitutional in 2007 and were, consequently, no longer applied in proceedings for the determination of expropriation compensation, which had to correspond to the expropriated property\u2019s full market value (see Messana v. Italy, no. 26128\/04, \u00a7 18, 9\u00a0February 2017). In the present case the amount of compensation was determined well after the Constitutional Court judgments and was therefore not subjected to any reduction with respect to the market value.<\/p>\n 31.\u00a0\u00a0In any event, the Grand Chamber made the following determination in Scordino (No. 1) (cited above, \u00a7 258): \u201c[w]ith regard, lastly, to the 20% tax deducted from the expropriation compensation awarded at domestic level, the Grand Chamber, like the Chamber, has not found the application of that tax to be unlawful as such but has taken account of that factor in assessing the facts\u201d.\u00a0Thus, in the Court\u2019s view, the case-law cited by the applicants cannot be understood as implying that the application of the tax, per se, ran contrary to Article 1 of Protocol No. 1.<\/p>\n 32.\u00a0\u00a0In view of the foregoing, and taking into account the wide margin of appreciation which the States have in taxation matters, the Court considers that the levying of the tax on the expropriation compensation awarded to the applicants did not upset the balance which must be struck between the protection of the applicants\u2019 rights and the public interest in securing the payment of taxes. Accordingly, this part of the complaint is manifestly ill\u00a0\u2011\u00a0founded and must be rejected in accordance with Article 35 \u00a7\u00a7 3 and 4\u00a0of the Convention.<\/p>\n For these reasons, the Court, unanimously,<\/p>\n Declares the application inadmissible.<\/p>\n Done in English and notified in writing on 8 February 2018.<\/p>\n Abel Campos\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Linos-Alexandre Sicilianos
\nRegistrar\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 President<\/p>\n