U-I-313/13

Reference no.:
U-I-313/13
ECLI:
ECLI:SI:USRS:2014:U.I.313.13
Act:
Real Property Tax Act (Official Gazette RS, No. 101/13) (RPTA)

Real Property Mass Appraisal Act (Official Gazette RS, Nos. 50/06 and 87/11) (RPMAA)
Operative provisions:
The Real Property Tax Act (Official Gazette RS, No. 101/13) is abrogated.
The Real Property Mass Appraisal Act (Official Gazette RS, Nos. 50/06 and 87/11) is inconsistent with the Constitution insofar as it refers to the mass appraisal of real property for the purpose of the taxation of real property.
Until a different statutory regulation of the taxation of real property is adopted, the regulations determined by the first through fifth indents of Article 33 of the Real Property Tax Act are applicable.  
On the basis of the regulations mentioned in the previous point, the competent authorities shall assess, for 2014, the compensation fee for building land use and the fee for the maintenance of forest roads with validity from 1 April 2014 onwards in the amount for the entire year. The obligation to pay property tax in conformity with the regulations mentioned in the previous point of the operative provisions arises on 1 April 2014. 
The time limits that apply to taxable persons determined in the regulations determined by the first through fifth indents of Article 33 of the Real Property Tax Act and that will have already expired by the publication of this Decision in the Official Gazette of the Republic of Slovenia shall expire on 30 April 2014.
The time limits for the competent authorities determined in the regulations determined in the first through fifth indents of Article 33 of the Real Property Tax Act and that have already expired in 2014 shall expire on 30 June 2014.
The Urban Municipality of Koper bears its own costs arising from this procedure.
This Decision shall take effect on the day of its public announcement.
Abstract:
In conformity with Article 5 of the Real Property Tax Act (hereinafter referred to as the RPTA), the taxable base for real property tax assessment is the appraised market value of the real property, which is determined in the procedure for mass appraisal of real property. The Real Property Mass Appraisal Act (hereinafter referred to as the RPMAA) leaves the following matters to implementing regulations: the formation of the real property valuation models determined by the first through ninth paragraphs of Article 7 of the RPMAA, the determination of the data determined by the tenth and eleventh paragraphs of Article 7 thereof, the determination of the methods of mass appraisal determined by Article 8 thereof, as well as the criteria determined by the fourth paragraph of Article 15 thereof. These are the elements that are fundamental for the determination of the taxable base, on the basis of which the tax obligation is determined. The determination of the taxable base lies in the competence of the legislature, because it affects the legal situation of taxable persons. The models, methods, and data that determine the taxable base are not clearly and precisely regulated by the RPMAA. With regard to that, the mentioned provisions of the RPMAA are inconsistent with Article 147 of the Constitution. Consequently, the taxable base determined by Article 5 of the RPTA as a blanket provision is inconsistent with the Constitution as well.
 
With regard to the determination of different tax rates for officially occupied residential real property in comparison with officially unoccupied residential real property and for real property pertaining to power plants in comparison with other commercial and industrial real property, the legislature failed to demonstrate that the reasons for differentiation have a sensible connection to the subject of the regulation and the purpose of taxation. Consequently, the first through fourth indents of point 1 of the second paragraph of Article 6 of the RPTA are inconsistent with the second paragraph of Article 14 of the Constitution.
 
The regulation of legal remedies determined by the second paragraph of Article 14 of the RPTA ensures only an ostensible right to appeal against the appraised market value of real property, therefore it entails a hollowing out of the right to legal remedies determined by Article 25 of the Constitution.
 
The division of revenue from the real property tax between the state and municipalities is not in itself inconsistent with Article 142 of the Constitution. The Act determines that municipalities are direct beneficiaries of revenue from the real property tax, therefore this tax is, with regard to the share that pertains to them, their own tax source.
 
The real property tax is, by its nature, sensibly incorporated in the implementation of local self-government in municipalities in which the relevant real properties are located. Therefore, it is fundamentally a municipal tax and the predominant part of the funds collected from the real property tax should belong to municipalities. How much this share should be is a question of appropriateness, i.e. statutory regulation. Since Article 9 of the RPTA does not ensure this [i.e. that the predominant part of the revenue collected from the real property tax pertains to municipalities], it is inconsistent with Article 140 of the Constitution.
 
From the financial autonomy of municipalities in imposing their taxes (Articles 142 and 147 of the Constitution) it follows that the authorisations of municipalities must be sufficiently extensive to allow municipalities to manage the tax as their own source of financing their tasks. A regulation that allows municipalities to increase or decrease tax rates by 50%, for reasons of spatial and economic policy, with regard to the part that pertains to them, under additional statutory limitations, does not ensure sufficient authorisations that would allow municipalities to efficiently carry out their constitutional and statutory tasks with their own funds. Consequently, Article 6 of the RPTA is inconsistent with Articles 140 and 142 of the Constitution insofar as it regulates the position of municipalities.
 
In the transitional period, revenues from the real property tax are only to be allocated to municipalities from the budget of the state. Such regulation causes municipalities to depend on the state, therefore it is not in conformity with the constitutionally guaranteed financial autonomy of municipalities determined by Article 142 of the Constitution.
Password:
1.2.51.3.2 - Constitutional Justice - Types of claim - Capacity to file a petition with the Constitutional Court - Filer of a request - One third of deputies.
1.2.51.3.3 - Constitutional Justice - Types of claim - Capacity to file a petition with the Constitutional Court - Filer of a request - National Council.
1.2.51.3.5 - Constitutional Justice - Types of claim - Capacity to file a petition with the Constitutional Court - Filer of a request - Representative bodies of a local community.
1.2.51.2.2 - Constitutional Justice - Types of claim - Capacity to file a petition with the Constitutional Court - Petitioner - Political party, society, association.
1.5.51.1.17.1 - Constitutional Justice - Decisions - Types of decisions of the Constitutional Court - In abstract review proceedings - Annulment - Of a statute.
1.5.51.1.15.1 - Constitutional Justice - Decisions - Types of decisions of the Constitutional Court - In abstract review proceedings - Finding that a regulation is not in conformity - With the Constitution.
1.5.51.1.22 - Constitutional Justice - Decisions - Types of decisions of the Constitutional Court - In abstract review proceedings - Determination of the manner of implementation of a decision.
1.5.51.1.11 - Constitutional Justice - Decisions - Types of decisions of the Constitutional Court - In abstract review proceedings - Decision on costs.
1.6.2 - Constitutional Justice - Effects - Determination of effects by the court.
1.6.5.1 - Constitutional Justice - Effects - Temporal effect - Entry into force of decision.
1.5.5.1 - Constitutional Justice - Decisions - Individual opinions of members - Concurring opinions.
1.4.11 - Constitutional Justice - Procedure - Hearing.
3.13 - General Principles - Legality.
4.10.7 - Institutions - Public finances - Taxation.
3.3 - General Principles - Democracy.
3.4 - General Principles - Separation of powers.
5.2 - Fundamental Rights - Equality.
5.3.13.2 - Fundamental Rights - Civil and political rights - Procedural safeguards, rights of the defence and fair trial - Access to courts.
5.3.13.3 - Fundamental Rights - Civil and political rights - Procedural safeguards, rights of the defence and fair trial - Double degree of jurisdiction.
4.8.3 - Institutions - Federalism, regionalism and local self-government - Municipalities.
4.8.7 - Institutions - Federalism, regionalism and local self-government - Budgetary and financial aspects.
5.3.13.19 - Fundamental Rights - Civil and political rights - Procedural safeguards, rights of the defence and fair trial - Adversarial principle.
Legal basis:
Arts. 14.2, 25, 138, 139, 140, 142, and 147, Constitution [CRS]
Arts. 34.1, 40.2, 43, 48, Constitutional Court Act [CCA]
Note:
¤ By the Order of the Constitutional Court dated 23 January 2014, cases Nos. U-I-323/13, U-I-1/14, U-I-6/14, U-I-19/14, and U-I-20/14 were joined to the present case for joint consideration and decision-making.
Document in PDF:
The full text:
U-I-313/13-88
25 March 2014
 
 
On the basis of the first paragraph of Article 30 of the Rules of Procedure of the Constitutional Court (Official Gazette RS, Nos. 86/07, 54/10, and 56/11), the Constitutional Court hereby issues the following
 
 
PRESS RELEASE
 
I  The Decision
 
In proceedings to review constitutionality initiated upon the requests of a group of deputies of the National Assembly, the National Council, the Urban Municipality of Koper, the Association of Municipalities of Slovenia, the Association of Municipalities and Towns of Slovenia, and upon the petition of the Municipality of Rogašovci, the Constitutional Court decided, by Decision No. U-I-313/13, dated 21 March 2014:
1) that the Real Property Tax Act (hereinafter referred to as the RPTA) is abrogated;
2) that the Real Property Mass Appraisal Act (hereinafter referred to as the RPMAA) is inconsistent with the Constitution insofar as it refers to the mass appraisal of real property for the purpose of taxation; and
3) that until a different statutory regulation of taxation of real property is adopted, the regulations determined by the first through fifth indents of Article 33 of the Real Property Tax Act are applicable.
 
The Constitutional Court reached the decision unanimously, composed of nine Judges. Judges Mag. Marta Klampfer, Dr. Etelka Korpič-Horvat, Dr. Jadranka Sovdat, Dr. Mitja Deisinger, Mag. Miroslav Mozetič, Dr. Ernest Petrič, and Jan Zobec submitted concurring opinions.
 
The Constitutional Court assessed the following issues:
1) whether the determination of the taxable base determined by Article 5 of the RPTA, which calls for the application of the RPMAA, is in conformity with the constitutional principle of legality when prescribing taxes determined by Article 147 of the Constitution;
2) whether different tax rates for certain groups of real property determined by the second paragraph of Article 6 of the RPTA are in conformity with the right to equality before the law determined by the second paragraph of Article 14 of the Constitution;
3) whether the regulation of legal remedies against real property tax assessment decisions determined by the second paragraph of Article 14 of the RPTA is in conformity with the right to legal remedies determined by Article 25 of the Constitution;
4) whether the regulation of the allocation and the division of the revenues from real property tax between the state and municipalities and the regulation of the authorisations of municipalities to manage the tax determined by Articles 2, 6, 9, 25, and 26 of the RPTA are in conformity with the principles of the financial and functional autonomy of municipalities determined by Articles 9, 138, 140, and 142 of the Constitution, and with Article 9 of the European Charter of Local Self-Government (Official Gazette RS, No. 57/96, MP, No. 15/96 – hereinafter referred to as the ECLSG).
 
 
II  The Principal Grounds for the Decision
 
1. Regarding the determination of the taxable base, the Constitutional Court assessed that Article 5 of the RPTA is a blanket provision that calls for the application of the RPMAA and the implementing regulations adopted on its basis. Consequently, the Constitutional Court extended the review of the constitutionality of the statutory provision on the determination of the taxable base from the viewpoint of Article 147 of the Constitution also to the RPMAA, insofar as it refers to the mass appraisal of real property due to the taxation of real property. 
 
2. The taxable base for real property tax assessment is the appraised market value of the real property, which is determined in the procedure for the mass appraisal of real property. The formation of real property valuation models and the determination of methods of mass appraisal are key to the mass appraisal of real property. The Constitutional Court assessed that, on one hand, the statutory regulation of real property valuation models determined by Article 7 of the RPMAA does not determine in a sufficiently clear and precise manner the legal situation of taxable persons, and on the other hand, leaves to the Government, in accordance with the first paragraph of Article 11 of the RPMAA, the regulation of questions which should fall within the exclusive competence of the legislature. By the enforcement clause determined by the fourth paragraph of Article 15 of the RPMAA also the [determination of the content of the] statutory regulation of real property mass appraisal methods determined by Article 8 of the RPMAA is left entirely to implementing regulations. Consequently, the mentioned provisions are inconsistent with Article 147 of the Constitution.
 
3. The legislature failed to demonstrate sound reasons that stem from the nature of the matter for the determination of different tax rates for officially occupied residential real property in comparison with officially unoccupied (residential) real property and for real property pertaining to power plants in comparison with other commercial and industrial real property. Consequently, the first through fourth indents of point 1 of the second paragraph of Article 6 of the RPTA are inconsistent with the second paragraph of Article 14 of the Constitution.
 
4. The regulation of legal remedies determined by the second paragraph of Article 14 of the RPTA ensures only an ostensible right to appeal against the appraised market value of a real property, therefore it entails the hollowing out of the right to legal remedies determined by Article 25 of the Constitution.
 
5. The Constitutional Court assessed that the division of the tax revenue between municipalities and the state (Article 2 of the RPTA) is not in itself inconsistent with the Constitution, because the part of the revenue from this tax that pertains to municipalities fulfils the criteria required by the Constitution for defining municipalities' own sources of funding.
 
6. However, also in this system entailing the division of tax revenue it must be taken into consideration that the subject of taxation is real property. From Article 140 of the Constitution it follows mutatis mutandis that the real property tax is fundamentally a municipal tax, therefore the predominant part of the funds collected by the real property tax should belong to municipalities. In light thereof, Article 9 of the RPTA is inconsistent with Article 140 of the Constitution.
 
7. With regard to the financial autonomy of municipalities when imposing their taxes, it follows that the authorisations of municipalities must be sufficiently extensive to allow the municipalities to manage the tax as their own source of financing tasks with regard to the circumstances in the particular municipality. A regulation that allows municipalities to increase or decrease tax rates by 50% for reasons of spatial and economic policy, regarding the part that pertains to them, under additional statutory limitations, does not ensure sufficient authorisations that would allow municipalities to efficiently carry out their constitutional and statutory tasks with their own resources. Consequently, the regulation is inconsistent with Articles 140 and 142 of the Constitution.
 
8. In the transitional period, the revenues from the real property tax are only to be allocated to municipalities, because the revenue from this tax pertains in its entirety to the budget of the state. Such regulation causes municipalities to depend on the budget of the state, therefore it is not in conformity with the constitutionally guaranteed financial autonomy of municipalities determined by Article 142 of the Constitution.
 
9. The fundamental provisions of the RPTA, without which other provisions of the RPTA cannot be implemented, are inconsistent with the Constitution, therefore the Constitutional Court abrogated this Act in its entirety. Since the legislature omitted a precise statutory regulation of the taxable base, the Constitutional Court established that the RPMAA is inconsistent with the Constitution insofar as it refers to the mass appraisal of real property due to the taxation of real property.
 
10. In order to prevent municipalities from remaining without a part of their revenue until a different statutory regulation of taxation of real property [is adopted], the Constitutional Court decided that in this period the regulations that had determined, before the entry into force of the RPTA, the obligation to pay certain municipal taxes, i.e. the compensation fee for building land use, the fee for the maintenance of forest roads, and the property tax, are to apply.
 
Mag. Miroslav Mozetič
President
 
U-I-313/13-89
25 March 2014
 
 
DECISION OF THE CONSTITUTIONAL COURT NO. U-I-313/13, DATED 21 MARCH 2014
 
The Principal Grounds for the Decision
 
1. The Constitutional Court assessed whether Article 5 of the Real Property Tax Act, which regulates the taxable base for the assessment of the real property tax, is in conformity with Article 147 of the Constitution, in accordance with which the state imposes taxes by law. Since Article 5 of the Real Property Tax Act determines that the taxable base is the appraised market value of a real property determined by regulations on the mass appraisal of real property, the Constitutional Court extended its assessment to the Real Property Mass Appraisal Act insofar as it regulates the mass appraisal of real property due to the taxation of real property.
 
2. When imposing taxes, it follows from the principle of legality, contained in Article 147 of the Constitution, that the tax obligation must be clearly evident already from the law and not only from implementing regulations, and that the law must inter alia determine the taxable base. With regard to Article 7 of the Real Property Mass Appraisal Act, the value of real property is of decisive importance for the determination of the taxable base, whereby the formation of valuation models is key to the determination of this value. However, the Real Property Mass Appraisal Act determines neither individual valuation models nor which groups of real property of the same kind are joined in individual valuation models. Moreover, not even individual elements that determine the models (i.e. value zones, value levels, and data on real property that are applied for the calculation of the value of real property) are determined in a sufficiently clear and precise manner. The Act also does not determine the methods of mass appraisal that are applied with regard to individual valuation models or the criteria for choosing an individual method, nor does it refer to the precisely determined standards for the valuation of real property whose application it in fact calls for in Article 8.
 
3. With regard to the above, the Constitutional Court assessed, on one hand, that the statutory regulation of real property valuation models determined by Article 7 of the Real Property Mass Appraisal Act does not regulate in a sufficiently clear and precise manner the legal position of taxable persons, while on the other, it leaves to the Government, in accordance with the first paragraph of Article 11 of the mentioned Act, the regulation of questions which should lie in the exclusive competence of the legislature. By the enforcement clause determined by the fourth paragraph of Article 15  [of the Real Property Mass Appraisal Act], also the [determination of the content of the statutory] regulation of real property mass appraisal methods determined by Article 8 of the Real Property Mass Appraisal Act is left entirely to implementing regulations. Therefore, the mentioned provisions of the Real Property Mass Appraisal Act are inconsistent with Article 147 of the Constitution.
 
4. Furthermore, the Constitutional Court assessed whether different tax rates for individual groups of real property determined by the second paragraph of Article 6 of the Real Property Tax Act are in conformity with the right to equality before the law determined by the second paragraph of Article 14 of the Constitution.
 
5. With regard to different taxation of officially occupied residential real property and officially unoccupied residential real property, the Constitutional Court assessed that the criterion of permanent residence, which was applied by the legislature for differentiation, has no reasonable connection to the subject of regulation. The conclusion of the legislature that residential real property which is not the owner’s official permanent residence can, merely because of that, be considered to be residential real property intended for rental under market conditions is namely erroneous. In addition to residential real property that is the owner’s official permanent residence, for residential purposes he or she can also use, for various reasons, another residential real property or allow persons close to him or her to reside in it. It is also possible that there is no demand on the rental market for residential real property. Consequently, it is not possible to achieve by the challenged differentiation in taxation the objective pursued by the legislature, i.e. the promotion of more economically rational use of residential real property.
 
6. With regard to the lower degree of taxation on real property pertaining to power plants in comparison with other commercial and industrial real property, the Constitutional Court also established that the criterion of real property pertaining to power plants bearing an additional burden due to concessions and other environmental charges has no reasonable connection to the subject of regulation.
 
7. The Constitutional Court also assessed the regulation of legal remedies determined by the second paragraph of Article 14 of the Real Property Tax Act from the viewpoint of the right to legal remedies determined by paragraph 25 of the Constitution. It established that the Real Property Tax Act ensures only an ostensible right to appeal against the appraised market value of a real property. Namely, if the allegations in a taxable person's complaint referred to the choice of the valuation model or method, the appeal would not be successful, because the appraised value of real property is only data in the real property register, which can be changed by neither geodesic nor tax authorities. Consequently, the right to appeal is in this part hollowed out, therefore the regulation is inconsistent with Article 25 of the Constitution.
 
8. When assessing the constitutional position of municipalities in the Real Property Transaction Tax Act, the Constitutional Court proceeded from Articles 138, 140, 142, and 147 of the Constitution. On the basis of these provisions of the Constitution, it  follows from the constitutional case law that municipalities must be capable of fulfilling the needs and interests of the inhabitants on their territory and that it is above all the municipalities who are responsible for the implementation of local self-government (such follows from Decision of the Constitutional Court No. U-I-43/99, dated 10 June 1999). Municipalities require sufficient sources of funding of their own to finance their statutory and constitutional tasks. Having their own sources of funding ensures municipalities autonomy and independence from the state. The Constitutional Court adopted the position that municipalities' own sources of funding can only be those that are in a direct relationship with the municipalities and with regard to which a law determines the municipalities as the beneficiaries, although they are, technically speaking, collected by the state (such follows from Decision of the Constitutional Court No. U-I-24/07, dated 4 October 2007).
 
9. The Constitutional Court assessed that the division of tax revenue between municipalities and the state (Article 2 of the Real Property Tax Act) is not in itself inconsistent with the Constitution, because the part of the revenue from this tax that pertains to municipalities fulfils the criteria required by the Constitution for defining municipalities' own sources of funding.
 
10. However, also in this system entailing the division of tax revenue, it must be taken into consideration that the subject of taxation is real property. Although real property tax is not an earmarked tax, it is substantively connected with municipalities' expenditures that they allocate in order to provide utilities to real property and thereby for benefit of real property owners. For such reason, it is understandable that in Member States of the European Union and also elsewhere in the world, real property tax is, as a general rule, a municipal tax. Also from Article 140 of the Constitution, which determines the working field of self-governing local communities, it follows mutatis mutandis that real property tax is, by its nature, incorporated in the implementation of local self-government in municipalities in which the relevant real properties are located. Such entails that it is fundamentally a municipal tax, therefore the predominant part of revenue collected by the real property tax should pertain to municipalities. How much this share should be is a question of appropriateness, i.e. statutory regulation.
 
11. On the basis of Article 142 and under the conditions of Article 147 of the Constitution, municipalities have financial autonomy when imposing their taxes. Such entails that in fact a law determines what the authorisations of municipalities are when imposing their taxes, however these authorisations must be sufficiently extensive to allow municipalities to manage the tax as their own source of funding their tasks with regard to the circumstances in the particular municipality. The Real Property Tax Act allows municipalities to increase or decrease tax rates by 50%, for reasons of spatial and economic policy, with regard to the part that pertains to them, under additional statutory limitations. Such regulation does not ensure municipalities sufficient authorisations to manage the real property tax so that they can efficiently carry out their constitutional and statutory tasks with their own funds, due to which it is inconsistent with Articles 140 and 142 of the Constitution.
 
12. In the transitional period, the revenue from the real property tax is only allocated to municipalities and thereby they lose the status of collecting revenue from their own tax sources. Namely, in the transitional period the revenue from this tax pertains in its entirety to the budget of the state. Such regulation causes municipalities to depend on the budget of the state and is therefore not in conformity with the constitutionally guaranteed financial autonomy of municipalities, in conformity with which municipalities are to finance their tasks from their own sources of revenue. Consequently, such regulation is inconsistent with Article 142 of the Constitution.
 
13. The fundamental provisions of the Real Property Tax Act, without which other provisions of this Act cannot be implemented, are inconsistent with the Constitution, therefore the Constitutional Court abrogated this Act in its entirety. Since the legislature omitted a definite statutory regulation of the taxable base, the Constitutional Court established that the Real Property Mass Appraisal Act is inconsistent with the Constitution insofar as it refers to the mass appraisal of real property for the purpose of the taxation of real property.
 
14. In order to prevent municipalities from remaining without a part of their revenue until a different statutory regulation of taxation of real property [is adopted], the Constitutional Court decided that in this period the regulations that had determined, before the entry into force of the RPTA, the obligation to pay certain municipal taxes, i.e. the compensation fee for building land use, the fee for the maintenance of forest roads, and the property tax, are to apply. The obligation to pay property tax is to begin on 1 April 2014, while the competent authority is to assess the compensation fee for building land use and the fee for the maintenance of forest roads from 1 April 2014 onwards, but in the amount for the entire year.
 
 
Dr. Etelka Korpič – Horvat
Judge
 
 
U-I-313/13-86
21 March 2014
 
                                              
DECISION
 
At a session held on 21 March 2014, in proceedings to review constitutionality initiated upon the requests of a group of deputies of the National Assembly, the National Council, the Urban Municipality of Koper, represented by Odvetniška družba Čeferin, o. p., d. o. o., Grosuplje (Čeferin Law Firm, Ltd.), the Association of Municipalities of Slovenia, Ljubljana, represented by Robert Smrdelj, President, and the Association of Municipalities and Towns of Slovenia, represented by Jasmina Vidmar, Secretary General, and upon the petition of the Municipality of Rogašovci, represented by Jože Korpič, attorney in Murska Sobota, following a public hearing held on 27 February 2014, the Constitutional Court
 
 
decided as follows:
 
1. The Real Property Tax Act (Official Gazette RS, No. 101/13) is abrogated.
 
2. The Real Property Mass Appraisal Act (Official Gazette RS, Nos. 50/06 and 87/11) is inconsistent with the Constitution insofar as it refers to the mass appraisal of real property for the purpose of the taxation of real property.
 
3. Until a different statutory regulation of the taxation of real property is adopted, the regulations determined by the first through fifth indents of Article 33 of the Real Property Tax Act are applicable. 
 
4. On the basis of the regulations mentioned in the previous point, the competent authorities shall assess, for 2014, the compensation fee for building land use and the fee for the maintenance of forest roads with validity from 1 April 2014 onwards in the amount for the entire year. The obligation to pay property tax in conformity with the regulations mentioned in the previous point of the operative provisions arises on 1 April 2014.
 
5. The time limits that apply to taxable persons determined in the regulations determined by the first through fifth indents of Article 33 of the Real Property Tax Act and that will have already expired by the publication of this Decision in the Official Gazette of the Republic of Slovenia shall expire on 30 April 2014.
 
6. The time limits for the competent authorities determined in the regulations determined in the first through fifth indents of Article 33 of the Real Property Tax Act and that have already expired in 2014 shall expire on 30 June 2014.
 
7. The Urban Municipality of Koper bears its own costs arising from this procedure.
 
8. This Decision shall take effect on the day of its public announcement.
 
 
REASONING
 
 
A
 
1. A group of deputies of the National Assembly, the National Council, the Association of Municipalities of Slovenia, the Association of Municipalities and Towns of Slovenia, and the Urban Municipality of Koper filed requests, and the Municipality of Rogašovci a petition, by which they challenge a number of provisions of the Real Property Tax Act (hereinafter referred to as the RPTA), and a number of them propose that the Constitutional Court abrogate the entire Act. The National Assembly replied to the requests and the petition, whereas the Government submitted an opinion thereon. Although not every applicant challenges each of the assessed statutory provisions, the Constitutional Court summarises the allegations of the applicants and the petitioner submitted in the written applications and at the public hearing in an undifferentiated manner, with a view to ensuring the highest possible transparency and clarity of the Decision, and thereby refers to all of them as applicants. For the same reasons, the Constitutional Court uniformly (in an undifferentiated manner) summarises the allegations by which the National Assembly and the Government are opposed to the argumentation presented by the applicants.
 
The allegations of the applicants
 
2. The applicants allege that the first and second indents of point 1 of the second paragraph of Article 6 of the RPTA − which determine a 0.15% tax rate for officially occupied and a 0.50% tax rate for officially unoccupied real property and which municipalities can also increase in accordance with the fifth paragraph of Article 6 of the RPTA − are inconsistent with the human right to private property and inheritance determined by Article 33 of the Constitution and with the human right to the safety of one’s home, connected with the right to human dignity. The amount of taxation on property itself (and not on the revenue it yields) determined in such a manner allegedly destroys the subject of taxation and thus enables its progressive confiscation or expropriation. For such reason and also because the challenged norms force owners to sell real property or to encumber their ownership right, in the opinion of the applicants the challenged norms impose a disproportionate burden on private property. Allegedly, the 0.50% tax rate on officially unoccupied real property entails an especially evidently disproportionate interference with private property. In addition, this tax rate is, in the applicants' assessment, determined arbitrarily and is thus inconsistent also with Article 2 of the Constitution. It is allegedly not directed towards the more economically rational management of residential real property; its concealed objective is allegedly to punish owners who own more than one real property by imposing taxes. With regard to the characteristics of the construction of real property in the past and the income capacity of their owners, the regulation allegedly also interferes with the principle of a social state determined by Article 2 of the Constitution.
 
3. The higher tax rate for officially unoccupied real property determined by the second indent of point 1 of the second paragraph of Article 6 and the first paragraph of Article 7 of the RPTA is, in the opinion of applicants, inconsistent with Article 14 of the Constitution. Without a sound reason substantiated by the nature of the matter, such tax rate namely allegedly imposes an unequal burden on the owners of residential real property who have arranged residential affairs in an essentially equal manner. The regulation allegedly also interferes with the autonomy of individuals in deciding how they will enjoy the fruits of their work. Furthermore, in the opinion of the applicants, the different taxation of dwellings is not based on their actual use, but on the registration of permanent residence, which in the opinion of the applicants is a constitutionally inadmissible reason for different taxation also with regard to the position of the Constitutional Court in Decision No. U-I-253/13, dated 13 February 2014 (Official Gazette RS, No. 15/14). By such regulation, the citizens of the Republic of Slovenia are allegedly discriminated against also in comparison with persons who are not Slovene citizens, because the latter can allegedly acquire the status of officially occupying more than one real property.
 
4. The applicants also allege an inconsistency with Article 14 of the Constitution by referring to Decision of the Constitutional Court No. U-I-147/12, dated 29 May 2013 (Official Gazette RS, No. 52/13), as regards: (1) the different determination of tax rates for real property pertaining to power plants, [on one hand], and for the other commercial and industrial real property referred to in the third and fourth indents of the second paragraph of Article 6 of the RPTA, [on the other]; (2) the fifth paragraph of Article 10 of the RPTA, which determines the upper level of taxation only for agricultural plots of land and not also for plots of land for the activities of businesspersons and craftsmen; (3) the second indent of the eighth paragraph of Article 4 of the RPTA, which determines that the holder of a personal easement is a taxable person only if the easement is registered on the entire real property; (4) the first indent of the eighth paragraph of Article 4 of the RPTA, which determines that a lessee is a taxable person [regarding such] and not the owner of the real property; (5) Article 8 of the RPTA, which differentiates, with regard to tax exemptions, between buildings for public use with special content and purpose which do not create added value (e.g. schools, kindergartens, health care centres), [on one hand], and religious buildings and cultural monuments, [on the other]; (6) Article 11 of the RPTA, which determines a decrease in the tax only for the residential real property of a certain category of taxable persons, and not for the real property of these persons for agricultural and business use; (7) point 4 of the first paragraph of Article 8 of the RPTA, which enables a tax exemption for humanitarian agencies and not for organisations of persons with disabilities. The regulation that determines that organisations of persons with disabilities are not exempt from paying real property tax is, in the assessment of the applicants, also inconsistent with Articles 33 and 67 of the Constitution.
 
5. The RPTA, i.e. Articles 6 and 7 thereof, which determine tax rates and the taxation of illegal structures, allegedly disproportionally interfere with the right of taxable persons who carry out a business or economic activity to private property as determined by Article 33 of the Constitution and Article 1 of Protocol No. 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms (Official Gazette RS, No. 33/94, MP, No. 7/94 – hereinafter referred to as the ECHR) and to free economic initiative as determined by Article 74 of the Constitution. According to the allegations of the applicants, the challenged regulation has no limitations that would prevent the real property tax from causing taxable persons to cease to exist or that the real property tax would disproportionately interfere with the benefits that these taxable persons acquire by operating.
 
6. The applicants allege that Article 5 of the RPTA, which determines the taxable base, Article 10, which determines how a tax authority assesses the tax, and Article 14, which regulates legal remedies against tax assessment decisions, are inconsistent with Articles 14, 22, 23, and 25 of the Constitution. Since, according to their allegations, the amount of the taxable base (i.e. the appraised market value of the real property, which is established [on the basis of] regulations on the mass appraisal of real property and which is entered into the real property register) and other elements that are important for the creation of a tax obligation, are established and modified only on the basis of official registers, the parties allegedly do not have the possibility to state facts and to propose evidence for the protection of their rights. According to the allegations of the applicants, a taxable person can only propose a modification of data regarding facts important for tax assessment to the administrative authority that keeps a register of those facts, i.e. outside the tax procedure. In such context, this authority allegedly does not decide in an administrative procedure, it allegedly does not issue a decision or an order thereon, and the taxable person allegedly has no legal remedy or judicial protection against it. The challenged regulation thus allegedly hollows out the rights of taxable persons to make a statement and to a fair trial, because it allegedly utterly deprives them of the possibility to participate in the procedure before a tax decision is issued. According to the allegations of the applicants, a taxable person is informed of the content of the decision-making regarding his or her tax obligation only upon receiving the tax decision, which at that moment is already executable. In the assessment of the applicants, Article 14 of the RPTA does not provide for effective judicial protection against such a decision. It namely does not enable appellate supervision and the verification of whether the state of the facts is correctly established (in particular, the value of real property). One consequence of this is allegedly also the inefficiency of judicial protection. The challenged regulation allegedly allows constitutionally inadmissible inequalities with regard to taxation, because it allegedly does not allow parties to prevent an incorrect tax assessment, even before the tax is assessed, by presenting facts and evidence to their benefit – especially as regards the excessive variation between the actual value of real property and its appraised market value (either as a consequence of errors when establishing and assessing facts or as a consequence of errors with regard to the valuation model itself or the application of the valuation model in a concrete case) − or to do so in procedures with legal remedies. For such reason it is allegedly inconsistent with Article 14 of the Constitution. The applicants substantiate the inconsistency of such regulation with the first paragraph of Article 14 of the Constitution and Article 1 of Protocol No. 12 to the ECHR (Official Gazette RS, No. 46/10, MP, No. 8/10 – hereinafter referred to as Protocol No. 12) by referring to the alleged inequality of the owners of real property in comparison with the owners of other forms of property. Only owners of real property are namely subject to taxation with regard to an abstractly determined property value and not with regard to its actual value. Also, with regard to the assessments of other taxes, which also comprise a complex state of the facts and a very high number of taxable persons (e.g. the personal income tax), a procedure for taking evidence is ensured in the first instance. In the opinion of the applicants, this fact raises the issue of the inconsistency of the challenged regulation, which does not ensure such procedure, with Article 14 of the Constitution.
 
7. Article 5 of the RPTA, which regulates the taxable base, and Article 6 of the RPTA, which regulates tax rates, are allegedly inconsistent with Articles 147, 2, 14, 33, 67, and 120 of the Constitution. In the opinion of the applicants, Article 147 of the Constitution requires that the taxable base and tax rate must be determined by law, and prohibits their being determined by an implementing regulation of a local community authority [following] a decision of the Government or a ministry. With regard to the determination of the taxable base – i.e. the appraised market value – the challenged Articles call for the application of the Real Property Mass Appraisal Act (hereinafter referred to as the RPMAA), which allegedly leaves the determination of the amount of the taxable base and the criteria for its calculation to implementing regulations. The RPMAA allegedly determines certain data and characteristics of real property that are used for the assessment of the appraised market value and at the same time calls for the application of mass appraisal methods and valuation models. It allegedly leaves the determination of methods and models to ministries, and the final determination of data relevant for the determination of the appraised market value to the Government. In such manner, the Act allegedly only calls for individual valuation elements, which are in their entirety determined by the Government with its ministries and in cooperation with local communities, therefore the determination of the taxable base is, with regard to the valuation models and methods, as well as the data that are taken into account during an assessment, exclusively in the Government's competence, without the Act having determined predictable conditions and limitations on the Government to this end. The RPMAA therefore allegedly does not determine: (1) that mass appraisal must be based on international standards and what these standards are; (2) what the methods for the formation of valuation models are, who adopts them, and in conformity with what; (3) how the supply and demand are assessed, who assesses them, and by which methodology; and (4) the criteria in accordance with which the combined effect of individual elements on the mass appraisal is taken into consideration. The challenged regulation is for the same reasons allegedly also inconsistent with Articles 33 and 67 of the Constitution, because allegedly only a law may determine an interference with private property and the manner of its enjoyment. Since (the ninth paragraph of Article 10 of) the RPMAA does not precisely determine which statements of the owners are to be taken into consideration when valuing real property, the challenged Articles 5 and 6 of the RPTA are also inconsistent with Articles 2 and 120 of the Constitution. They namely allow broad arbitrariness and discretion with regard to the decisions of administrative authorities, which are final and lead to the determination of real property values, against which no objection is possible. Due to the insufficient statutory criteria, the valuation of real property and thus the determination of the taxable base is, in the assessment of the applicants, not sufficiently predictable and is thus inconsistent with Article 2 of the Constitution. The lack of statutory criteria under which the remarks of owners would be taken into consideration equally is, in the opinion of the applicants, inconsistent with Article 14 of the Constitution and does not ensure the equality of all owners of real property with regard to tax assessment.
 
8. The applicants allege that Article 15 of the RPTA, which enables certain taxable persons – instead of paying the tax on real property subject to taxation – to propose to a tax authority the establishment of a lien on this real property and the prohibition of its sale or encumbering their ownership right, is inconsistent with Articles 2, 14, 23, and 33 of the Constitution. Allegedly, it is also not clear whether the [mentioned] norm also refers to businesspersons and farmers and whether it also refers to real property for agricultural and business activities. If it does not refer to all the mentioned persons and subjects, Article 15 of the RPTA is allegedly also inconsistent with the second paragraph of Article 14 of the Constitution. The challenged regulation allegedly allows, contrary to Article 33 of the Constitution, taxable persons – tenants of denationalised dwellings – to ensure [the repayment of] their tax debt with someone else's real property, and owners of real property to pay the tax debt instead of taxable persons. Since real property owners allegedly have no legal remedy and judicial protection against encumbering their ownership right, the challenged norm is allegedly also inconsistent with Article 23 of the Constitution. Owners of denationalised dwellings are allegedly also in an unequal position in comparison with other owners, which is contrary to Article 14 of the Constitution.
 
9. Articles 5 (the taxable base), 6 (tax rates), and 33 (the cessation of the validity of regulations) of the RPTA are, in the opinion of the applicants, inconsistent with Articles 2, 14, 33, and 67 of the Constitution. The applicants draw attention to the fact that Article 33 of the RPTA abolishes the payment of the compensation fee for building land use and the fee for the maintenance of forest roads, whereby it does not abolish the obligation to pay the [tax on] cadastral income. In such manner, the legislature allegedly arbitrarily differentiated between the owners of agricultural plots of land and the owners of building land, whereby the owners of agricultural plots of land must allegedly pay a double charge.
 
10. The applicants allege, inter alia, that Article 6 of the RPTA, which determines tax rates, and Article 8 of the same Act, which determines exemptions from this tax, are inconsistent with Articles 2 and 14 of the Constitution, because they determine a tax exemption only for religious buildings and not for other buildings in which religious activities are also carried out. In such manner, the legislature allegedly unequally treated the beneficiaries of tax exemptions, because with regard to certain other beneficiaries it allegedly determined a full exemption from the payment of tax, which is linked to the entire activity of the beneficiary and not only to a part thereof (e.g. the real property of humanitarian agencies, international organisations, and foreign states). Since the challenged regulation allegedly differentiated, without substantiation, between matters of an exclusively religious nature, which fall within the internal affairs of religious communities, it is allegedly also inconsistent with Article 7 of the Constitution. The taxation of real property in which religious activities are carried out allegedly interferes, contrary to Articles 7 and 1 of the Constitution, with the undisturbed performance of religious activities and allegedly forces religious communities to sell and close religious buildings. Allegedly, it also limits the exercise of the freedom of conscience and religious beliefs, and limits or abolishes liturgical, educational, and charitable activities. By the taxation of the real property of religious communities, believers are allegedly subject to double taxation. Consequently, the challenged regulation is allegedly also inconsistent with Articles 41, 42, 50, and 51 of the Constitution, with the principle of a social state determined by Article 2 of the Constitution, and with the principle of the prohibition of discrimination determined by the first paragraph of Article 14 of the Constitution.
 
11. The possibility of a municipality increasing the tax burden by 50% that is included in the fifth paragraph of Article 6 of the RPTA is allegedly arbitrary and entails the unequal taxation of religious communities, because the latter might differ in different communities. For such reason, in the assessment of the applicants, this norm is inconsistent with Article 2, Article 7 in relation to Article 14, and with Articles 39, 41, 42, 50, and 51 of the Constitution.
 
12. Article 2 of the RPTA determines that the revenues from the tax pertain to municipalities and to the budget of the state. Article 9 of the RPTA determines in more detail the division of the tax between a municipality and the state budget, namely in such manner that municipalities receive 50% of the tax on the real property on their territory (there exists a certain exception with regard to the tax on forest plots of land), while 50% of the assessed tax goes to the budget of the state. In the opinion of the applicants, municipalities are not ensured, contrary to Article 142 of the Constitution, [their] own autonomous revenue sources (such as they had hitherto enjoyed), because the real property tax is not only a revenue source of a municipality, but also of the state. A [source of revenue that would be municipalities'] own revenue source is also not ensured to municipalities because the latter do not have [any] influence on the elements of this tax (on the determination of its amount, the method of its assessment and exaction, and exemptions). Furthermore, with the entry into force of the RPTA, the resources of municipalities allegedly decreased – regarding the applicant Urban Muncipality of Koper, to a very significant extent. The disproportionality thus resulting between the revenue sources and the tasks of municipalities allegedly inadmissibly interferes with the financial autonomy of municipalities, and thereby also with their functional autonomy and capacity to carry out local self-government, which allegedly entails an inconsistency with Articles 142, 9, 138, and 140 of the Constitution and Article 9 of the European Charter of Local Self-Government (Official Gazette RS, No. 57/96, MP, No. 15/96 – hereinafter referred to as the ECLSG). Since the amount of the tax is allegedly not predictable due to the possibility of decreases and deferred payments, the challenged regulation is allegedly also inconsistent with Article 2 of the Constitution. The applicants allege that after the entry into force of the RPTA, 60 municipalities will receive less revenue than they received on the basis of the charges previously in force. In their assessment, such entails an inconsistency with the second paragraph of Article 14 of the Constitution due to the unequal position of these municipalities and their citizens in comparison with the other 152 municipalities and their inhabitants.
 
13. From the viewpoint of Articles 9, 138, 140, and 142 of the Constitution and Article 9 of the ECLSG, Article 6 of the RPTA, which regulates tax rates, allegedly provides municipalities too narrow a possibility to influence, by their active conduct, their own revenue sources and thereby to independently regulate matters within the competence of local communities. Furthermore, the possibility to increase the already high determined rates is allegedly not realistic. Allegedly, it does not enable municipalities to decide whether to assess a tax, in what amount, how to exact it, whom to exempt, etc. The challenged norm thereby allegedly hinders the instruments of municipal spatial and economic policies and thus deprives municipalities of their original competence as regards spatial management and the opportunity to create conditions for economic development.
 
14. Article 4 of the RPTA determines that also municipalities and the managers of municipal real property are, inter alia, taxable persons. Allegedly, the state thereby imposed on municipalities, contrary to Article 140 of the Constitution, a new task without providing them necessary resources therefor. The applicants are of the opinion that this newly imposed obligation interferes, contrary to Article 9 of the ECLSG, with the revenue sources of municipalities and reduces the proportionality of the exercise of local self-government. The applicants allege that these taxable persons provide goods and services that are subject to [protection due to their connection to] human rights and fundamental freedoms and that due to the challenged norm will be subject to excessive taxation. Therefore, in their opinion, the challenged provision places the citizens of different municipalities in an unequal position and is inconsistent with the second paragraph of Article 14 of the Constitution and with the principle of a social state determined by Article 2 of the Constitution.
 
15. Articles 25 and 26 of the RPTA determine that the revenue from tax from 2014 to 2016 (with a certain exception) pertains to the state, which allocates a part of this income to municipalities, so that each municipality receives an amount equal to that which it assessed itself in 2012 for the compensation fee for building land use. The challenged regulation allegedly unequally treats, contrary to Article 14 of the Constitution, municipalities and the inhabitants of different municipalities, only with regard to the fact of whether and how municipalities in 2012 assessed the compensation fee for building land use. Thus, for instance, according to the allegations of the applicants, the municipalities that in 2012 did not assess the compensation fee for building land use (e.g. the Municipality of Rogašovci) will not receive anything, although the owners of real property in this municipality will pay tax – and among them, the municipality itself as well. Allegedly, contrary to Article 138 of the Constitution, also Articles 25 and 26 of the RPTA prevent inhabitants of different municipalities, from the viewpoint of financing, from equally exercising the right to local self-government.
 
16. Articles 25 and 26 of the RPTA are, in the assessment of the applicants, also inconsistent with Article 142 of the Constitution. On one hand, they namely allegedly enable the financing of municipalities contrary to the conditions for financing determined by Article 142 of the Constitution. On the other hand, Articles 25 and 26 of the RPTA are allegedly inconsistent with the requirement of the financial autonomy of municipalities contained in the same provision of the Constitution, with the requirement of the functional independence of municipalities determined in Article 140 of the Constitution, and with Article 9 of the ECLSG. They namely allegedly determine that in 2014−2016 this tax is at most an assigned tax source and not a municipality's own source of revenue, and in addition, they do not define when the state must assign this revenue source. Referring also to Decision of the Constitutional Court No. U-I-24/07, dated 4 October 2007 (Official Gazette RS, No. 101/07, and OdlUS XVI, 74), the applicants emphasise that such an assigned source of revenue, which therefore pertains to the state, which then transfers such resources to municipalities – in light of the fact that the RPTA at the same time abolishes the hitherto municipalities' own sources of revenue – creates a constitutionally inadmissible dependence of municipalities on the state.
 
The reply of the National Assembly and the opinion of the Government
 
17. According to the assessment of the National Assembly and the Government, in conformity with the position of the Constitutional Court in Decision No. U-I-91/98, dated 16 July 1999 (Official Gazette RS, No. 61/99, and OdlUS VIII, 196), the rate of taxation of officially occupied residential real property does not entail an interference with private property determined by Article 33 of the Constitution. Namely, the challenged tax together with other tax burdens does not jeopardise the essence of private property, because the [tax] rate is allegedly appropriately low, and certain appropriate [tax] reliefs are allegedly determined for taxable persons with low income.
 
18. Also the tax rate for an officially unoccupied dwelling is, in the assessment of the Government and the National Assembly, within the limits of the economic and social function of private property. The differentiation between officially occupied and officially unoccupied real property is, according to their allegations, in conformity with the second paragraph of Article 14 of the Constitution, factually substantiated with regard to the purpose of their use: the former is intended for a residence, whereas the latter is not necessary and is used economically irrationally (i.e. owners do not receive rent therefor). The objectives of such differentiation are allegedly to encourage the economically rational management of dwellings, especially the promotion of renting under market conditions, as well as higher taxation of luxury dwellings.
 
19. In the opinion of the National Assembly and the Government, there exist constitutionally admissible reasons for all differentiations between different categories of real property and taxable persons. In fact, only real property pertaining to power plants are, in comparison with other industrial real property, subject to certain concessionary and environmental charges, and in addition, they have already hitherto been subject to lower taxation than similar commercial or industrial real property. Also the upper level of taxation to which agricultural and forest plots of land are subject is allegedly determined in order to ensure taxation similar to the preceding tax regime, and in such context, the disproportionally high value of agricultural and forest plots of land in certain zones due to speculative expectations is also important. The differentiation between the taxation of real property owned by a borrower and real property in the possession of a lessee allegedly follows from the legal nature of such contract. With regard to the different regulation of exemptions, the National Assembly and the Government allege that the legislature decided, in the framework of its constitutionally admissible discretion, that it would treat real property intended for certain generally beneficial activities more favourably and thereby determined each type of tax exemption on the basis of a reasonable and factually substantiated reason. Since organisations of persons with disabilities allegedly do not pursue an equally extensive generally beneficial charity purpose as humanitarian agencies, these two types of organisations are allegedly not in the same position. The RPTA allegedly treats officially occupied dwellings more favourably with regard to the tax rate and with regard to the possibility of its decrease, because such real property is of key importance from the viewpoint of an individual's existence.
 
20. The tax rate for commercial real property is allegedly determined in conformity with the economic and ecological function of private property. Such real property is used, by definition, to acquire income; for such reason, the capacity of this property to cover obligations stemming therefrom is higher, and such real property is also more burdensome on the environment.
 
21. The National Assembly and the Government also reject the alleged inconsistency of the regulation of the tax assessment procedure and legal remedies with the Constitution. They explain that the taxable base is not an individual, but a generalised appraised market value of real property entered in the real property register on a certain date. In conformity with this particularity, also the exercise of the legal remedy determined in Article 14 of the RPTA is determined. The appellate reasons are allegedly not limited; instead, the particularity of the appellate procedure is allegedly only the fact that in the first instance, the appellate reasons are verified by the authority competent for keeping and correcting data in the real property register (the Surveying and Mapping Authority of the Republic of Slovenia – hereinafter referred to as the Surveying and Mapping Authority). The Surveying and Mapping Authority thus allegedly verifies the appellate allegations that refer to the (in)correctness of data in the register on which the taxable base is based (regarding the owners and the real property) and the appellate allegations regarding the taxable base itself – the appraised market value of the real property. Allegedly, judicial protection against an appeal is ensured in proceedings for the judicial review of administrative acts.
 
22. With regard to the allegations regarding the unconstitutionality of the tax assessment procedure, the National Assembly and the Government draw attention to the differentiation between an individual valuation and mass appraisal of real property and to the large number of tax assessment procedures each year. They explain that the appraised market value of real property is, in conformity with the RPMAA, determined by means of mass appraisal procedures and methods – i.e. statistical and other analytical methods of processing data regarding the real property market, which, by taking into account the rules and methods of real property value assessment, determine, through valuation models and in a systematic and uniform manner, the value of a large number of real properties on a certain date. In the assessment of the National Assembly and the Government, such entails that the appraised estimation of value is not abstract, but is determined on the basis of actual and empirically supported data regarding the real property market and such takes into account the most important elements [that determine] the value of the real property (as a general rule, the location, size, age, renovation, and quality). It is allegedly based on verifiable and reliable models and data. For such reason, it allegedly ensures equal treatment to all real property and allegedly does not violate the principle of equality. If data in the real property register are complete and correct, substantial deviations of the appraised value from the market value are allegedly not possible (except within the limits of what is statistically allowed), because the valuation models are statistically sufficiently reliable. Furthermore, these models are formed, in conformity with the RPMAA, in a number of supervisory and adjustment procedures, and they are also verified by the owners via the experimental calculation. Allegedly, [any] objection of owners to such experimental calculation of [real property] values that refer to the valuation model can be verified by valuation methods. In conformity with the Real Property Recording Act (Official Gazette RS, No. 47/06 – hereinafter referred to as the RPRA), an owner him- or herself can allegedly at any moment rectify the data on real property in the real property register, and such owner also allegedly has the possibility to prove who the actual owner is. Since, in accordance with the RPMAA, owners thus have the possibility, before the valuation models are implemented, to verify their correctness and to object to the experimental calculation of the appraised market value, and, in accordance with the RPRA, they have the possibility to at any time harmonise (with all the evidence or by a mere statement) data regarding their real property with the state of the facts, in the assessment of the National Assembly and the Government, they can have a significant influence on the appraised market value of a [concrete] real property. Such allegedly entails that in procedures before a tax assessment decision is issued parties have the possibility to influence the state of the facts that is the basis for the issuance of the decision. Together therewith, the possibility to modify data on real property in the framework of the appellate procedure against a tax assessment decision entails appropriate legal protection of owners. The National Assembly and the Government thereby draw attention to the fact that the RPTA prescribed, for 2014, an obligatory notification of owners on data regarding real property and their appraised market value, together with an added tax calculation, namely in a manner that enables owners to modify the data registered in the real property register before the tax is assessed.
 
23. With regard to the allegations denying the precision of the taxable base, the National Assembly and the Government allege that the statutory solutions are, in conformity with the established constitutional case law, sufficiently precise. In their assessment, from the viewpoint of the protection of the rights of taxable persons, the challenged regulation refers appropriately to the statutory regulation (the RPMAA). In the assessment of the National Assembly and the Government, the RPMAA determines all the essential criteria on the basis of which the final amount of the appraised market value of real property is determined by an implementing act; it namely determines the following: that valuation models are formed with regard to the supply and demand on the market; that they are determined by mass appraisal methods and it defines these methods; that the valuation must be based on international valuation standards and on as many data on the real property market as possible, as well as on their statistical processing; the establishment and publishing of the criteria for verifying the quality of the valuation; and the types of data that will be taken into account during the valuation.
 
24. The possibility to ensure the [payment of a tax] obligation determined by Article 15 of the RPTA is, according to the allegations of the National Assembly and the Government, clearly regulated and available to taxable persons who are beneficiaries of a social relief or supplementary allowance who are the owners of any type of real property (even a commercial property). Allegedly, in conformity with the regulation of property law and debt enforcement of obligatory claims, tax debt can neither be covered nor repaid from the property of a person who is not a tax debtor without the agreement of that person.
 
25. In the assessment of the National Assembly and the Government, the simultaneous taxation of cadastral income and the ownership of real property does not entail a doubling of the tax burden. From the established constitutional case law it allegedly follows that individual subjects and objects subject to taxation do not exclude each other and can be, within the framework of a uniform tax system, subject to different charges multiple times (Decisions No. U-I-299/96, dated 12 December 1996, Official Gazette RS, No. 5/97, and OdlUS V, 177, and No. U-I-72/00, dated 13 March 2003, Official Gazette RS, No. 31/03, and OdlUS XII, 15).
 
26. The National Assembly and the Government reject the [alleged] inconsistency with Article 7 of the Constitution with the argument that also according to the standpoint of the European Court of Human Rights (hereinafter referred to as the ECtHR), the right of religious communities to a more favourable tax position does not follow from the freedom of conscience and religion. Also according to the assessment of the Constitutional Court, the constitutional position of religious communities allegedly does not require state financing of these communities or more favourable tax treatment thereof. Allegedly, the legislature treats humanitarian agencies more favourably, in conformity with the Constitution, due to the generally beneficial manner of the use of their real property, as ensured by the requirements regarding the operations and the ownership of these organisations in conformity with the Humanitarian Agencies Act (Official Gazette RS, No. 98/03).
 
27. The National Assembly and the Government are convinced that Articles 2 and 9 of the RPTA do not entail depriving municipalities of their own revenue sources, because it is determined that the latter are direct beneficiaries [of revenue] from tax sources originating on their territory. Likewise, in their assessment, the introduction of the real property tax does not entail a significant loss of the revenue resources of municipalities, and the revenue sources for the financing of the original tasks of municipalities are not insufficient – both for an abstract municipality and for the applicant Urban Municipality of Koper as well. Above all, the National Assembly and the Government stress that the mere lowering of the hitherto amount [received by] certain municipalities does not also entail an unconstitutional interference with the financial autonomy or the constitutionally ensured rights to local self-government. In their assessment, sufficient mechanisms allowing the active influence of municipalities on their own revenue sources are ensured as well, because municipalities can, through spatial development, influence the value of real property, which is important for tax assessment, and because they can modify their part of the tax rate by 50% in conformity with the criteria of their spatial and economic policy. Independence from the financial resources of the state is allegedly also ensured to municipalities by the fact that they may freely dispose of the [revenue from the] revenue source provided thereto.
 
28. With regard to the alleged insufficient influence of municipalities on the management of taxes, the National Assembly and the Government draw attention to the fact that with regard to Articles 146 and 147 of the Constitution, the fiscal sovereignty of municipalities is only partial, because the regulations of local communities should not contain provisions for which there is no substantive grounds in the law. Such substantive grounds (the subject of taxation, taxable persons, the taxable base, and the tax rate) can therefore be found in the RPTA, which allegedly determines, for local communities, the directions and frameworks for the prescription of the content and the quantity of taxation by implementing regulations. The Government and the National Assembly assess that the challenged Article 6 of the RPTA provides municipalities with an influence on spatial and other local policies by the different tax treatment of narrow groups of real property. In addition to the appropriate autonomy of municipalities, the regulation allegedly ensures the uniformity of taxable persons, subjects of taxation, principal tax rates, as well as transparency and the comparability of the system between different municipalities, and thus reinforces the principles of equality and justice. In the opinion of the National Assembly and the Government, the challenged regulation prevents the arbitrary actions of municipalities when determining the amount of the tax obligation, as was allowed under the hitherto system – for instance, the omission of the determination of the compensation fee for building land use (as is the case regarding the petitioner the Municipality of Rogašovci). The challenged regulation thereby also ensures that in the framework of the statutory possibilities, municipalities will provide for a sufficient amount of their own resources for their financing, which is allegedly their duty determined by the first paragraph of Article 142 of the Constitution.
 
29. The National Assembly and the Government underline that the duty to pay tax, which is also determined for municipalities by Article 4 of the RPTA, does not entail either an original or vested competence of a municipality in the sense of Article 140 of the Constitution. It is precisely the substantial inequalities of the tax burden in the hitherto regulation that allegedly cause substantially different prices of communal, social, and other public services. In contrast, the challenged regulation allegedly follows the objective of equalising tax burdens (all entities under public law are taxable persons, not only municipalities) or a more just distribution thereof, whereby due to the special position of the providers of public services the tax rate for such real property is allegedly low.
 
30. The position of the National Assembly and the Government is that Articles 25 and 26 of the RPTA regulate a smooth transition to a new source of financing, in conformity with the principle of trust in the law; they namely ensure to all municipalities an equal amount of resources from [the taxation] of real property as [was ensured to them] before the RPTA entered into force. In their opinion, they ensure municipalities, in such manner, the stability and continuity of the financing and adaptation to new circumstances, and at the same time a transitional period is envisaged for the system of the financing of municipalities to be adapted. In the assessment of the National Assembly and the Government, Article 14 of the Constitution does not require different treatment of municipalities that hitherto did not fulfil the obligation to charge the compensation fee for building land use (e.g. the Municipality of Rogašovci). According to the allegations of the National Assembly and the Government, in conformity with Article 6 of the Financing of Municipalities Act (Official Gazette RS, Nos. 123/06, 57/08, and 36/11 – hereinafter referred to as the FMA-1), the real property tax is deemed to be a municipality’s own revenue source also in the transitional period. Since the challenged Articles 25 and 26 of the RPTA do not interfere, according to the allegations of the National Assembly and the Government, with the statutory regulation of the financing of municipalities with regard to solidarity funding [allocated from personal income tax revenue to balance municipal budgets], they are not inconsistent with Article 142 of the Constitution and Article 9 of the ECLSG. The statutory reallocation of municipalities' own resources that exceed appropriate spending between individual municipalities is allegedly not inconsistent with the financial autonomy of municipalities. The allegation regarding the inequality of municipalities is allegedly unsubstantiated, because the real property tax is allegedly not an earmarked charge.
 
 
The public hearing
 
31. On 27 February 2014, the Constitutional Court held a public hearing (Article 35 of the Constitutional Court Act, Official Gazette RS, No. 64/07 – official consolidated text and 109/12 – hereinafter referred to as the CCA). In addition to the applicants and the opposing party, it also invited thereto the legal expert Prof. Dr. Ivo Lavrač and Assoc. Prof. Dr. Alenka Temeljotov Salaj, as well as the representatives of the Government, the Surveying and Mapping Authority, and the Tax Administration of the Republic of Slovenia (hereinafter referred to as the Tax Administration).
 
32. The legal expert Prof. Dr. Ivo Lavrač considers it important that the real property tax encourages owners to ensure that their real property carries out a certain function. In his opinion, different tax rates correctly determine a discount with regard to residential real property − because also people with insufficient income own dwellings − and impose a higher tax rate on commercial real property, because companies' alternatives and possibilities with regard to tax reliefs are much more flexible. In the opinion of Prof. Dr. Lavrač, the standards that Article 8 of the RPMAA calls for the application of are the International Standards of Mass Appraisal, which are accessible on the Internet and are originally American. Prof. Dr. Lavrač explained that the methods and criteria of mass appraisal are general definitions on the basis of which the models for individual types of real property are determined. The implementing regulations that complement the RPMAA allegedly define the methods, e.g. the method of the assessment of value by monitoring comparable sales. For types of real property that are not massively on the market, the models allegedly apply other methods, and these models are allegedly also defined in the implementing regulations.
 
33. The legal expert Assoc. Prof. Dr. Alenka Temeljotov Salaj drew attention to the fact that different tax rates in combination with different value zones, levels, models, and faulty or incomplete data registers lead to the system being fallible. She considers the taxation of commercial and industrial real property with a 0.75% rate to be inappropriate, especially during the times of an economic crisis. Assoc. Prof. Dr. Alenka Temeljotov Salaj explained that during the [mass] calculation of the appraised market value, some methods used when carrying out individual valuations in accordance with international standards, i.e. the method of comparable sales, the method of the capitalisation of profit, and the buying-value method, are applied. She stressed that the manner of choice of these methods should be determined with regard to the availability of data on the market, and drew attention to the fact that if the market is passive, a correct approximation of value is very difficult to ascertain and that different methods lead to very different results. According to the assessment of Assoc. Prof. Dr. Alenka Temeljotov Salaj, taxable persons who are not trained in real property valuation cannot verify the correctness of the classification of the value level and the calculation of the value itself; they can, however, verify the basic data regarding the real property and the type of model applied. According to the statements of Assoc. Prof. Dr. Alenka Temeljotov Salaj, international standards for the assessment of value determined by Article 88 of the Auditing Act (Official Gazette RS, No. 65/08) are applied for [the purposes of] mass appraisal. Therefore, these are the same standards as those applied for individual valuation, except that the set of characteristics included in the mass appraisal model is allegedly narrower than when individual assessments are carried out.
 
34. The representatives of the Surveying and Mapping Authority underlined that the appraisal of value is based on expertise and international standards, whereby the criteria, standards, and models are clearly prescribed by a decree of the Government and by rules. According to their allegations, during an assessment, the Surveying and Mapping Authority does not apply the American standards of value appraisal, but International Valuation Standards (hereinafter referred to as the IVS) of the International Valuation Standards Committee. The representatives of the Surveying and Mapping Authority explained that different code lists are kept for individual data from the real property register, whereby the annex to the RPTA includes a code list of [the different types of] actual use of buildings, on the basis of which models are classified and with regard thereto [also] types of real property that in conformity with the RPTA are subject to different tax rates. Data registered in the cadastre of buildings are modified, according to the representatives of the Surveying and Mapping Authority, in an administrative procedure by the issuance of an administrative act, whereby technical data from the real property register are modified only upon [receipt of] a notification from the owner or by filling in a form, i.e. without an administrative procedure. With regard to the informative calculation of tax in 2014, they explained that after owners receive this calculation, they can arrange and modify data in the real property register, and after that, the Surveying and Mapping Authority transfers these data as of the cut-off date to the Tax Administration. With regard to an appeal against a tax assessment, the representatives of the Surveying and Mapping Authority explained that the Surveying and Mapping Authority verifies the allegation of taxable persons with regard to concrete data and determines whether the allegation – i.e. data – is correct or false. Allegedly, the Surveying and Mapping Authority notifies the Tax Administration thereof and not taxable persons. The complex arrangement of all data in registers is, in the opinion of the representatives of the Surveying and Mapping Authority, not yet complete.
 
35. The representative of the Tax Administration explained that the Tax Administration sends the Surveying and Mapping Authority a copy of any appeal against a tax assessment that refers to real property data, data regarding the persons determined as taxable persons, or the appraised market value; the Surveying and Mapping Authority deems such an appeal to be a motion for a modification of data in the real property register. According to her, the Surveying and Mapping Authority does not issue a decision thereon, therefore, no appeal is possible regarding these data. Likewise, in conformity with Article 14 of the RPTA, allegedly no appeal is possible against a real property valuation model itself.
           
 
The acquisition of explanations and data
 
36. During the procedure, the Constitutional Court acquired certain explanations and data, namely (1) from the Tax Administration: data regarding the amount that municipalities charged in 2012 and 2013 for the compensation fee for building land use and data regarding the amount of debt stemming from the compensation fee for building land use and unrecovered debt; (2) from the Surveying and Mapping Authority: data regarding the value of all real property in the Republic of Slovenia and an explanation regarding the application of the methods of valuation of different types of real property and data regarding the registered buildings and parts of buildings in the cadastre of buildings; (3) from the Slovene Real Property Association – FIABCI Slovenia: data regarding the RPTA.
 
 
B – I
 
Procedural Prerequisites and the Scope of the Review
 
37. On the basis of the tenth indent of the first paragraph of Article 23a of the CCA, representative associations of self-governing local communities can initiate, by request, the procedure for the review of the constitutionality or legality of a regulation or general act issued for the exercise of public authority, if the rights of self-governing local communities are threatened. The allegations of the Association of Municipalities of Slovenia and the Association of Municipalities and Towns of Slovenia refer to the constitutional position and constitutional rights of municipalities and the position of municipalities as taxable entities. The allegations are connected with the income and expenditures of municipalities and thus demonstrate a direct influence on the rights of municipalities. The objection of the National Assembly that the representative associations do not have procedural standing to invoke the rights of municipalities as taxable entities is therefore erroneous. The requests of both representative associations of municipalities fulfil the procedural prerequisites determined by the CCA.
 
38. On the basis of the ninth indent of the first paragraph of Article 23a of the CCA, representative bodies of local communities initiate, by request, the procedure for the review of the constitutionality or legality of a regulation or general act issued for the exercise of public authority if such interfere with the constitutional position or constitutional rights of a self-governing local community. On the basis of this provision, the Urban Municipality of Koper filed a request for the review of the constitutionality of the RPTA. The order of the Municipal Council of the Urban Municipality of Koper was not attached to the request; however, the request was filed, on behalf of the Urban Municipality of Koper, by the mayor on the basis of the authorisation under Article 192 of the Statute of the Urban Municipality of Koper (Official announcements, Nos. 40/2000, 30/01, 29/03, and Official Gazette RS, Nos. 90/05, 67/06, and 39/08). With regard to that, the Constitutional Court assessed the filed request as a request for the review of the constitutionality of state regulations which encroach upon the constitutional status and rights of a local community, as determined by Article 91 of the Local Self-Government Act (Official Gazette RS, No. 94/07 – official consolidated text, 76/08, 79/09, and 51/10 – hereinafter referred to as the LSGA).
 
39. The Municipality of Rogašovci filed a petition for the initiation of a procedure for the review of constitutionality, by which it challenged the third paragraph of Article 25 and the third paragraph of Article 26 of the RPTA. These two provisions regulate the granting of state budget revenues to individual municipalities in the transitional period. A petition for the initiation of the procedure can be lodged by anyone demonstrating legal interest (the first paragraph of Article 24 of the CCA). In conformity with the second paragraph of the mentioned Article, legal interest is deemed to be demonstrated if a regulation or general act issued for the exercise of public authority whose review has been requested by the petitioner directly interferes with his rights, legal interests, or legal position. The challenged provisions have direct effect on the position of individual municipalities. They namely determine the concrete scope of revenues that a municipality receives from the budget of the state in the transitional period from 2014 until 2016. With regard to that, the Constitutional Court accepted for consideration the petition of the Municipality of Rogašovci for the review of the constitutionality of the third paragraph of Article 25 and the third paragraph of Article 26 of the RPTA. Since the conditions determined by the fourth paragraph of Article 26 of the CCA were fulfilled, it proceeded to decide on the matter itself.
 
40. The Constitutional Court joined cases No. U-I-313/13, No. U-I-323/13, No. U-I-1/14, No. U-I-6/14, No. U-I-19/14, and No. U-I-20/14 for joint consideration and decision-making.
 
41. Among the provisions of the RPTA challenged by the applicants, the major criticisms refer to the taxable base for the assessment of real property tax, which is, as determined by Article 5 of the RPTA, the appraised market value of real property. This value is assessed on the basis of the RPMAA and implementing regulations adopted on its legal basis. Article 1 of the RPMAA expressly determines that the mass appraisal of real property is also intended for taxation. Article 5 of the RPTA is therefore a blanket provision that refers to the RPMAA as regards the assessment of the taxable base. Since these two Acts are mutually connected, the Constitutional Court extended the procedure for the review of constitutionality, on the basis of Article 30 of the CCA, also to Articles 7 and 8, the first paragraph of Article 11, and the fourth paragraph of Article 15 of the RPMAA insofar as they apply to the taxation of real property.
 
 
B – II
 
The Constitutional Starting Points Regarding the Regulation of Taxes
 
42. The fundamental provision of the Constitution that regulates the imposition of taxes is Article 147, which determines that the state imposes taxes by law. In conformity with this provision, the imposition of taxes falls within the competence of the legislature, which may only impose them by law.[1] Article 147 of the Constitution thus determines the principle of legality in the field of taxation.[2] Already by Decision No. U-I-9/98, dated 16 April 1998 (Official Gazette RS, No. 7/98 and 39/98, and OdlUS VII, 74), the Constitutional Court adopted the position that the imposition of taxes does not entail only the introduction of a tax and the determination of its elements (the subject of taxation, the taxable base, the taxable persons, and the tax rate), but also requires that it must be evident and predictable from the law what the state requires from taxable persons. On one hand, the principle of legality determined by Article 147 of the Constitution gives the state the authorisation to impose taxes, and on the other hand it is intended for the protection of taxable persons, because it requires that their legal position is, with regard to tax obligations, clearly and predictably evident already from the law and not only from implementing regulations. Thus, Article 147 combines, in the field of taxation, two requirements which otherwise in other fields follow from Articles 87 (the regulation of rights and duties by law) and 2 (the principle of precision and clarity of laws) of the Constitution. The requirements imposed by Article 147 of the Constitution on the legislature are, from the viewpoint of fundamental constitutional principles, an expression of the principle of democracy (Article 1 of the Constitution) and the principle of the separation of powers (the second paragraph of Article 3 of the Constitution). On the fundamental level of the state, it follows from these principles that taxes are prescribed by a democratically elected representative body that has the function of the legislature and not by the executive branch of power, which otherwise has at its disposal these taxes when exercising the tasks of the state. Such requirement also follows from the second paragraph of Article 120 of the Constitution.
 
43. The legislature has wide discretion in the field of taxation. The choice of the subject of taxation falls within this discretion. Consequently, the choice of the subject of taxation cannot be a subject of a review of constitutionality. The omission of other possible subjects of taxation also cannot be a subject of a review of constitutionality. If these decisions of the legislature are conditioned by financial-political, national-economical, socio-political, or also technical tax motives, they do not affect the constitutional principle of equality before the law, even if, in conformity with the selected subject of taxation, they result in a different tax burden on individuals. Therefore, the Constitutional Court does not assess which tax burden is most appropriate for fulfilling the financial needs of the state or the community (Decision of the Constitutional Court No. U-I-9/98).
 
44. When the legislature selects the subject of taxation, it must distribute the tax burden as evenly as possible between taxable persons. The tax burden, which from the viewpoint of a taxable person entails an interference of the state with his or her property and legal sphere, is justified in relation to taxable persons precisely by the equality of taxable persons with regard to the burden. The constitutional principle of equality before law (the second paragraph of Article 14 of the Constitution) is thus one of the guarantees that determine and limit the legislature's discretion in the field of taxation.
 
45. From the constitutional principle of equality there follows the fundamental principle of tax law − the principle of tax justice or the principle of the even distribution of the tax burden between taxable persons. The requirement of an even distribution of the tax burden also includes taking into consideration the inequality of the situations of taxable persons and their different treatment, which is proportionate to these situations. This is because in such a manner proportionality between unequal [taxable persons] can be established and in such a manner tax equality and thus equality before the law is [also] established. Furthermore, it must be taken into consideration that only such normative diversity that corresponds to the diversity of the states of the facts is in accord with the principle of equality, whereby the differentiation must not be arbitrary and the regulation must, in the framework of its purpose, select means that are proportionate to the established diversity of situations that are the basis for the normative differentiation. Therefore, it does not suffice that the chosen criterion for differentiation has a sensible connection to the subject of a (different) legal regulation. Also the application of the chosen criterion must pass the test of sensibleness in such a manner that it finalises the logic that justifies the differentiation (Decisions of the Constitutional Court No. U-I-357/98, dated 15 March 2001, Official Gazette RS, No. 24/01, and OdlUS X, 42; No. U-I-350/98, dated 6 April 2000, OdlUS IX, 78; and No. U-I-46/05, dated 11 January 2007, Official Gazette RS, No. 7/07, Intermunicipal Official Gazette of the Regions of Styria and Carinthia, No. 2/07, and OdlUS XVI, 2). On the other hand, the extreme conception of equality, if the nature of a certain actual and legal situation is not taken into consideration, can lead to inequality (Decision No. U-I-57/92, dated 3 November 1994, Official Gazette RS, No. 76/94, and OdlUS III, 117).
 
46. The principle of the even distribution of the tax burden, derived from the constitutional principle of equality before the law, is not exhausted in the statutory regulation itself. This principle must ensure that the evenness in the tax burden will in fact have effect in any individual instance of tax assessment. Such entails that the regulation of a certain tax must legally and actually enable the equal treatment of taxable persons. Therefore, it must strive for consistent implementation of the legislature's decision on taxation and allow it. The principle of consistency, which must ensure the equality of the actual effect of a taxable burden, is thus an essential integral part of tax equality. It can only be implemented if the law introduces rules that compare and/or differentiate, while these rules enable, by the precise content of statutory norms, their non-arbitrary application in (possible) executive regulations and when carrying out concrete tax assessments by a tax decision. Statutory rules must ensure the implementation of equality in the law in individual instances of tax assessment.
 
 
B – III
 
Taxable Base: The Assessment of Article 5 of the RPTA as well as Articles 7 and 8, the First Paragraph of Article 11, and the Fourth Paragraph of Article 15 of the RPMAA from the Viewpoint of Article 147 of the Constitution
 
47. Article 5 of the RPTA defines the taxable base as "the appraised market value of a real property as determined by regulations on the mass appraisal of real property and attributed to a real property in the real property register on 1 January of the year for which the tax is being assessed".[3] The applicants allege that the regulation of the taxable base determined by Article 5 of the RPTA is inconsistent with the second paragraph of Article 120 and with Article 147 of the Constitution. Since Article 147 of the Constitution is a special provision in relation to the principle of legality determined by the second paragraph of Article 120 of the Constitution, the Constitutional Court assessed the applicants' allegations in the framework of the principle of legality in conformity with Article 147 of the Constitution.[4] The Constitutional Court has already adopted the position that tax obligations must be clearly evident already from the law that introduces the tax and not only from implementing regulations (compare Decision of the Constitutional Court No. U-I-296/95, dated 27 November 1997, Official Gazette RS, No. 82/97, and OdlUS VI, 157, paragraph 9 of the reasoning). The law must at least define the taxable person, the subject of taxation, the taxable base, and the tax rate (Decision of the Constitutional Court No. U-I-181/01, dated 6 November 2003, Official Gazette RS, No. 113/03, and OdlUS XII, 88, paragraph 7 of the reasoning). Since Article 5 is a blanket provision that calls for the application of the RPMAA and implementing regulations adopted on its legal basis, the Constitutional Court assessed the applicants' allegations regarding the taxable base in the framework of the assessment of the provisions of the RPMAA.
 
48. The mass appraisal of real property in conformity with the RPMAA includes the procedure for the general valuation of real property and the procedure for the attribution of [the appraised] value to real property (Article 5 of the RPMAA). The formation of real property valuation models, which is a subject of regulation under Article 7 of the RPMAA, is key to the general valuation. The importance of real property valuation models proceeds from the first paragraph of Article 7 of the RPMAA: these models determine how the characteristics of real property influence the value of real property with regard to the supply and demand on the real property market. Since the value of real property is of decisive importance for the determination of the taxable base, it is evident that the formation of real property valuation models is of key importance for the determination of the tax position of taxable persons. Due to their importance for the determination of the taxable base for the real property tax, real property valuation models are a statutory matter that, with regard to the regulation of the essential elements, the legislature must not leave to original regulation by executive regulations. The importance of the original legislative regulation of models also lies in ensuring the constitutional principle of equality, i.e. in ensuring a comparable burden on taxable persons.
 
49. The RPMAA does not determine individual real property valuation models and also does not determine which groups of real property of the same kind are joined in individual valuation models. Only the Government Decree on the Determination of Real Property Valuation Models (Official Gazette RS, No. 95/11 − hereinafter referred to as the Valuation Models Decree), adopted on the basis of the first paragraph of Article 11 of the RPMAA, determined the real property valuation models.[5] The third and fourth paragraphs of Article 7 of the RPMAA only determine the general starting point that real property valuation models are to be formed with regard to their land use allocations[6] or actual use (buildings and parts of buildings). The RPMAA does not define in more detail the term "actual use of buildings and parts of buildings" and also does not determine individual types of actual use.[7] The fifth paragraph of Article 7 of the RPMAA determines the term "land use allocations",[8] but this definition is not clear and precise. With regard to land use allocations, the RPMAA refers to municipal spatial acts adopted in conformity with regulations that regulate spatial planning. The RPMAA leaves the manner of the determination of land use allocations for building plots to be regulated by an implementing regulation, whereby the RPMAA only defines the term "building plots" as plots of land where construction is in fact possible and which are determined by municipalities. Since it is not evident from the Act what the phrase "construction is in fact possible" means, it is not possible to determine, on the basis of the fifth paragraph of Article 7 of the RPMAA, which plots of land are building plots. The contents, which were determined only by the third paragraph of Article 3 of the Rules on Determining Building Plots (Official Gazette RS, No. 66/13) are thus original content, because they do not have an appropriate statutory basis in the RPMAA.
 
50. The sixth paragraph of Article 7 of the RPMAA determines that real property valuation models are determined by a value zone, value level, the method of the calculation of the value, and data on real property used for the calculation of real property values. The seventh through tenth paragraphs of Article 7 of the RPMAA determine the terms "value zone",[9] "value level",[10] "the method of the calculation of the value",[11] and "data on real property that are used for the calculation of real property values"[12]. With regard to the definition of the terms "value zone" and "value level", which are as well key to the determination of real property valuation models, the Constitutional Court established that they are not sufficiently clear and precise, because they do not allow taxable persons to predict, at least essentially, how the characteristics of his or her real property influence its classification into a value zone or a value level, and consequently the formation of a taxable base for the payment of the real property tax. It is especially important that the Act is indefinite with regard to data on real property that are used for the calculation of real property values. The RPMAA in fact does not determine all data regarding real property that are listed in the real property register and that are used for the calculation of real property values.[13] The tenth paragraph of Article 7 of the RPMAA only enumerates relevant data on real property non-exhaustively.[14] The RPMAA leaves more detailed regulation to the Government (the eleventh paragraph of Article 7 of the RPMAA).[15]
 
51. On the basis of the above, the Constitutional Court assessed that the statutory regulation of real property valuation models determined by Article 7 of the RPMAA does not fulfil the requirements of the principle of legality determined by Article 147 of the Constitution. On one hand, it does not regulate in a sufficiently clear and precise manner the legal situation of taxable persons, while on the other hand, it leaves questions that should be in the exclusive competence of the legislature to regulation by the Government (the first paragraph of Article 11 of the RPMAA). For such reason, Article 7 of the RPMAA is inconsistent with Article 147 of the Constitution.
 
52. The RPMAA also does not determine methods of real property mass appraisal that are used with regard to individual valuation models, nor does it determine the criteria for choosing a particular method. The first sentence of the second paragraph of Article 7 of the RPMAA only determines that methods of real property mass appraisal are important for the formation of valuation models. The RPMAA does not determine which methods these are and how they affect the formation (e.g. the number and choice) of valuation models. Also equally indefinite is Article 8 of the RPMAA, which abstractly determines that "statistical and other analytical methods of processing data regarding the real property market, which enable, by means of valuation models and by taking into consideration the standards of the assessment of real property values and the quality criteria of mass appraisal, a systematic and uniform determination of the values of a larger number of real properties on a certain date" are the methods of real property mass appraisal.
 
53. The Constitutional Court has already explained that the reference of a law to standards that in a certain field contain professional rules is not in itself disputable. However, only reference to standards adopted on the basis of a statutory authorisation is admissible (Decision of the Constitutional Court No. U-I-251/00). Therefore, already on the basis of the law it must be evident which standards are at issue and who adopted them or is authorised to adopt them. Since Article 8 of the RPMAA does not refer to precisely determined real property valuation standards,[16] it does not fulfil, from this point of view, the requirements of the principle of legality when imposing taxes determined by Article 147 of the Constitution. The RPMAA also does not determine in more detail individual "statistical and other analytical methods" for processing data regarding the real property market. Individual methods of the mass appraisal of real property (i.e. the method of comparable sales, the method of the capitalisation of profit, and the buying-value method)[17] and criteria for their application are determined in the Rules on the Criteria of Real Property Mass Appraisal (Official Gazette RS, No. 94/08 – hereinafter referred to as the Rules on the Criteria), which were adopted on the basis of the fourth paragraph of Article 15 of the RPMAA.[18] These methods are of essential importance for the legal position of taxable persons, because the choice and application of these methods is of decisive importance for the determination of the appraised market value of an individual real property and thus for the determination of the taxable base.
 
54. Since in Article 8 of the RPMAA the legislature omitted the regulation of a question which should have been regulated by the law, and by the fourth paragraph of Article 15 of the RPMAA left the regulation of valuation methods entirely to implementing regulations (the so-called pure enforcement clause), Article 8 of the RPMAA and the fourth paragraph of Article 15 of the RPMAA are inconsistent with Article 147 of the Constitution.
 
55. With regard to the fact that Articles 7 and 8, the first paragraph of Article 11, and the fourth paragraph of Article 15 of the RPMAA are inconsistent with Article 147 of the Constitution, also the blanket provision of Article 5 of the RPTA is consequently – for the same reasons – necessarily inconsistent with Article 147 of the Constitution.
 
 
B – IV
 
Tax Rates: The Assessment of the Second Paragraph of Article 6 of the RPTA from the Viewpoint of the Second Paragraph of Article 14 of the Constitution
 
56. The first paragraph of Article 6 of the RPTA determines that tax rates are determined with regard to groups of real property, namely buildings and parts of buildings together with plots of land on which they are constructed with regard to the valuation model and the code for the actual use, and plots of land with regard to such valuation model as is attributed to a particular real property in the real property register. From the second paragraph of Article 6 of the RPTA it follows that with regard to the determination of tax rates, the legislature introduced a series of differentiations. With regard to residential buildings or parts of buildings, the legislature differentiates between officially occupied and officially unoccupied real property,[19] whereby the tax rate for officially occupied real property is 0.15% and 0.50% for officially unoccupied real property. The legislature regulated commercial and industrial real property less favourably (a 0.75% tax rate) than residential real property, but made an exception in such framework for real property pertaining to power plants, which are subject to a lower, i.e. 0.40%, tax rate. With regard to buildings, a special tax rate is determined also for agricultural buildings (a 0.30% tax rate). Point 2 of the second paragraph of Article 6 of the RPTA introduces a series of differentiations also with regard to tax rates for plots of land without buildings.[20] Notwithstanding the foregoing, also illegal constructions are subject to a higher tax rate. Illegal residential real property is subject to a 0.50% tax rate, whereby with regard to other types of illegal real property, the tax rate that would normally apply is increased threefold (the first paragraph of Article 7 of the RPTA).
 
57. One of the applicants' criticisms with regard to the determination of tax rates refers to the differentiation between officially occupied and officially unoccupied residential real property. They allege that the higher tax rate for officially unoccupied real property is inconsistent with the principle of equality determined by the second paragraph of Article 14 of the Constitution. According to their assessment, there is no sound reason that would stem from the nature of the matter for such differentiation. They also draw attention to the fact that the different taxation of dwellings is not based on their actual use for the purpose of residence, but on the formal registration of permanent residence. For equal reasons, the applicants also object to the lower tax rate for real property pertaining to power plants in comparison to other commercial and industrial real property.
 
58. With regard to such criticisms, the Constitutional Court assessed whether the challenged two regulations are consistent with the general principle of equality before the law determined by the second paragraph of Article 14 of the Constitution. In this regard, it took into consideration that only such normative diversity that corresponds to the diversity of the states of the facts corresponds [also] to the principle of equality, whereby the differentiation must not be arbitrary and the regulation must, in the framework of its purpose, select means proportionate to the established diversity of situations, which are the basis for the normative differentiation. The chosen criterion for differentiation must thus have a sensible connection to the subject of (a different) legal regulation, while the application of the chosen criterion must pass the test of reasonableness in such a manner that it finalises the logic that justifies the differentiation (Decisions of the Constitutional Court No. U-I-357/98, No. U-I-350/98, and No. U-I-46/05).
 
 
Residential Real Property
 
59. All taxable persons who must pay tax on residential real property are in essentially equal situations. Regardless of whether real property is residential or not, owners are obliged to pay the tax because they own real property whose characteristics are such that they are intended for the people to reside in them. The legislature differentiates between owners of residential real property with regard to the circumstances of whether an owner has his or her permanent residence registered in that real property (or, if the taxable person is not a citizen of the Republic of Slovenia, whether he or she has his or her permanent or temporary residence registered in that real property) and whether in the year before the year for which the tax is being assessed a legal transaction involving the non-profit rental or rental on the free market of the [relevant] real property was registered in the register of the real property market, for at least six months. Consequently, the Constitutional Court had to assess whether the legislature has a sound reason for such differentiation that proceeds from the nature of the matter.
 
60. From the legislative file it follows that the legislature wanted to encourage, by a higher tax rate for officially unoccupied real property, more economically rational treatment of residential real property. In its opinion, also the Government states that the differentiation between officially occupied and officially unoccupied real property is factually substantiated with regard to the purpose of the use of such. Officially unoccupied real property is namely allegedly used in an economically irrational manner, because owners allegedly do not receive any payment for such. The objective of this differentiation was thus allegedly the promotion of the economically rational management of dwellings, especially the promotion of the rental of dwellings under market conditions.
 
61. The two criteria imposed by the legislature for differentiation, i.e. permanent residence and whether a legal transaction involving the non-profit rental or rental on the free market [of residential real property] was registered for at least six months, do not have a sensible connection to the subject of the regulation. The conclusion of the legislature that residential real property that is not the owner’s official permanent residence can, merely because of that, be considered to be residential real property intended for rental is namely erroneous. It is entirely possible that there is no demand on the rental market for certain residential real properties or that persons close to the owner reside in them on the basis of relations that are legally not regulated (for instance, a dwelling is temporarily made available to a child free of charge). Likewise, due to various reasons (e.g. conducting work outside the area of permanent residence) the owner can also use as a residence, for various reasons, another residential real property. In the context of the taxation of residential real property, the differentiation on the basis of the registered permanent residence does not have a sensible connection to the subject and purpose of such taxation. The purpose that the legislature wished to achieve by the challenged differentiation in taxation cannot even be achieved thereby. Consequently, the first and second indents of point 1 of the second paragraph of Article 6 of the RPTA are inconsistent with the second paragraph of Article 14 of the Constitution.
 
 
Commercial and Industrial Real Property
 
62. The second paragraph of Article 6 of the RPTA determines that commercial and industrial real property are subject to a 0.75% tax rate. An exception to this rule applies to real property pertaining to power plants, which are subject to a lower, 0.40%, tax rate. With regard to the fact that the energy sector falls within industrial activities, taxable persons who must pay the tax for real property pertaining to power plants, other commercial, and industrial real property are in an equal position. Since the legislature differentiates between real property pertaining to power plants and other commercial and industrial real property, the Constitutional Court had to assess whether the differentiation, which in fact is based on the nature of the activity, pursues a sound reason that follows from the nature of the matter.
 
63. From the legislative file and especially from the opinion of the Government, it follows that the mentioned differentiation is allegedly justified by the fact that real properties pertaining to power plants[21] carry the burden of other charges (concessions and environmental charges). The legislature allegedly thereby pursued the principle of the equal distribution of the tax burden. Such objective is in itself constitutionally admissible, because it pursues one of the fundamental principles of tax law. However, the question arises whether this differentiation is justified in the concrete case, i.e. whether it has a sensible connection to the subject of regulation.
 
64. The challenged Act regulates the taxation of real property. It is the owner who is obliged to pay the tax, whereby in a concrete case it is "the person who uses the real property in the framework of its activity." The allegation of the Government that real properties pertaining to power plants are subject, in addition to the real property tax, also to concessions and environmental charges is admittedly true. However, environmental charges, which in relation to the use of water are regulated by the Waters Act (Official Gazette RS, Nos. 67/02, 57/08, 57/12, and 100/13), are paid for the use of water and water pollution. These charges do not have a connection to real property in itself, but to the [business] activity, i.e. the production of electrical energy. Likewise, users of a [certain] real property pertaining to power plants do not pay a concession due to the use of the real property in itself, but for having exploited the natural resource to produce energy and for having used the facilities of the water infrastructure with regard to the value of the electrical energy produced and not with regard to the value of the real property pertaining to power plants. The purpose of the payment of concessions and environmental charges and the basis for their payment is thus not real property and its value. The differentiation introduced by the RPTA therefore does not stem from the subject of the regulation nor does it have a sensible connection thereto. Consequently, the third and fourth indents of point 1 of the second paragraph of Article 6 of the RPTA are inconsistent with the second paragraph of Article 14 of the Constitution. Since the Constitutional Court established the unconstitutionality of Article 5 of the RPTA, which regulates the taxable base by calling for the application of the RPMAA, it did not assess the question of the constitutionality of tax rates as such and whether they possibly also interfere with Articles 33 or 74 of the Constitution. For such reason, it also did not separately assess the criticism that the 0.75% tax rate for commercial and industrial real property is inconsistent with the Constitution. However, in this context the Constitutional Court draws attention to its Decision No. U-I-357/98.
 
 
B – V
 
The Assessment of the Second Paragraph of Article 14 of the RPTA from the Viewpoint of Article 25 of the Constitution
 
65. Article 25 of the Constitution ensures everyone the right to appeal or to any other legal remedy against the decisions of courts and other state authorities, local community authorities, and bearers of public authority by which his rights, duties, or legal interests are determined. In relation to Article 25 of the Constitution, the Constitutional Court concluded, in Decision No. U-I-297/95, dated 28 October 1998 (Official Gazette RS, No. 76/98, and OdlUS VII, 198), that the content of the right to a legal remedy presupposes that the beneficiary has at his disposal such a legal remedy by which he can protect his rights and interest, i.e. an effective legal remedy (e.g. Decision No. U-I-34/95, dated 29 October 1997, Official Gazette RS, No. 73/97, and OdlUS VI, 138).
 
66. In conformity with the law regulating the tax procedure (the first paragraph of Article 14 of the RPTA), an appeal is allowed against a decision on a real property tax assessment. If the complaint (also) refers to data on real property, taxable persons, or the appraised market value of real property, the tax authority sends a copy of the appeal to the Surveying and Mapping Authority, which deems the appeal to be a motion for a change in the data in the real property register (the second paragraph of Article 14 of the RPTA). If the appeal refers exclusively to data on real property, taxable persons, or the appraised market value of real property, and the Surveying and Mapping Authority registers the change of data in the real property register, the tax authority issues a new decision by which it replaces the decision challenged by the appeal (the seventh paragraph of Article 14 of the RPTA). If the Surveying and Mapping Authority does not change data in the real property register, the tax authority acts in conformity with the provisions of the law that regulates the general administrative procedure regarding the procedure of the first instance authority (the eighth paragraph of Article 14 of the RPTA). If the procedural prerequisites are fulfilled, the first instance tax authority must send the appeal without delay to the second instance authority with jurisdiction (the first paragraph of Article 245 of the General Administrative Procedure Act, Official Gazette RS, No. 24/06 – official consolidated text, 126/07, 65/08, and 8/10).
 
67. Therefore, from the second paragraph of Article 14 of the RPTA it follows that by an appeal against a decision on a tax assessment it is also possible to challenge the appraised market value of the real property. If the Surveying and Mapping Authority does not change the data on the appraised market value of the real property, the appeal is assessed by a second instance tax authority. It is the Ministry of Finance who has subject-matter jurisdiction for deciding in the second instance in tax procedures (the second paragraph of Article 70 of the Tax Procedure Act, Official Gazette RS, No. 13/11 – official consolidated text, 32/12, 94/12, and 111/13 – hereinafter referred to as the TPA-2). The RPTA contains no special provisions regarding the procedure of the second instance authority. Since the TPA-2 also does not have any special provisions, the Ministry of Finance proceeds in conformity with the law that regulates the general administrative procedure (the third paragraph of Article 2 of the TPA-2).
 
68. With regard to the fact that the appraised market value of real property depends not only on data on real property, but also on the selected valuation model and the selected valuation methods, the question is raised whether the possibility of an appeal against the appraised market value of a real property also entails the possibility of challenging individual elements of the applied individual real property valuation model or method. Since the second paragraph of Article 14 of the RPTA expressly differentiates between an appeal against data on a real property and an appeal against the appraised market value of a real property, the interpretation that an appeal against the appraised market value of a real property in fact only entails an appeal against the data on a real property cannot be correct. With regard to the wording of the second paragraph of Article 14 of the RPTA, only [such] interpretation is possible that an appeal against the appraised market value of a real property also allows the statement of appellate reasons that exceed the data on a real property and can thus also refer to the selected model or method of real property valuation.
 
69. On the other hand, the third paragraph of Article 11 of the RPMAA determines that no objection is possible against an appraised market value calculated with finality. The latter can only change if data on the real property change in the real property register. Therefore, on the basis of the third paragraph of Article 11 of the RPMAA, legal remedies against the appraised market value of a real property − insofar as this value is based on the selected models or methods of valuation − are not admissible. In conformity with the second paragraph of Article 7 of the RPMAA, real property valuation models are subject to review at least every four years. In conformity with the RPMAA, the value of a real property is thus data registered in the real property register. In conformity with Article 5 of the RPTA, these data represent the taxable base on the basis of which real property tax is calculated.
 
70. Therefore, if a taxable person's appellate allegations refer to the choice of a valuation model or method (and not only to data on a real property), the appeal would not be successful, because a real property value only entails data in the real property register. The Surveying and Mapping Authority will not be able to change these data on the basis of the appeal sent by the Tax Administration, nor if the second instance authority proceeds in the same manner. This is why the second paragraph of Article 14 of the RPTA only ensures an ostensible right to appeal against the appraised market value of a real property, which entails the taxable base. Such an appeal cannot be effective and entails an interference with the right of taxable persons to a legal remedy. Since an appeal against the appraised market value of a real property, insofar as it refers to the choice of the valuation model or method, does not ensure success in the sense that it would be possible, on its basis, to change the [appraised] value of a real property (and thus the taxable base), the right to a legal remedy ensured by Article 25 of the Constitution is in this part in fact hollowed out.[22] Consequently, the second paragraph of Article 14 of the RPTA is inconsistent with Article 25 of the Constitution.
 
71. The appraised market value of a real property − as is attributed to a real property on the basis of the RPMAA and the regulations adopted on its legal basis − is key to the calculation of the taxable base, therefore its assessment is essential for the calculation of the taxable obligation. Such entails that the calculation of the appraised market value of a real property, which otherwise is conducted by the Surveying and Mapping Authority, is essential for deciding on tax obligations that are in fact decided on by the Tax Administration. Therefore, when the appraised market value of real property influences the legal position of taxable persons and entails the basis for the determination of their tax obligations, the procedure of its assessment − if the procedure is separated from the general tax procedure in which a concrete decision on a tax obligation is issued − must ensure the right to make a statement determined by Article 22 of the Constitution and the right to a legal remedy determined by Article 25 of the Constitution.
 
 
B – VI
 
The Assessment of the RPTA from the Viewpoint of the Constitutional Position of Municipalities
 
72. The applicants allege that the RPTA does not ensure them their own source of financing tasks from the [sphere of] their competence, which they could dispose of autonomously. They underline that the real property tax is not only a revenue source of municipalities, but also of the state. The autonomy of municipalities when managing individual components of the tax (the tax rate, the method of assessment, the determination of exemptions and exceptions) is thus allegedly disabled. The applicants are of the opinion that due to the division of the tax between municipalities and the state the substantive basis of the local self-government of municipalities is jeopardised, because they allegedly receive less revenue than from the hitherto taxes on real property. The RPTA thus allegedly deprives them of opportunities for creating the conditions for development.
 
73. Article 2 of the RPTA determines that revenue from the real property tax pertains to the budgets of municipalities and the budget of the Republic of Slovenia, whereby Article 9 determines that 50% of the tax revenues collected from the statutorily determined tax rates pertain to the state and 50% to municipalities.[23]
 
74. The Constitution determines the self-governing position of local communities and, in such framework, their functional and financial autonomy. Residents exercise local self-government in municipalities and other local communities (Article 138 of the Constitution). Local affairs that may be regulated by the municipality autonomously and which affect only the residents of the municipality fall within the competence of the municipality (Article 140 of the Constitution). The financial autonomy of municipalities is ensured by Article 142 of the Constitution, which expressly determines that a municipality is financed from its own revenue sources; only those municipalities that are unable to completely provide for the performance of their duties due to insufficient economic development are ensured, in conformity with the law, additional funding by the state (above all, funds for balancing [the municipal budget]). From such constitutional position of municipalities it follows that municipalities must be able to fulfil the needs and interests of the residents on their territory. For such reason they need sufficient revenue sources.
                                                                                                                
75. With regard to the assessment of the financial autonomy of municipalities and the function of funds for balancing [the municipal budget] when implementing this principle, the Constitutional Court has already adopted the position that municipalities themselves are responsible for the implementation of local self-government − on the basis of the endeavours of local residents and the economy (Decision of the Constitutional Court No. U-I-43/99, dated 10 June 1999, Official Gazette RS, No. 59/99, and OdlUS VIII, 146). When assessing the financial and functional autonomy of municipalities in connection with municipalities' own revenue sources, the Constitutional Court stressed that the constitutional position ensures autonomy to the local self-government, i.e. independence in relation to the state; although the concrete position and the framework of the autonomy of a local community are determined by laws, the legislature must not revoke or jeopardise the constitutionally determined position of local communities (this is stated in Decision No. U-I-24/07, paragraphs 14, 15, and 17 of the reasoning). For such reason, with regard to the determination of [municipalities'] own revenue sources, the Constitutional Court adopted the position that [municipalities'] own revenue sources should be in direct relation to the municipalities; the law should determine that municipalities are direct beneficiaries of a particular revenue source, although it would be, technically speaking, collected by the state (this is stated in Decision No. U-I-24/07, paragraph 27 of the reasoning).
 
76. The challenged regulation determined by Article 2 of the RPTA determines that a part of the revenues from the real property tax pertains to the budgets of municipalities. The Act thereby determines that municipalities are direct beneficiaries of a part of the revenues from the real property tax. No obligation or condition is imposed on municipalities in order to acquire or to use these revenues. The challenged statutory regulation thus establishes the direct relationship of this tax source with municipalities and thus fulfils the criterion of municipalities being direct beneficiaries [of tax revenue] and of the direct relation of [municipalities'] own tax source with municipalities. In the system of financing municipalities, these resources have the same characteristics as revenue from real property taxes under the regulations hitherto in force.[24] The tax [collected] on the basis of real property [ownership] is thus their own tax source. The fact that a part of the revenue from this tax also pertains to the budget of the state does not affect this conclusion. With regard to the above, Article 2 of the RPTA is not in itself inconsistent with Article 142 of the Constitution.
 
77. However, also in the system providing for the division of tax revenue it must be taken into consideration that the subject of taxation is real property. The real property tax, although it is not an earmarked tax, is substantively connected with municipalities' expenditures that they allocate in order to provide utilities to real property and thereby for the benefit of real property owners. For such reason, it is understandable that in Member States of the European Union and also elsewhere in the world, the real property tax is, as a general rule, a municipal tax.[25] In fact, in individual European states there exist exceptions to this rule, but they are directed towards a particular type of real property.[26] Also in the Slovene legal order real property has hitherto been subject to different taxes, the common characteristic of which was that they pertained in their entirety to municipalities, except the tax on real property of higher value, introduced in 2012, which pertained in its entirety to the state.
 
78. The fact that the real property tax is, by its nature, incorporated in the functioning of local self-government follows mutatis mutandis already from the Constitution. In conformity with the first paragraph of Article 140 of the Constitution, local affairs that may be regulated by the municipality autonomously and which affect only the residents of the municipality fall within the competence of the municipality. On such basis, the second paragraph of Article 21 of the LSGA determines the original tasks of municipalities, among which are, inter alia, spatial development planning, the performance of tasks regarding interferences in physical space and the construction of facilities, the provision of the public service of managing building land, the creation of conditions for the construction of housing, provision for an increase in the rent/social welfare housing fund, the regulation and maintenance of the water supply and power supply facilities, and the construction, maintenance, and regulation of local public roads, public ways, recreational and other public areas, as well as the regulation of traffic. From the mentioned tasks of municipalities it follows that the real property tax is substantively connected with municipalities, because by this tax resources for enabling rational and efficient use and exploitation of real property in municipalities' territory are provided.
 
79. The second sentence of Article 147 of the Constitution determines that local communities impose taxes and other charges under conditions provided by the Constitution and law. Such entails that local communities are, when imposing taxes, always limited by statutory limitations, but at the same time also that when determining municipal taxes by law, the legislature must take into consideration the constitutional position of local communities, which also gives them the right to their own, autonomously prescribed revenue sources. Therefore, when imposing taxes in conformity with the first sentence of Article 147 of the Constitution, the legislature must take into consideration the constitutionally determined tasks of municipalities, such as proceed from Article 140 of the Constitution, and in connection therewith also the financial autonomy of municipalities determined by Article 142 of the Constitution, which determines the principle of their financing from their own revenue resources. From the constitutional case law related to that Article of the Constitution it follows that municipalities must have the possibility to have an influence, by their active conduct, on their own revenue sources and that it is primarily municipalities themselves who are responsible for the implementation of local self-government (this is stated in Decision No. U-I-24/07, paragraphs 25 and 26 of the reasoning). For such reason, the legislature must ensure, when imposing a municipal tax, the constitutionally determined functional and financial autonomy of municipalities and take into consideration, with regard to the real property tax, the substantive connection of the subject of taxation with the implementation of local self-government.
 
80. The fifth paragraph of Article 6 of the RPTA determines the authorisation granted to municipalities to increase or decrease, by 50%, in conformity with the criteria of their spatial and economic policy, tax rates in the part that pertains to municipalities, whereby the eighth paragraph of that Article prescribes the content of these criteria. Municipalities do not have the authorisation to prescribe exemptions from the payment of tax (Article 8 of the RPTA). Such entails that the only measure by which municipalities adapt the tax to the circumstances on their territory is to increase or decrease the tax rate. However, in accordance with the sixth and seventh paragraphs of Article 6 of the RPTA, this authorisation is further limited in connection with the receipt of funds for balancing [the municipal budget] from the budget of the state (in such event, municipalities must not decrease tax rates) and in connection with illegal constructions (regarding which they must neither increase nor decrease tax rates), agricultural and forest plots of land, buildings for public use, as well as real property pertaining to defence purposes (regarding which they must not increase tax rates). Furthermore, the RPTA determines the authorisations of municipalities to adapt tax rates only for the purposes of spatial and economic policy, and not also for the purposes of other policies, especially social ones,[27] which are carried out by municipalities on the basis of Article 140 of the Constitution and Article 21 of the LSGA, and which are as well an important element of the functional autonomy of municipalities when implementing local self-government. Also the statutorily determined exemptions and tax reliefs, although some of them take into consideration the social position of taxable persons (Articles 8 and 11 of the RPTA), do not ensure the autonomy of municipalities. Only the determination of more extensive authorisations of municipalities when imposing a local tax truly ensures also the autonomy [of municipalities] when carrying out their original tasks with regard to the needs of their residents.
 
81. The RPTA determines that the state and municipalities are equal with regard to tax income collected from the statutorily determined tax rates. Each level of power receives one half of these revenues. Since with regard to the direct incorporation of the subject of taxation into the local environment, the real property tax is substantively connected to the implementation of local self-government, and is essentially a municipal tax, the predominant part of the collected revenue should pertain to municipalities. How much this predominant share of the real property tax that is to pertain to municipalities should be is a question of appropriateness, i.e. statutory regulation.
 
82. Due to the implementation of the system of the division of revenues from the real property tax between the state and municipalities into equal parts, the RPTA consequently does not provide municipalities sufficient authorisations for managing the real property tax in such a manner that they could, on the basis of their own resources, efficiently carry out their constitutional and statutory tasks. For such reason, Article 9 and the fifth paragraph of Article 6 in relation to the eighth paragraph of Article 6 of the RPTA are inconsistent with Articles 140 and 142 of the Constitution.
 
83. The third paragraph of Article 25 and the third paragraph of Article 26 of the RPTA regulate the division of the tax between the state and municipalities in the transitional period, which lasts from 2014 until 2017. During these three years, the revenue from the tax pertains in its entirety to the budget of the state, whereby resources are granted to municipalities in the statutorily determined amount.
 
84. The applicants criticise the challenged regulation for the fact that the entire real property tax pertains to the budget of the state and that, contrary to the financial autonomy of municipalities, resources are only granted to municipalities.
 
85. In conformity with Article 142 of the Constitution, a municipality is financed from its own revenue sources. In the constitutional case law, it is an accepted position that the resources from the budget of the state that are only granted to a municipality cause the municipality to depend on the state and they do not [allow the municipality to] carry out its responsibilities as regards ensuring local self-government and the provision of the resources necessary therefor (this is stated in Decision No. U-I-24/07, paragraph 27 of the reasoning).
 
86. For such reason, the legislature must also in the transitional period until 2017 ensure municipalities the financing of their tasks from their own revenue sources, not only from resources granted from the budget of the state. By such [regulation], the legislature namely dispossessed municipalities of their own revenue sources without replacing them with another equal revenue source.
 
87. With regard to the above, the regulation of the transitional period determined by the third paragraph of Article 25 and the third paragraph of Article 26 of the RPTA is inconsistent with Articles 138, 140, and 142 of the Constitution.
 
 
B – VII
 
88. The Constitutional Court established that Article 5, the first through fourth indents of point 1 of the second paragraph of Article 6, the fifth and eighth paragraphs of Article 6, Article 9, the second paragraph of Article 14, the third paragraph of Article 25, and the third paragraph of Article 26 of the RPTA are inconsistent with the Constitution. These provisions of the Act determine the taxable base, the tax rates for buildings or parts of buildings together with the plots of land on which they are constructed, the right to appeal, and the position of municipalities in relation to this tax. These are the fundamental provisions regarding the real property tax without which the other provisions of the RPTA cannot be implemented. Consequently, the Constitutional Court abrogated the RPTA in its entirety (point 1 of the operative provisions). In doing so, it did not address the allegations regarding those provisions that cannot be implemented due to the already established unconstitutionalities.
 
89. The Constitutional Court established that Articles 7 and 8, the first paragraph of Article 11, and the fourth paragraph of Article 15 of the RPMAA are inconsistent with the Constitution. These are provisions that regulate the mass appraisal of real property and are essential for the determination of the taxable base for the taxation of real property. With regard to that, the Constitutional Court established that the RPMAA, insofar as it refers to the taxation of real property, is inconsistent with the Constitution (point 2 of the operative provisions). On the basis of the first paragraph of Article 48 of the CCA, the Constitutional Court issued a declaratory decision, because the legislature failed to establish a statutory basis in conformity with Article 147 of the Constitution. What is at issue is namely the omission of [the adoption of] a precise statutory regulation of the mass appraisal of real property, which is essential for the assessment of the real property tax. The legislature can constitutionally consistently determine the taxable base by either the RPMAA or by the law by which it is to introduce the real property tax. For such reason, the Constitutional Court did not set a time limit by which the legislature must harmonise the RPMAA with the Constitution. If the legislature decides to determine the taxable base by the RPMAA, it will have to take into consideration that an insufficient statutory determination of real property mass appraisal models and methods and data on the characteristics of real property also raises the threat of their arbitrary use, which can cause a constitutionally inadmissible inequality of the burden on taxable persons. Therefore, when harmonising the mentioned provisions of the RPMAA with the Constitution, the legislature will have to pay due attention to ensuring the equality of taxable persons and to ensuring effective legal remedies in the procedure for the attribution of the appraised market value to real property in accordance with the first paragraph of Article 14 of the RPMAA.
 
 
B – VIII
 
90. In order to prevent municipalities from remaining without revenues that they had previously been receiving from real property taxes in conformity with the regulations previously in force, in the period until the legislation on the assessment of the real property tax that is harmonised with the Constitution enters into force, the Constitutional Court determined, on the basis of the second paragraph of Article 40 of the CCA, the manner of implementation of this Decision. It determined that until a different statutory regulation of the real property tax is adopted, the regulations determined by the first through fifth indents of Article 33 of the RPTA are applicable (point 3 of the operative provisions). Although the Constitutional Court has already established that the manner in which the compensation fee for building land use has been legally implemented is disputable, it reiterates its position from Decision No. U-I-39/97, dated 16 December 1999 (Official Gazette RS, No. 1/2000, and OdlUS VIII, 282), namely that the possible abolishment of this direct revenue source of municipalities (before the new real property tax is introduced) could seriously jeopardise the carrying out of the constitutional tasks of municipalities. For such reason, the Constitutional Court decided that the compensation fee for building land use and the fee for the maintenance of forest roads for 2014 are assessed in conformity with the regulations previously in force, with validity from 1 April 2014 onwards, but in the amount for the entire year (point 4 of the operative provisions). The [obligation to pay] property tax in conformity with the first indent of Article 33 of the RPTA[28] arises on 1 April 2014. This ensures municipalities, in 2014 as well, essentially undiminished revenue sources of their own as would exist if the RPTA had not entered into force. The absence of taxes and other public charges on real property in comparison with 2013 without replacement by other revenue sources would entail a greater interference with the constitutional position of municipalities than financing under the regulations previously in force. When determining the manner of implementation, the Constitutional Court could not take into consideration the regulations determined by the sixth and seventh indents of Article 33 of the RPTA, because the taxable base for tax [assessment] is, in conformity with these regulations[29], also based on real property values assessed in accordance with the RPMAA, which the Constitutional Court established is inconsistent with the Constitution. The time limits for taxable persons that are determined in the regulations determined by the first through fifth indents of Article 33 of the RPTA and that will already have expired by the publication of this Decision in the Official Gazette of the Republic of Slovenia shall expire on 30 April 2014 (point 5 of the operative provisions). The time limits for the competent authorities that are determined in the regulations determined in the first through fifth indents of Article 33 of the RPTA and that have already expired in 2014 shall expire on 30 June 2014 (point 6 of the operative provisions).
 
91. The Constitutional Court decided that the Decision shall take effect on the day of its public announcement (point 8 of the operative provisions).
 
 
B – IX
 
92. The applicant Urban Municipality of Koper requests the reimbursement of its costs of the procedure before the Constitutional Court. In procedures before the Constitutional Court each participant bears his own costs, unless the Constitutional Court decides otherwise (the first paragraph of Article 34 of the CCA). Especially substantiated reasons would have to exist for a different decision. The applicant does not allege such reasons. Consequently, the Constitutional Court decided that the Urban Municipality of Koper bears its own costs in the procedure (point 7 of the operative provisions).
 
 
C
 
93. The Constitutional Court adopted this Decision on the basis of Articles 43 and 48, the second paragraph of Article 40, and the first paragraph of Article 34 of the CCA, as well as on the basis of the fifth paragraph of Article 46 of the of the Rules of Procedure of the Constitutional Court (Official Gazette RS, No. 86/07, 54/10, and 56/11), composed of Mag. Miroslav Mozetič, President, and Judges Dr. Mitja Deisinger, Dr. Dunja Jadek Pensa, Mag. Marta Klampfer, Dr. Etelka Korpič – Horvat, Dr. Ernest Petrič, Jasna Pogačar, Dr. Jadranka Sovdat, and Jan Zobec. The decision was reached unanimously. Judges Mozetič, Deisinger, Klampfer, Korpič – Horvat, Petrič, Sovdat, and Zobec submitted concurring opinions.
             
 
Mag. Miroslav Mozetič
President
 
Notes:
[1] On the basis of Article 147 of the Constitution, taxes and other charges can also be imposed by local communities, but only under conditions provided by the Constitution and law.
[2] Also Article 87 of the Constitution determines that the National Assembly may determine the rights and duties of citizens and other persons only by law.
[3] For 2014, the relevant date determined for the assessment of the taxable base is 1 April 2014.
[4] The Constitutional Court adopted a similar statement in Decisions No. U-I-215/11, Up-1128/11, dated 10 January 2013 (Official Gazette RS, No. 14/13), No. U-I-257/09, dated 14 April 2011 (Official Gazette RS, No. 37/11), No. U-I-178/10, dated 3 February 2011 (Official Gazette RS, No. 12/11, and OdlUS XIX, 17), and No. U-I-156/08, dated 14 April 2011 (Official Gazette RS, No. 34/11).
[5] Article 2 of the Valuation Models Decree determines individual valuation models, namely dwellings (STA), houses (HIS), garages (GAR), shops (PPL), offices (PPP), industrial buildings (IND), heavy industry buildings (INP), vineyard cottages (PKZ), agricultural buildings (PKO), buildings for public use (PNJ), other buildings (PND), building plots (ZGS), built-up plots of land (PSZ), agricultural plots of land (KME), forest plots of land (GOZ), other plots of land (ZDR), power plants (PNE), mines (PNM), ports (PNP), [gas] stations (PNB), and special real property (PPN). Cf. International Valuation Guidance Note No. 13: Mass Appraisal for Property Taxation, p. 10, which recognises, for instance, seven real property valuation models: single-family residential property, multifamily residential property, commercial property, industrial property, non-agricultural land property, agricultural property (forest property included), and special-purpose property, which includes non-profit use, use by the state, and recreational premises.
[6] Except for built-up plots of land, for which the models are formed with regard to the actual use of the plots of land.
[7] The use of buildings is otherwise determined by the second paragraph of Article 79 of the RPRA, however this Act only differentiates between residential, non-residential, and common use of a part of a building. In conformity with the fourth paragraph of Article 79 of the RPRA, a more detailed differentiation of the actual use of a part of a building is published only as a methodological instruction on the website of the Surveying and Mapping Authority. The code list published on the website of the Surveying and Mapping Authority recognises, inter alia, 128 different types of actual use of parts of buildings and 53 different types of land use allocations.
[8] The fifth paragraph of Article 7 of the RPMAA determines the following: "Land use allocation is such land use allocation as determined in the municipal spatial acts in conformity with regulations that regulate spatial planning, except for building plots. Building plots are plots of land on which construction is in fact possible and which are determined by municipalities. The manner of the determination of land use allocation for building purposes in conformity with this Act is prescribed by the minister competent for the environment and spatial planning."
[9] The seventh paragraph of Article 7 of the RPMAA determines: "Value zones determine areas on which real property with equal characteristics have equal value."
[10] The eighth paragraph of Article 7 of the RPMAA determines: "Value levels determine value grades, which are formed on the basis of a reference real property. A reference real property is a real property that is used as a basis for the determination of real property valuation models. There is one value level determined per each value zone."
[11] The ninth paragraph of Article 7 of the RPMAA determines: "The method of the calculation of a value in the form of equations, tables, point systems, factors, or graphs determines the application of value zones and value levels, as well as how data on real property for the calculation of a value are taken into account."
[12] The tenth paragraph of Article 7 of the RPMAA determines: "Data on real property that are used for the determination of a value are data on the characteristics of real property that are registered in the real property register and that are grouped in the following groups of data:
− data on the characteristics of a parcel (data on the location, surface area, use, quality rating, the plot of land under the building, and other data on the parcel),
− data on the characteristics of a building (data on the location, surface area, use, final treatment, installations, maintenance of the building, and other data on the building),
− data on the characteristics of a part of a building (data on the location, surface area, use, final treatment, installations, maintenance of the building, and other data on the part of the building),
− data on the characteristics of real property intended for carrying out an [economic] activity (data on the location, size, actual use and land use allocations, year of construction, maintenance, installations, final treatment, production, and other data on the activity)."
[13] The register of real property was established by the RPRA, which in the first paragraph of Article 96 defines the register as a multi-purpose collection of data on real property on the territory of the Republic of Slovenia, which is established and kept in order to provide data that reflect the actual state of real property in nature.
[14] Data registered in the real property register are in fact exhaustively listed in the fifth paragraph of Article 103 of the RPRA, however the RPMAA does not refer to this provision and does not determine that these data can also be used for tax purposes. In conformity with the sixth paragraph of Article 103 of the RPRA, these data can only be used for the purposes of establishing and keeping the real property register.
[15] On such basis, the Government adopted the Decree on Data on Property Characteristics in the Real Property Register (Official Gazette RS, No. 95/11, 109/11, and 7/14).
[16] From the reply of the Government, it follows that the Surveying and Mapping Authority allegedly uses the International Valuation Standards (IVS) of the International Valuation Standards Committee, with registered office in London, UK, which from 2007 no longer contain a special standard for mass appraisal of real property for tax purposes (International Valuation Guidance Note No. 13: Mass Appraisal for Property Taxation). On the other hand, from the reply of a legal expert, Prof. Dr. Ivo Lavrač, who was invited to the public hearing, it follows that the Standard on the Mass Appraisal of Real Property 2013 of the International Association of Assessing Officers, with registered office in Kansas City, U.S.A., is used.
[17] The method of comparable sales is based on prices of real property in fact realised, [i.e. prices of real properties] that were the subject of sales on the real property market (the second paragraph of Article 3 of the Rules on the Criteria). The method of the capitalisation of profit is based on the profitability of real property (the third paragraph of Article 3 of the Rules on the Criteria). The buying-value method is based on the construction costs of real property (the fourth paragraph of Article 3 of the Rules on the Criteria).
[18] In this context there also arose a terminological confusion, because Article 3 of the Rules is entitled "The Method of Assessment of Real Property Value" and not "Methods of Real Property Mass Appraisal".
[19] The third paragraph of Article 6 of the RPTA defines the term of officially occupied residential real property. An officially occupied real property is a residential real property in which a taxable person has his or her registered permanent residence during the period relevant for tax assessment, or, if the taxable person is not a Slovene citizen, his or her temporary residence. In the event that a real property is in co-ownership or joint ownership, a share in the real property owned by a co-owner or joint owner who has his or her officially registered permanent residence in it is deemed to be an officially occupied real property. Likewise, a residential real property is deemed to be officially occupied if in a determined period of time a legal transaction entailing its rental was registered for at least six months.
[20] Point 2 of the second paragraph of Article 6 of the RPTA determines:
"Tax rates for plots of land without buildings are:
 – 0.15% for agricultural plots of land;
 – 0.07% for forest plots of land;
 – 0.75% for plots of land for commercial and industrial use;
 – 0.40% for plots of land for energy sector purposes;
 – 0.50% for plots of land for the purposes of the construction of buildings;
 – 0.50% for other plots of land;
 – 0.15% for plots of land for residential use (functional plots of land)."
[21] From the opinion of the Government it follows that the expression and definition were introduced by the RPTA and that what are at issue are real properties that are valued in accordance with the model for power plants – PNE – and buildings with a code number of actual use 1251002, i.e. power plant industrial buildings.
[22] Cf. case law of the Constitutional Court with regard to the hollowing out of the right to judicial protection determined by Article 23 of the Constitution in Decisions No. Up-1857/07, U-I-161/07, dated 3 December 2009 (Official Gazette RS, No. 105/09, and OdlUS XVIII, 55), No. U-I-18/02, dated 24 October 2003 (Official Gazette RS, No. 108/03, and OdlUS XII, 86), and No. Up-76/03, U-I-288/04, dated 17 March 2005 (Official Gazette RS, No. 34/05, and OdlUS XIV, 110).
[23] Article 9 of the RPTA reads as follows:
"Revenues from tax are allocated to:
− budgets of municipalities, from tax on real property on their territory, in the amount of 50% of the tax assessed by taking into account the tax rates from the second and fourth paragraphs of Article 6, the first paragraph of Article 7 of this Act, as well as the increases and decreases in conformity with the fifth, sixth, and seventh paragraphs of Article 6 of this Act, except the tax assessed on forest plots of land in the part that pertains to municipalities, which is transferred to a special sub-account of the budget of the state and is allocated to municipalities for the maintenance of forest roads in conformity with regulations on forests;
− the budget of the Republic of Slovenia in the amount of 50% of the tax assessed by taking into account the tax rates from the second and fourth paragraphs of Article 6, and the first paragraph of Article 7 of this Act."
[24] Article 6 of the FMA-1 determines:
"([municipalities'] own tax sources)
(1) Municipalities' sources of financing are revenues of the municipal budget (hereinafter: revenues) from:
– real property tax;
– tax on vessels;
– tax on real property transactions;
– tax on inheritance and gifts;
– tax on winnings from classic games of chance, and
– some other tax, if such is determined by the law that regulates an individual tax.
(2) The municipality is entitled to revenues from taxes listed in the previous paragraph in conformity with the law that regulates an individual tax.
(3) The source of the financing of municipalities are revenues from 54% of the personal income tax paid in the year before the previous year and increased by the inflation in the last year and in the year for which appropriate municipal expenditure is calculated in conformity with this Act.
(4) A municipality is entitled to revenues from the personal income tax in conformity with the criteria determined by this law for the financing of appropriate municipal expenditure. The Government determines, by a decree, the manner how the revenues from the personal income tax are transferred to municipalities."
[25] See Bulletin of the National Assembly, dated 18 October 2013, p. 12.
[26] See M. Schellekens (Ed.), European Tax Handbook 2013, IBFD, Amsterdam 2013: e.g. Sweden (tax from industrial, business, and other non-residential real property constitutes revenue of the state), Denmark (tax on residences − houses, apartments, summer residences, etc. − constitutes revenue of the state) and the Czech Republic (tax on higher-value residential real property constitutes revenue of the state).
[27] From the second paragraph of Article 21 of the LSGA it follows that the duties of municipalities include, inter alia, the provision of services for the basic welfare of children and the family, and for socially threatened, disabled, and elderly people.
[28] I.e. the Civil Tax Act (Official Gazette SRS, No. 36/88 et seq.).
[29] I.e. tax on real property of higher value.
 
 
U-I-313/13-90          
25 March 2014
 
Concurring Opinion of Judge Mag. Miroslav Mozetič
 
 
1. I agree with the Decision in its entirety. However, regardless of that, I would like to note certain thoughts by which I would like to express certain disagreements with individual arguments or to additionally substantiate individual points of the operative provisions of the Decision.
 
2. Point 1 of the operative provisions of the Decision of course does not mean that the introduction itself of the real property tax is inconsistent with the Constitution. [The question of] whether such should be introduced or not falls within the exclusive competence of the legislature (the National Assembly). In conformity with the amended Article 90 of the Constitution (Official Gazette RS, No. 47/13), it is not admissible to decide in a referendum on such a decision of the legislature (i.e. regarding a tax law). However, as applies to any law, it applies particularly to those laws by which the rights and obligations of citizens are regulated that their content must be in conformity with the Constitution. The question of whether the content of an individual adopted law is in conformity with the Constitution can be, however, submitted to the Constitutional Court. The present Decision is a response to such a question raised by the applicants and petitioners regarding the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA).
 
3. The Decision itself, in paragraph 86 of the reasoning, replies to the possible question of why the Constitutional Court abrogated the entire RPTA, although it only established that individual provisions thereof are inconsistent with the Constitution. I agree with the reasoning. It is true that the Constitutional Court could have abrogated only those provisions that it expressly established are inconsistent with the Constitution and explain in the reasoning that it did not deal with the other provisions, because already due to the unconstitutional provisions the Act is unusable in its entirety. The effect would be the same, although in such case we would still have a (partially) valid Act that could not (should not) be applied, because the two essential elements of taxation – the taxable base and tax rates – have been declared unconstitutional. Likewise, also from the viewpoint of the constitutional position of local communities, the unconstitutionality of the RPTA was established with regard to their financial autonomy. In my opinion, already merely this unconstitutionality is a reason for the Act to be abrogated in its entirety. Nonetheless, also the manner of implementation clearly shows that the challenged Act cannot apply. I am of the opinion that in such manner the legislature received a completely clear message that the real property tax [project] must be started once again from the beginning and, in my opinion, firstly the questions pertaining to the financial autonomy of municipalities should be resolved.
 
4. I agree with the positions [expressed] in all paragraphs of the reasoning, except partially with section B. – VI. "The Assessment of the RPTA from the Viewpoint of the Constitutional Position of Municipalities". I am convinced that the RPTA inadmissibly and unconstitutionally interfered with the constitutional position of municipalities, namely also from the viewpoint of the constitutional requirement of municipalities' own (budgetary) sources. In fact, the Decision establishes the inconsistency of the fifth paragraph of Article 6 and Articles 8, 9, 25, and 26 of the RPTA with the Constitution, while it establishes that Article 2 of the Act is in conformity with the Constitution. I am of the opinion that the arguments that substantiate the established unconstitutionality of the mentioned Articles also substantiate, to the same degree, the unconstitutionality of Article 2 of the RPTA. Only the provisions of all the mentioned Articles together provide an answer to the question of whether the real property tax, as regulated by the challenged Act, can still be deemed to be municipalities' own, autonomous revenue source and if the regulation is therefore in conformity with Article 142 of the Constitution. The first sentence of this Article namely determines that a municipality is financed from its own revenue sources. The legislature is thereby imposed [the task] of ensuring municipalities their own source of revenue which they need to carry out their tasks. The Constitutional Court has already explained in numerous Decisions, which are correctly summarised in the reasoning, what this means, and there is nothing to add.
 
5. It is true that Article 2 of the RPTA determines that the real property tax pertains to municipalities and the state, and Article 9 states that it is divided equally between them. Such allegedly entails that a part of this tax is a municipality's own source of tax revenue. However, the question that nonetheless occurs to me is namely whether the [claim that] this tax is a municipality's own revenue source is not merely a hollow declaration so that the requirement under the Constitution is only formally satisfied. My belief is that the answer to this question depends on the finding of whether municipalities are in fact able to autonomously manage such tax source or not, and to what degree. Neither the provisions of Article 9 nor those of the fifth paragraph of Article 6, and even less those of Articles 25 and 26 [of the RPTA], which otherwise regulate the transitional period of the implementation of the new Act, offer a positive answer thereto. The autonomy determined in the fifth paragraph of Article 6 of the RPTA is, although it is substantial at first sight – an increase or decrease by 50% at most – substantially limited already by the sixth, seventh, and eighth paragraphs of the same Article. The already limited autonomy is only ensured to a small number of municipalities that do not receive funds for balancing [the municipal budget]. If we also take into consideration tax rates, which for certain real property are, with regard to their use, already high, it is unrealistic to expect additional increases from municipalities. In my opinion, in such a manner the autonomy of the management of [municipalities'] own tax sources is proved to be ostensible, and therefore, the real property tax that pertains to municipalities is only ostensibly their own autonomous revenue source. The purpose of Article 2 of the RPTA is thus only to formally satisfy the requirement under Article 142 of the Constitution. This brings me to the conclusion that also Article 2 of the Act is inconsistent with the Constitution. Such does not mean, however, that I am of the opinion that the real property tax may only be a source of financing for municipal budgets.
 
 
Mag. Miroslav Mozetič
Judge
 
 
 
U-I-313/13-91          
27 March 2014
 
 
Concurring Opinion of Judge Jan Zobec
 
 
1. Although I voted for the Decision in its entirety and also concur to a certain degree with its underlying reasons, I wish to express, in my concurring opinion, my view on property taxes from the viewpoint of the constitutional guarantee of private property, especially the private property of residential real property. The applicants namely also referred to the fact that the real property tax excessively interferes with the constitutional guarantee of private property, and the Decision does not contain answers to these allegations.
 
A few brief introductory thoughts on the importance of private property in the circle of civilisation to which we belong
 
2. Private property entails one of the central constitutional values and one of the pillars of western civilisation. Already the Magna Carta Libertatum or The Great Charter of the Liberties of England of 1215, which made the king's power subject to law and which entails the first step towards the implementation of the idea of the rule of law, contained numerous important safeguards of ownership – e.g. the principle that in order to increase the budget of the state it is necessary to obtain the approval of the representative body; the provision that the crown's officials must not seize anyone's movable property without immediate payment – unless the seller voluntarily agrees that the payment be postponed; it also ensured protection from unlawful deprivation of possession or (arbitrary) deprivation without a judicial decision.[1] The theory on property rights also occupies the central position in the political philosophy of John Locke, which inspired the American Revolution and was reflected in the Declaration of Independence. In the opinion of this thinker of the Age of Enlightenment, whose philosophy profoundly influenced modern liberalism, private property already exists on the basis of natural law and before political power is formed. The true and real meaning of governing is the protection of these natural property rights, which Locke connected with freedom. For such reason, he claimed that people created and appointed the government in order to thereby protect their lives, freedoms, and possessions. And since ownership is a natural right, also the authorisations of the government are, according to him, necessarily limited by the duty to protect private property. He firmly stood by the position that the legislature is not authorised to arbitrarily interfere with private property and that the imposition of taxes without the people's consent is arbitrary, hinders the fundamental law of private property, and undermines the objective and meaning of governing.[2] Both of these – the Magna Carta Libertatum and Locke's view on private property – had a strong influence on the Anglo-American political-philosophical and legal identity. Locke's concept of private property percolated into English common law and in the famous work Commentaries on the Laws of England, William Blackstone built specifically on Locke's formulation.[3] Throughout the entire Revolutionary period, the Americans stressed that real property must occupy a central place in constitutional regulation. And as Arthur Lee stated, private property is the guardian of every other right – to take it away from people is the same as if their liberty were taken away.[4] The Fifth Amendment to the American Constitution (due process of law) explicitly includes Locke's concept, according to which the protection of private property is the principal objective of government, and places private property parallel to life and freedom.
 
3. Also Article 2 of the French Declaration of the Rights of Man and of the Citizen of 1789 states that the aim of every political association is the preservation of the natural and imprescriptible human rights of man – and these rights are liberty, property, security, and resistance to oppression. Article 17 continues: "Property being an inviolable and sacred right, no one can be deprived of it, unless demanded by public necessity, legally constituted, and under the condition of a just and prior indemnity.”
 
4. On the other hand, taxes are an inevitable necessity and already by the nature of the matter, the state can only collect them by interfering with the property of its citizens and legal entities, i.e. by nationalising a part of their private property. Therefore, in order to actually be able to protect the private property of its citizens and ensure the implementation and protection of other human rights (and thus fulfil the fundamental objective of its existence), it has to interfere with what it is obliged to protect. This entails the paradox of property, which is expressed through its social, economic, and environmental function. Therefore, the question is whether what is at issue is an internal paradox (of property) or just an external conflict between what is private and what is public. The answer to this question determines how (by what criteria) this paradox or conflict should be resolved and who should supervise it, how, and in what scope. Or more precisely: what is at issue is the question of whether the obligation to pay taxes and other public charges is an internal characteristic of private property, an integral part thereof, or whether it entails an interference therewith, i.e. an outward interference with the human right.
 
Real property tax is an interference with private property
 
5. Let me say right from the beginning that I concur with the starting point of the applicants' thesis that a real property tax, especially regarding residential real property, is already by itself an interference with the constitutional guarantee of property and should therefore be subject to the strict test of proportionality. It is true that the first paragraph of Article 67 of the Constitution defines the economic, social, and environmental function of property by stating that the manner in which property is acquired and enjoyed shall be established by law so as to ensure its economic, social, and environmental function. It is also true that the Constitutional Court has already taken a position thereon, namely that "the right to private property also includes as an integral part thereof – and not perhaps a limitation – the duty to contribute for the needs of the public" and that "already on the basis of the Constitution, also certain property burdens that are carried by those having (the right to) private property are an integral part of the content of private property." The Constitutional Court therefore decided that a tax determined in the framework of the economic, social, and environmental function of private property "still does not entail an interference (limitation) with the constitutionally protected right to private property."[5]
 
6. I find the position that tax burdens in themselves are still not an interference with the constitutional guarantee of private property, as long as they are not excessive, to be highly disputable, which in other terms entails that the state has in this part "a free hand" to interfere, "if necessary", with the property of its citizens and legal entities. Such namely entails that as long as the tax is not excessive, the owner is also not constitutionally protected from tax burdens and that therefore in this part there is no constitutional protection of property from the state. Namely, the latter can then, by law (that is adopted by any governing majority) and "if necessary", take what it deems to belong to it (provided that the law does not violate some other constitutional principles and orders – e.g. [the principles of] legality, clarity, and the precision of tax legislation, equality, the prohibition of retroactivity)[6] – the state is in this respect namely only bound by the Constitution. And where the Constitution does not impose limits on the state, where there is no constitutional protection from its measures, is where the state has "a free hand".
 
7. In such circumstances, property, especially when what is at issue is property that is subject to property tax, i.e. property that in the past has already been acquired, is not entirely and effectively constitutionally protected. The primary meaning and purpose of the constitutional guarantee of property is namely the protection of an individual's freedom in the property field from the state and its appetites. When we renounce constitutional protection from state interference with a certain part of property, the property is in this part no longer protected and remains, for such reason, in fact only "half-property" that is only protected in civil horizontal relationships between individuals equal to one another, and is not protected from the tax pretensions of the state. Or more directly: such position hands a part of property into the hands of the state. While this can still be advocated with regard to taxes on income and taxes on consumption, it seems to me completely unacceptable with regard to a property tax whose subject is immovable property already acquired in the past.[7]
 
8. For such reason, I agree with Professor Kerševan that such position according to which the "[f]undamental authoritative interference that in the modern legal regulation influences most often an individual's position and his possibility of free self-realisation, i.e. an interference with his property, […] not only is not limited by the human right to private property, but is (even) an integral part thereof, […] takes from an individual the fundamental function of the human right to private property, which is, in conformity with the nature of the human right to private property, precisely protection from authoritative interferences therewith."[8] The position that an interference is embedded in a human right as an integral part thereof, i.e. its reduction, decrease, and gradual negation, entails similar nonsense as claiming that an illness is an integral part of health (although, by definition, health is the absence of illness). The property of citizens and legal entities is not to function as a cash machine from which the state can randomly withdraw sums of money for its needs of one kind of another (and for constitutionally unsupervised needs) even unto the limits of excess.
 
A separate comment regarding residential real property
 
9. Due to private property as regards residential real property being given more weight by important constitutional values – not only by freedom in the field of property – its relative weight is correspondingly greater.  A dwelling represents one of the essential conditions for life; it is a place that provides to the inhabitants residing therein, in addition to physical shelter, development and integration, and gives them a sense of security; it is "a fundamental component of living in peace, dignity, and security – the three fundamental human rights".[9] Therefore, the private property of residential real property also protects, in a predominant part, the right to a home, to spatial privacy, security, family life, the free development of a personality, and personal dignity. All these values give it a special weight and importance. Especially on the territory of Slovenia. The characteristic of real property reality in Slovenia that stands out is namely the significant dispersion of the private property of residential real property,[10] which means that (in contrast to elsewhere in the world) the private property of such real property has in our country a significantly greater weight. The private property of a dwelling that is intended to generate rental income is something completely different than the private property of a dwelling in which the owner and his or her family or any of his or her closest relatives (also with his or her family) reside. I find the collection of taxes from such an object that does not generate any income for the owner, but serves to carry out other constitutional values (which are highly important from the viewpoint of human personality), especially delicate.
 
10. Viewed from this perspective, it becomes apparent that the real property tax is not so much a property tax as it is a tax on the right to a home, to privacy, security, personal dignity, etc. This is where I see an additional reason for the position that the limitations of a human right could possibly entail an integral part of that right itself being unacceptable. When ownership of residential real property is concerned, which is a material foundation and condition for numerous other human rights, there is even no normative legal basis in the first paragraph of Article 67 of the Constitution for such a position. There is none because the agglomeration of all other human rights that exist because of and via the human right to private ownership of a dwelling is so strong, so important, and so predominant that it simply drowns out its property components (to which the first paragraph of Article 67 of the Constitution refers, which states that the manner in which property is acquired and enjoyed shall be established by law so as to ensure its economic, social, and environmental function).
 
The threat of the jeopardising of the substance of property
 
11. With regard to the real property tax, I see the next reason for applying the criticised position regarding the tax as an integral part of the right to private property to be unacceptable also due to the following: this tax, which is a regular, repeated tax on immovable property, is paid from the regular income of taxable persons, which entails from what remains thereof after all other charges – the personal income tax, pension and health insurance contributions, etc. – are paid. Then, the tax that was paid when the real property itself was acquired should also be added thereto. In total, the aggregate burden often substantially exceeds 50%.[11] If, however, the real property tax was "paid" out of the value of the real property itself, i.e. from its substance (from the subject of taxation), then this would entail a pure confiscatory tax – in order to recover tax debt, the state would namely gradually sequester the real property.[12] The fact that such possibilities are not excluded in advance proceeds from Article 15 of the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA), in conformity with which, for taxable persons who on the basis of the regulations that regulate social security benefits are entitled to receive monetary social aid or a supplementary allowance and who are, therefore, in conformity with Article 11 of the RPTA, entitled to a decrease in the real property tax of 50%, there is envisaged "the privilege" of ensuring [the payment] of such tax obligation by registering a lien on the real property along with the prohibition of its sale or encumbering the ownership right on the real property subject to taxation. The essence of such generosity is that the fulfilment of the tax obligation is postponed until the death of the taxable person. For all the other persons, including borderline cases that do not fall within the category of taxable persons determined by Article 11 of the RPTA, general provisions on tax enforcement apply.
 
12. As regards the property tax – which due to its nature, i.e. the taxation of an already acquired, immovable property, of which the vast majority of residential real properties is not profit-generating, leans towards devouring its own substance, i.e. the subject of taxation, which means, in other terms, a gradual reduction of the private property – the position that such tax already entails an integral part of the human right to private property, which is additionally also limited by other important constitutionally protected values as regards residential real properties, is therefore especially unacceptable. Private property is reduced annually by the amount of the tax rate. I do not claim that this is a priori unconstitutional, because a property tax is in itself not unconstitutional. What I wish to draw attention to is only the fact that such a tax entails an interference with the constitutional guarantee of private property and that we cannot say that inasmuch as it is not excessive it is already an integral part of the right itself. Regardless of the amount of the tax rate, it must thus be subject to the strict test of proportionality. From such perspective, it is entirely irrelevant which group of real property is at issue – what is essential is that the taxable base is not income from real property (profit), but its appraised market value.
 
The principle of up to 50% taxation
 
13. When in Decision U-I-91/98, dated 16 July 1999, the Constitutional Court decided that the prescription of tax burdens cannot be deemed to entail an interference with private property if the taxation is not excessive, it also formed the position that taxation is excessive (and that it thus entails an interference with the constitutional guarantee of private property, which must be assessed in accordance with the strict test of proportionality) when it exceeds 50% of return on such property.[13] This is a formula of the manifest disproportionality of a tax obligation, which indicates when the legislature has (only/already) exceeded the sphere of its autonomy and broke into the constitutionally protected core of private property. The formula is already quantified and does not deal with the weight of the interference with private property. However, this is what should have been essential. Essential, because the individual instance of an affected private property can be weighed with different constitutional values. It is namely not the same if what is at issue is income from stock exchange speculation or commercial and industrial real property whose owner is in some manner already burdened by the tax on profit, not to mention the completely non-profit-generating private property of a residential real property. Precisely the latter has a strong social connotation and a distinctive social function – not only for its holder but for all the members of his or her family, for the spouse, children, and perhaps also others. Moreover, the principle of up to 50% taxation is on the abstract (statutory) level virtually unrealisable, because the integral tax burden is different for each individual taxable person – and it also changes over time. Even if we proceeded from an average taxable person, that would only be a static construct. In fact, the average taxable person does not exist in real life.
 
14. However, even if we accepted the principle of up to 50% taxation (which within the concept in accordance with which taxes do not entail an interference with private property but a part thereof protects against an increase in the highest tax rates), there exists a substantiated expectation that for a large number of taxable persons the cumulative tax burden (all taxes that taxable persons are obliged to pay and that they pay from their regular income – both income taxes and the property tax) will be excessive due to the magic level of 50% being exceeded.[14] Namely, if we proceed from the supposition that the use of property must at the same time (i.e. equally) serve the community, then this can at most apply to the tax on profits, i.e. that the state is due one half (at most) of what the taxable person created (earned, produced, gained), whereas the taxable person may freely dispose of the remaining half. And since immovable property is only another form of this half of the property that remained with the taxable person after the state seized "its" half due to the social function of private property, its further appetite to sequester this (remaining) property, which is no longer covered by the social function of private property, must be subject to the strict test [of proportionality].
 
Why the strict test
 
15. Some might ask what the point is of arguing whether the property tax, if it is not excessive, is actually an interference with the human right to private property. In the end, we namely arrive at the same point: if it is not excessive, it will also pass the strict test of proportionality. And vice versa – if it is excessive, it will also fail the strict test of proportionality. However, there is a difference – it is not only conceptual, but also practical. Considering that the property tax itself entails an interference with the constitutional guarantee of private property, then already the approach of the legislature when introducing and changing (increasing) this tax will be different – knowing that it interferes with a human right, it will act more responsibly, in a more well thought out manner, more considerately, it will not be so superficial or adopted by sleight of hand (although the RPTA is a systemic law, it was adopted in the expedited procedure). Above all, in a procedure before the Constitutional Court the legislature will not bear the burden of passing the strict test of proportionality. It will have to be successful and convincing in arguing that the tax is not only appropriate, but also necessary and proportionate in the narrower sense.
 
16. It is true that in the field of taxation the legislature has wide discretion – also with regard to the choice of the subject of taxation. For these decisions it bears political responsibility, which does not concern the Constitutional Court. The only element important for the review of constitutionality is that taxes as such primarily pursue the objectives of public finances, which is certainly in conformity with the Constitution and for such reason the test of legitimacy is passed in advance. The constitutionally admissible objective of the prescription of taxes is namely already determined by the first paragraph of Article 146 of the Constitution, in accordance with which the state and local communities raise funds for the performance of their duties by means of taxes (i.e. the fundamental financial objective of a tax). There also cannot be any problems with the appropriateness as the first level of the strict test of proportionality (by which the Constitutional Court assesses whether an interference with a human right is not disproportionate). Already due to its nature, any tax is an appropriate means for filling the budgetary coffers of the state and financing the tasks of the state.[15]
 
17. The situation is different with regard to necessity. Also here, we must proceed from the principle that in the field of public finances the legislature has wide autonomy. What the amount of the budget is, what its structure is, and which its sources will be is a matter of its political assessment, which is subject to political responsibility. In this respect, the Constitutional Court must be reserved. What it certainly may assess, however, is the question of whether the selected type of tax interferes in the mildest possible manner with the human right to private property (i.e. whether it imposes taxes in the mildest possible manner). The question must be posed whether the taxation is in conformity with justice, which in the field of taxation entails that the tax burden is distributed as evenly as possible between taxable persons. If certain taxable persons pay a higher tax, which means that they are subject to a more intense interference with the right to personal property, in order for others to carry a lesser burden, then it is clear that the burden on those who pay more at the expense of others is not necessary. The same objective (of public finances) that here plays the role of an independent variable (and that in the case at issue would amount to an income of approximately EUR 188 million into the budget of the state and the same total revenue into the municipal budgets)[16] can namely also be achieved in a manner that interferes less with the human right to private property of certain taxable persons – simply in such manner that in conformity with the requirement of tax equality the tax burden is evenly distributed.[17] To illustrate, I ask myself why there applies to the owner of an officially unoccupied dwelling by which he or she resolved the housing distress of his or her child a 0.50% tax rate, whereas a 0.15% tax rate applies to the owner of an officially occupied residential real property (e.g. a single-family house in which there is enough space also for the owner's child – possibly the same amount [of space] as in the officially unoccupied dwelling mentioned above in which the child of the owner of that dwelling lives). Or, for that matter, what the difference is between a person who has established a personal easement on an officially unoccupied dwelling in which (for instance) his or her child lives and a person who is in an equal situation but who did not establish such personal easement (because, for instance, he or she does not trust his or her child that much).[18] And finally, why would someone who owns two residential real properties and lives in both of them alternatingly (the second might be, e.g., a holiday house or a holiday apartment) have to pay tax on one of them at a higher tax rate than, for instance, someone who only owns one residential real property and who resolves his or her need for the other (if he or she has any) by the occasional rental (of a hotel room, a holiday apartment, etc.). After all, what is at issue is the real property tax, i.e. a property tax, not a lifestyle tax – the subject of taxation is property, not the free choice of an individual as to where, how, and with whom he or she will live.
 
18. In such context, there can (exceptionally) also arise the subsequent question that refers to the necessity of the interference with private property. What I have in mind are the possibilities that certain budgetary revenues be realised in another manner that is less invasive from the perspective of the human right to private property. What is at issue is the possibility of selling (i.e. privatisation) the property of the state – indeed, not in general (also these decisions namely fall within the prerogative of the politics), but exceptionally when disproportionally large agglomerations are owned by the state, when, for instance, the share of the property of the state in the national economy is distinctly predominant (in the energy sector, telecommunications, banks, insurance companies, and other large economic systems; all of these [sectors] are still in the predominant ownership of the state). If the objective of public finances that is pursued by a property tax is evidently achievable also by selling such property (and thus by a less invasive interference with the private property of citizens), it may be established  that an interference with the property of citizens is not necessary.
 
19. Finally, when assessing the necessity it can also be important what the entire amount of unrecovered tax claims is in comparison with the expected effect of the disputable tax on public finances.[19] The unrecovered tax claims that are (if they are) the consequence of the ineffective work of the state namely cannot entail a reason for an interference with the human right to private property. In particular, because they are contrary to the fundamental principle of tax law – the principle of tax justice or the principle of the equality of taxation, which is derived from the constitutional principle of equality before the law. It is inadmissible for the state to resolve the burden of its own inefficiency (also the unsuccessful combating of the grey economy falls therein),[20] or, which is even worse, the burden of its potential unsubstantiated (arbitrary) writing-off of tax obligations of certain taxable persons, by imposing additional tax obligations on others. Every tax claim that is unrecovered without substantiation and unjustifiably is an actual contribution to tax inequality and is thus unconstitutional.[21]
 
20. If the tax passed the test of the criterion of necessity, also passing the test of proportionality in the narrower sense would follow. In this context, it should be assessed whether the objective (the attenuation of the deepening crisis in public finances by a relatively weak financial "injection") justifies the means – the interference with the private property of real property and by such with the constitutional values that this right encompasses with regard to individual groups of real property.
 
Instead of a conclusion
 
21. I very much agree with Friderich A. Hayek when he says that the less the probability of an individual acquiring a fortune, the more the current property necessarily seems to be an unjustified privilege. This scholar then continues that politics will certainly strive to tear this property from private hands, by means of either a slow process of high taxation on inheritance or a faster process of direct seizure[22] – I would add thereto: or by the excessive taxation of real property already acquired in the past. However, the task of the constitutional judiciary is then to protect the human right to private property – whereby the task of politics (the legislative and executive powers) is to ensure that the existing property will not be (seen as) an unjustified privilege – which entails that it must increase the probability of individuals acquiring a fortune. As for the question of how, the Nobel Laureate immediately explains: "A regulation that is based on private property and on private supervision over the means of production presupposes that such private property can be acquired by any successful individual. If this is not possible, even those individuals that otherwise could possibly become the most renowned capitalists of the new generation can become the enemies of the well-established rich class."[23] And the circle is complete.
 
 
Jan Zobec
Judge
 
 
Notes:
[1] "No freeman shall be […] disseised […], except by the lawful judgement of his peers or by the law of the land."
[2] J. Locke, Second Treatise on Government, in: P. Laslett (Ed.), Two Treatises of Government, 2nd edition, Cambridge University Press, Cambridge, 1967, p. 380.
[3] "So great moreover is the regard of the law for private property, that it will not authorise the least violation of it; no, not even for the general good of the whole community." See W. Blackstone, Commentaries on the Laws of England, London 1765, 1:134–135, 140–141; accessible at: http://press-pubs.uchicago.edu/founders/documents/v1ch16s5.html (accessed on 26 March 2014).
[4] See J. W. Ely, Jr., The Guardian of Every Other Right, Oxford University Press, Oxford, 2008, p. 26.
[5] Decision No. U-I-91/98, dated 16 July 1999 (Official Gazette RS, No. 61/99, and OdlUS VIII, 196), paragraph 19 of the reasoning. In this case, the Constitutional Court assessed the tax on banks' balance sheet assets, which initially was defined as a property tax, but was then re-characterised by the Constitutional Court as a "concealed" profit tax.
[6] See E. Kerševan, Ustavne omejitve davčnega poseganja v lastninsko pravico, Javna uprava, Vol. 49, Nos. 1–2 (2013), p. 7.
[7] The Constitutional Court has not yet assessed true property taxes from the viewpoint of an interference with the right to private property, whereby the hitherto constitutional standpoint on this question with regard to other taxes is not completely established. An early standpoint of the Constitutional Court was to deem that tax burdens entail an interference with private property (e.g. Decisions No. U-I-296/95, dated 27 November 1997, Official Gazette RS, No. 82/97, and OdlUS VI, 157; No. U-I-9/98, dated 16 April 1998, Official Gazette RS, No. 39/98, and OdlUS VII, 74; as well as No. U-I-365/96, dated 4 November 1999, Official Gazette RS, No. 99/99, in OdlUS VIII, 241). The standpoint was changed by the already mentioned Decision No. U-I-91/98.
[8] E. Kerševan, op. cit., p. 10.
[9] See N. Ćosić, Lastniško stanovanje kot pomemben dejavnik varnosti starejših ljudi (bachelor’s degree thesis), University of Ljubljana, Faculty of Social Sciences, Ljubljana, 2011, p. 16. The author then refers to Allardt's classification of needs into three groups: "to have", "to love", and "to be", and concludes that private ownership of a dwelling fulfils the needs under all three groups (ibidem, p. 17).
[10] Slovenia is at the very top of the list of the states with the highest share of privately owned dwellings. As of 1 January 2011, the share of such dwellings was 90%, whereby 78% of all inhabited dwellings were privately owned, meaning that at least one member of the household was the owner. 81% of the population lived in such dwellings. Another important piece of information is that the majority of rental dwellings are non-profit rental dwellings (70%) and that 5% of the entire population lived therein [on that date]. See D. Dolenc, E. Miklič, B. Razpotnik, D. Šter, and T. Žnidaršič, Ljudje, družine, stanovanja, Statistical Office of the Republic of Slovenia, Ljubljana, 2013, pp. 42, 44, 45; accessible at: http://www.stat.si/doc/pub/Ljudje_druzine_stanovanja.pdf (accessed on 26 March 2014). For comparison, in Germany, the share of privately owned dwellings is 41%.
[11] On the basis of international analyses, with regard to the effective taxation of the highest level of income of natural persons and social security contributions (which also entail a charge), Slovenia is ranked first in the world, whereby the taxation of individuals significantly exceeds one half of their income, and lower income is subject to above average taxation as well. The KPMG Individual Income Tax and Social Security Rate Survey 2009 indicates that in 2009 the effective income tax rate applicable on an income of USD 100,000 income amounted to 32.8%, whereas the effective tax rate with regard to social contributions was 22.1%, together amounting to taxation totalling 54.9%, which places Slovenia in the first place in the world. Also from an analysis of the value added tax rates in EU Member States it follows that the 22% tax rate is well above average (VAT Rates Applied in the Member States of the European Union, Situation as at 1 July 2013, European Commission, 2013).
[12] From the Order of the German Federal Constitutional Court No. 2 BvL 37/91, dated 22 June 1995 (BVerfGE 93, 121), it follows that property tax can only be assessed in such a manner that when combined with other tax burdens it does not interfere with the substance of the property itself, with the core of the property, and [in such a manner] that it can be paid from a normally expected and possible income (Sollerträge) – otherwise the result of the taxation would entail the gradual confiscation [of the property], which would entail, for a taxable person, a disproportionate burden and a significant interference with his or her property relations.
[13] (Also) here, the Constitutional Court followed the German Federal Constitutional Court (see paragraph 22 of the reasoning of Decision No. U-I-91/98), which in the already mentioned Order No. 2 BvL 37/91 accepted the principle of up to 50% taxation (Halbteilungsgrundsatz), in accordance with which the state can only impose that one half of return on such property (at most) be collected as tax. The 2nd senate (which is not even competent to adopt such decisions; this is in the competence of the 1st senate) derived this principle (only as obiter dictum) from the interpretation of the second paragraph of Article 14 of the Basic Law, in conformity with which property entails obligations and its use shall also [German: zugleich] serve the public good. From the word zugleich, which is etymologically derived from "to equal shares" (zugleich = zu gleichen Teilen), it then came to the conclusion that the property tax, in addition to other taxes, can only sequester profit if the aggregate tax burden on normally expected and possible income – whereby income, deductible expenses, and other reliefs are treated in a standardised manner – remains close to one half in the distribution between what is private and what is public.
[14] See note 11.
[15] Cf. paragraph 13 of the reasoning of the already mentioned Decision No. U-I-9/98, dated 16 April 1998.
[16] See the concurring opinion of Judge Dr. Deisinger with regard to this Decision, p. 3.
[17] See note 15.
[18] Empirical data on the number of established personal easements on dwellings prove that in this regard the legislature evidently interfered with the freedom of disposal in the field of property. According to land register data, as many as 202,251 such easements have been established. That is sufficiently illustrative. See: http://www.delo.si/gospodarstvo/finance/osebna-sluznost-koliko-boste-placali-notarju.html (accessed on 26 March 2014).
[19] If the real property tax were collected in its entirety it would contribute approximately EUR 188 million to the budget of the state. See the concurring opinion of Judge Dr. Deisinger with regard to this Decision, p. 3.
[20] As comparable experiences prove, the introduction of certified cash registers is more effective than the propaganda slogan "Use your mind, don’t leave your receipt behind".
[21] From data that the Tax Administration of the Republic of Slovenia sent to the Constitutional Court by letter No. 0100-952/2014-3, dated 10 March 2014, it follows that as of 31 December 2013 the combined tax debt of all natural persons and legal entities amounted to as much as EUR 1,472,787,087. Of course, the unrecovered taxes from the grey economy are not included in this amount. If we were to also include such taxes, the total amount of the tax inefficiency of the state would be incomparably higher.
[22] F. A. Hayek, Ustava za svobodo, Inštitut Karantanija and Inštitut Nove revije, Ljubljana, 2012, p. 487.
[23] Ibidem, p. 488.
 
 
U-I-313/13-92
25 March 2014
 
 
Concurring Opinion of Judge Dr. Jadranka Sovdat
 
 
I
 
1. The abrogation of the entire Act that introduced the real property tax could at first sight communicate that the taxation of real property as such is in itself unconstitutional. Of course, this is not true. Therefore, I wish to emphasise already right at the start that the introduction of a real property tax is in itself not unconstitutional. As the Decision also states, the decision to introduce the tax falls within the sphere of the discretion of the legislature. By the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA), the legislature made this decision and the Act as such is therefore not unconstitutional in itself just because it introduces the taxation of real property. It was also possible to sooner or later expect its introduction, because it was necessary to replace the regulation of the compensation fee for building land use, which the Constitutional Court already in Decision No. U-I-39/97, dated 16 December 1999 (Official Gazette RS, No. 1/2000, and OdlUS VIII, 282), characterised as a (still) admissible transitional regulation of taxation. The expectation of the introduction of this tax was also confirmed by the Real Property Mass Appraisal Act (Official Gazette RS, No. 50/06 and 87/11 – hereinafter referred to as the RPMAA), which already in 2006 stated in Article 1 that one of the purposes of the introduction of the valuation of real property on the basis of mass appraisal was precisely to impose taxation thereon. The question of whether the legislature introduces a real property tax or some other tax is therefore a decision that is not for the Constitutional Court to assess. If, however, the legislature decides to introduce such a tax, it must implement such in conformity with the Constitution. When deciding on whether it has to respect, inter alia, the principle of legality determined by Article 147 of the Constitution as a special principle in relation to the principle of legality determined by the second paragraph of Article 120 of the Constitution and whether it has to respect the principle of equality before the law determined by the second paragraph of Article 14 of the Constitution, the legislature namely has no discretion. The question of whether in this case the legislature acted in conformity with the Constitution when it introduced the statutory provisions challenged by the applicants and the petitioner is, however, the subject of this Decision.
 
2. In deciding I supported the position that the Constitutional Court abrogate individual provisions of the RPTA, namely those that it was assessing, and not the entire Act. The applicants and the petitioner precisely specified which provisions they were challenging, and the abrogation of the entire Act could also be misleading at first sight in the sense that perhaps also other statutory provisions that the Constitutional Court did not even touch upon in its assessment were subject to a review [of constitutionality]. If there are no reasons for expanding the review to provisions that are not challenged, there also cannot exist reasons for these provisions to be found in the operative provisions of the Decision. For such reason, it seemed to me that it would be consistent for the Decision to abrogate those statutory provisions that were the subject of review. However, it is also true that the assessment of the unconstitutionality of the statutory provisions that determine the taxable base, the tax rates, the tax as municipalities' own source of revenue, and the legal remedies available results in the abrogation of (or the establishment of an unconstitutionality regarding) the essential provisions of the statutory regulation. Other statutory regulations thereby become pointless, because such an incomplete Act cannot be applicable. Even the establishment of a single unconstitutionality would suffice for such conclusion (e.g. with regard to the taxable base, because without it there cannot exist a tax obligation). In the end, a decision of the Constitutional Court (the operative provisions and the reasoning) in any event entails a whole, because what is essential is precisely the reasons due to which the unconstitutionality of statutory provisions has been established. In conformity with the established constitutional case law, the extent of the operative provisions is necessarily co-determined by the scope of the review, as is evident from the reasoning, in this case also with regard to the lower premise of the review of constitutionality, i.e. the individual statutory provisions. For such reason and because I agree with the individual established unconstitutionalities, I voted, despite some reservations, in favour of point 1 of the operative provisions. In any event, new work awaits the legislature when this tax is [re]introduced.
 
3. I also agree with the fact that in light of the content of Article 5 of the RPTA, which actually – with regard to one of the most important parts for the determination of the tax obligation, i.e. the taxable base – calls for the application of the RPMAA, it was also necessary, on the basis of the principle of connexity (Article 30 of the Constitutional Court Act, Official Gazette RS, No. 64/07 – official consolidated text and 109/12 – hereinafter referred to as the CCA), to assess the constitutionality of the RPMAA. And not just in this part. Also due to the answer to the question of whether there is an effective legal procedure with effective procedural guarantees [with regard to the matter at hand], this was in my opinion necessary precisely because the RPMAA contains the entire basis of the regulation of the taxable base and the procedure for its assessment in order for it to subsequently be entered as data in the real property register (the first paragraph of Article 14 of the RPMAA) and, as such, applied (as data) in the tax assessment procedure (the third paragraph of Article 10 of the RPTA). Therefore, in my opinion, also in this part a specific review of the RPMAA should be carried out; currently it is namely only indicated in the form of a warning to the legislature. The constitutionality of the regulation in the RPMAA is namely in both respects the first of the key elements of the constitutionality of the challenged regulation. Here we are dealing not only with the unconstitutionality of individual statutory provisions that could be abrogated (such as the pure enforcement clause in the fourth paragraph of Article 15 and the express prohibition of a legal remedy in the third paragraph of Article 11 of the RPMAA), but also with the fact that the Act contains a double unconstitutional legal gap, which in one part refers to legality and in another to the efficiency of the legal procedure. Therefore, I concur with the establishment of the unconstitutionality of this Act (point 2 of the operative provisions), which is, after all, an established technique of decision-making in the event such unconstitutionalities are established. If the legislature insists on the taxation of real property on the basis of the RPMAA, it will first have to take care to eliminate these unconstitutionalities. It could, however, also decide on a different introduction of the taxable base for the real property tax.
 
4. I also concur with the adopted manner of implementation of the Decision (the second paragraph of Article 40 of the CCA), by which the Constitutional Court temporarily stepped into the legislative field until the legislature itself reacts, in order to prevent municipalities from being deprived of their own tax revenue source. The manner of implementation entails the establishment of a (temporary once again!) legal basis (especially) for assessing the compensation fee for building land use (points 3 through 6 of the operative provisions).[1] I can namely agree with the fact that despite the questionability of how long this temporary regulation can continue to be in force in conformity with the Constitution (Decision No. U-I-39/97), it would be even more unconstitutional if we deprived local communities of their own revenue source without replacing it with another source of their own. This is also the reason why, in my opinion, the abrogation of the RPTA does not entail that the legislature can abandon its activities in this field. It must continue them responsibly and diligently, whereby already from the outset it must proceed from the fact that it is necessary to establish a system that will not only be in conformity with the constitutional limits of legality and equality, but that will be established simply and transparently to such a degree (Article 2 of the Constitution) that it will not cause situations such as we witnessed following the issuance of the experimental calculations. Currently, the regulation is established in such a manner that by its nature 1) it causes, (also) due to the multitude of data,[2] many errors (I mean those that arise during clerical work, when harmonising and summarising databases, etc., and not the accuracy of the data and the regulation of legal situations, which are the concern of the owners of real property, although also such data can entail a problem if they are formulated too broadly and if they are to be continuously updated also in the future), 2) it causes the initiation of a series of procedures by which taxable persons in fact avoid certain statutory provisions, 3) it would also lead to a series of appellate procedures, which can thereby be expected. Thousands of appellate procedures not only entail a practical problem when implementing statutory provisions (whereby certain appellate procedures in the field of taxation currently already last a couple of years!). Such problems namely grow into the inefficiency of legal procedures in which monetary obligations to the state are imposed on people by an executable decision of the first instance. In such manner, they become a constitutional problem in itself and this happens even sooner if the legislature does not respect, from the outset, the principle of equality determined by the second paragraph of Article 14 of the Constitution, which the equal distribution of tax burdens is an integral part of.
 
 
II
 
5. I also wish to add a couple of my own perspectives on the argumentation of individual sections that consequently entail the establishment of unconstitutionalities with regard to both the RPTA and the RPMAA. Since with regard to Article 1 the RPMAA is in fact, insofar as what is at issue is the determination of the taxable base, a "tax law", which is confirmed by Article 5 of the RPTA, the answer to the question of the conformity of Article 5 of the RPTA with the Constitution is in reality contained in the RPMAA. Constitutionally, nothing is wrong with the fact in itself that the taxable base is a piece of data that arises on the basis of the procedure for the attribution of the appraised value to an individual real property after the mass appraisal is carried out. However, it is unconstitutional if the Act that [the tax law] calls for the application of and in accordance with which this piece of data arises does not fulfil the constitutional requirements. I agree with the reasoning contained in the Decision that the RPMAA did not provide a statutory framework that is in conformity with Article 147 of the Constitution. It determined land use allocations and the actual use of buildings and parts of buildings (the third, fourth, and fifth paragraphs of Article 7 of the RPMAA) as the fundamental criteria and the basis for the formation of valuation models. The provisions of the seventh through tenth paragraphs of the mentioned Article establish essential elements on the basis of which valuation models are to be formed, namely with regard to the value zone, the value level, the method of the calculation of the value, and data on real property (the sixth paragraph of Article 7). The tenth paragraph of this Article thereby enumerates certain data on parcels, buildings, parts of buildings, and activities, whereby in all cases it also leaves the door open to the determination of other data that are to be determined by the Government in accordance with the authorisation determined by the eleventh paragraph of Article 7 of the RPMAA. In the end, the choice of these data affects the determination of the value of real property, which became clearly apparent when the appraised value was attributed to an individual real property. The appropriateness of the choice of data can entail one of the reasons for inequality before the law to consequently arise. In fact, the valuation models were first defined only by the first paragraph of Article 2 of the Decree on the Determination of Real Property Valuation Models (Official Gazette RS, No. 95/11). Furthermore, in my opinion, such reasoning is logical, because also at the public hearing no answers were provided to the question of why it is possible, on the basis of the statutory provisions in force determined by the RPMAA, to determine precisely such models as are determined in the mentioned Decree. The essential elements determined by the RPMAA are then obviously used in every individual model, due to which we arrive in the end at a nearly impenetrably vast multitude of data, including – already from the start – value zones, the number of which, besides the 19 value levels, rises to allegedly over 300, as Professor Dr. Ivo Lavrač, of the Faculty of Economics of the University of Ljubljana, warned.[3] The legislature left the determination of the mass appraisal methods and standards (Article 8 of the RPMAA) to executive regulations. However, even from executive regulations it is not possible to understand which standards are to be used. On the basis of the fourth paragraph of Article 15, the RPMAA also left the determination of the criteria (the two terms used for criterion [in Slovene] are of course synonyms) for choosing individual methods of mass appraisal entirely to the implementing regulation of the minister [responsible for the registering of real property] without providing at the same time a substantive statutory basis therefor. As is evident from the Rules on the Criteria of Real Property Mass Appraisal (Official Gazette RS, No. 94/08 – hereinafter referred to as the Rules), "the criteria" are the criteria for choosing the method of the assessment of the value of real property and the criteria for the formation and determination of (the proposals of) valuation models (Article 2 of the Rules); they are determined in Articles 3, 4, and 5 of the Rules. We are thus first informed from the Rules that the value of real property is assessed on the basis of the methods of comparable sales, the capitalisation of profit, and the buying value, as well as when each of these methods is applied – these are probably the criteria for choosing the methods (also the Decision warns of a terminological confusion with regard to these terms). In the RPMAA there is absolutely no statutory basis for such. Therefore, the fourth paragraph of Article 15 of the RPMAA is also, in my opinion, a pure enforcement clause, which is inadmissible from the viewpoint of Article 147 of the Constitution. The article of the RPTA that calls for the application of such an unconstitutional Act cannot serve as the [legal] basis for assessing the real property tax, because what is at issue is the unconstitutionality of one of the fundamental elements of tax assessment, i.e. the taxable base. Therefore, also in my opinion, the abrogation of Article 5 of the RPTA is appropriate.
 
6. The tax law must provide a sufficient statutory framework, which must, inter alia, ensure equality before the law and thus also equality as regards the executive regulation in order for taxable persons in procedures to be treated in conformity with the principle of equality before the law. If the legislature does not ensure this, there exists a threat of arbitrariness already when determining the executive regulations, and a correspondingly greater threat when regulations are applied in an individual case. The result of the use of regulations in an individual case entails the attribution of the appraised value to a particular real property, which is [then] registered in the real property register (the first paragraph of Article 14 of the RPMAA) This [piece of data] is, in conformity with the third paragraph of Article 10 of the RPTA, one of the pieces of data on the basis of which the decision on tax assessment is issued. At this moment I cannot explain to myself in any other manner than that it is due to arbitrariness, for instance, the classification of parking spaces as parts of buildings owned in condominium according to the model for garages (the fourth paragraph of Article 5 of the Decree on the Determination of Real Property Valuation Models), according to which [multi-storey] car parks that carry out a business activity and in such role rent out parking spaces for either a longer-term lease or for shorter remunerative use as a service on the market are otherwise classified. I raised a question regarding this, in my opinion, trivial situation at the public hearing. Nevertheless, I did not receive an answer that convinced me that the regulation is not unconstitutional. Such classification of a parking space in a two- or multi-dwelling house owned in condominium, which only serves the purpose that the owner can use it to park his or her car in the basement of his or her home, in the same manner as the owner of a house can use one in the basement of his or her home, is inconsistent already with the general criterion determined by the fourth paragraph of Article 7 of the RPMAA (with regard to the actual(!) use of buildings and parts of buildings – commercial use is an occupied term in the legal order). It is also inconsistent with the second paragraph of Article 14 of the Constitution. There is namely no sound reason that follows from the nature of the matter on the basis of which the legislature could treat the owner of a parking space in a two- or multi-dwelling house in the same manner as the owner of a [multi-storey] car park that serves the purpose of carrying out a business activity. In my opinion, the same also applies to garages that are stand-alone buildings next to residential houses and serve completely the same actual use as garages that are located in the basement of a single-dwelling house – to park the car when its owner is at home. With regard to the fourth paragraph of Article 7 of the RPMAA, the above even entails that such inequality in fact only arose in the executive regulation (the Decree) when a model was selected for which no statutory basis could be found in the existing statutory regulation. As is also established in the Decision, the Act in any case leaves the determination of the valuation models to executive regulation, which is inconsistent with Article 147 of the Constitution. The requirement that virtually all houses, regardless of whether they are single- or multi-dwelling houses, must have parking spaces – due to which, as is emphasised, not even in the past was it possible to buy dwellings in newly constructed houses owned in condominium without also buying the parking spaces pertaining thereto – is by the nature of the matter also logical, because in modern times this is the only way to regulate parking in urban areas. Municipalities, as the beneficiaries of the tax revenue source, were of course very interested in such construction, because otherwise they would have to provide for substantial investment in infrastructure that would enable the resolution of parking problems. Therefore, they would not consider for a moment the idea of taxing such parking spaces differently than dwellings.
 
7. We still do not have all condominiums registered in the cadastre of buildings or in the land register (even in the very centre of the capital we have venerable houses in which, judging by judicial disputes, condominium has not yet been registered). The taxable persons, owners of parking spaces, were publicly advised to avoid the higher taxation of their parking spaces by changing the geodesic entries on the basis of effectuated detailed expert reports (from which it would be clear that these parking spaces are an additional part of the dwellings). The above would again cause a whole series of procedures in the cadastre of buildings, which was also confirmed at the public hearing. The efficiency of the state apparatus is also co-dependant on the due consideration of the legislative and executive powers, which cause such, to say the least, sometimes obviously unnecessary procedures of one kind or another. The advised manner of avoiding the taxation of parking spaces according to a higher tax rate to me entails, pardon my expression, making a fool out of people. The citizens must respect their state, but also the state must respect its citizens and others who reside and do business on its territory. As this is the foundation of a state governed by the rule of law, the state must strive to achieve that the majority of the addressees of the norms also accept these as law (which is directed towards justice) and thus also submit thereto, without it being necessary in each individual case to impose on them a sanction that ensures the effectiveness of the legal norm. This applies even more to instances dealing with such a large number of addressees of legal norms as is the case with regard to the tax law at issue. Instead of the Act ensuring respect for equality by introducing legal norms, we direct the people towards new complex and costly procedures – when there is an obvious inequality in the Act (and/or the executive regulation) – so that they will be able to ensure to themselves, despite the inequality in the Act, actual equality before the law?! The legislature adopts laws precisely for them to be respected, for the addressees of the legalised legal norms to also abide thereby, and not for the legal norms to in fact remain "latent" and for their addressees to resort to numerous procedures (at their expense and at the expense of taxpayers, who pay the officials of the state who will have to carry out such procedures), by which they will in fact circumvent the purpose of clearly written legal norms. This is not how one should act in a state governed by the rule of law. Something similar apparently arose also with regard to personal easements on dwellings.
 
8. The issue of parking spaces and a (stand-alone) garage next to a home is indeed trivial. Yet, precisely due to its simplicity it clearly demonstrates how the legislature must already at the outset, by an appropriate statutory basis, ensure that taxable persons will be treated equally. As is evident from the allegations of the applicants, especially those especially emphasised at the public hearing (especially those of the National Council), significantly greater problems from the viewpoint of equality obviously exist elsewhere: with regard to plots of land and especially with regard to business activities, and in particular with regard to [the question of] on what basis the methods and criteria for carrying out the valuation are determined. And also that the methods and criteria must enable an appropriate basis over time, meaning that already at the outset the assessment of the value of real property at the time of an (abnormally intense) economic boom on the real property market as well as in times of an economic crisis must be taken into consideration. In addition, the Municipality of Rogašovci drew special attention at the public hearing to the fact that on its territory there are numerous Roma settlements. The state, together with municipalities, should have purchased the plots of land on which Roma settlements are situated long ago. If the state and municipalities have not done so yet, and from public data it is evident that they have not, whereby what is at issue can be the protection of the right of Roma inhabitants to a home, the legislature must also create a special statutory regulation to ensure that the owners of plots of land who due to Roma settlements cannot even enjoy this property of theirs will not be subject to the real property tax. The Act cannot treat these owners of plots of land, who are in a completely different situation than other owners who can enjoy their property, in the same manner because this is also unconstitutional from the viewpoint of the second paragraph of Article 14 of the Constitution.
 
9. I draw attention to all these issues because the establishment of an appropriate statutory basis must not entail the simple copying of individual provisions of implementing regulations into law, but requires that the legislature responsibly carry out its task in this field. It entails the transfer (unfortunately too late for the application of the challenged Act) of this debate into the parliament to the degree that an appropriate statutory basis is established and that respect for the principle of equality is ensured with regard to the taxation of real property. Precisely with regard to respect for this principle there arises the essential constitutional criticism due to which, also in my opinion, it must be established that we are dealing with not only an unconstitutionality with regard to the taxable base (due to the unconstitutionality of the RPMAA), but also an unconstitutionality with regard to the determination of tax rates determined by the second paragraph of Article 6 of the RPTA.
 
10. The principle of equality before the law in the field of tax assessment essentially requires the standpoint that the Constitutional Court already adopted by Decision No. U-I-355/98, dated 22 March 2001 (Official Gazette RS, No. 28/01, and OdlUS X, 56). This standpoint is necessary precisely in order for a balanced distribution of tax burdens to be ensured, which forms the very basis of tax justice. In order for equality before the law to be achieved, i.e. in the application itself of the law in each individual case, the first condition is the establishment of equality within the law,[4] which is the obligation of the legislature. In fact, the legislature can thereby generalise and standardise, but not to such a degree that it would thereby affect a greater number of cases or the addressees of the statutory norm.[5] The assessment of the justification of a concrete reason for an admissible differentiation (or for the equal treatment of different states of the facts) must be carried out in accordance with a test of the principles of systemic justification, substantive legality, and legal consequences, as well as with regard to the typological justification.[6] In the case at issue, the legislature did not carry out such an assessment. This is evident, for instance, in the field of the taxation of plots of land where due to the existing regulation disproportionally high taxes are imposed on owners depending on what the plans for future investments in the spatial acts of individual municipalities are, which in this moment can only exist on paper and for which it cannot be expected that they will be realised until there is appropriate economic development, whereby the actual use of the plots of land is completely different (as they are meadows, forests, etc.). The decision on whether construction is also in reality possible on these plots of land (already in the year of taxation or only subsequently?) is first left to the implementing regulation and then to the municipalities, without the owner of the real property thereby having the possibility [to submit] effective objections.
 
11. The above-mentioned fact is even more obvious in the field of business activities, which as to their functioning substantially differ with regard to profits in the business field gained from real property used when carrying out business activities. The circumstances for the differentiation in the tax burden must entail not only a sound reason that follows from the nature of the matter; the selected criterion for differentiation must also pass the test of reasonableness in such a manner that it pursues to the end the logic that justifies the differentiation: the amount of the obligation must be reasonably proportionate to the amount of profits gained by the use of [an individual] real property (this is stated in the eleventh paragraph of the reasoning of Decision No. U-I-355/98). Owners who use real property to carry out a business activity do not own them only for the purpose of possessing them, but precisely in order to carry out a business activity – they cannot carry such out without the real property. This is a logical continuation of the fundamental criterion – with regard to the use of land (actual use or land use allocations) or the use of buildings and parts of buildings (the third through fifth paragraphs of Article 7 of the RPMAA). In my opinion, in order to achieve the mentioned equality, the value of an individual real property assessed on the basis of the above must be taken into consideration, as well as the tax rates, because these constitute a whole only together with the value and thus cannot be assessed separately from the viewpoint of tax equality. For instance, a 0.75% tax rate for commercial and industrial real property is in itself not necessarily disputable. In conformity with the challenged regulation, such tax rate demonstrates, on the one hand, together with the assessed values of real property, a substantially lower tax burden with regard to certain large business entities (e.g. the Port of Koper, as alleged by the Urban Municipality of Koper as an applicant; at the public hearing the applicants also drew attention to other examples, e.g. large shopping centres), and on the other hand, it entails (without a transitional period and with the reduced value of real property already taken into consideration – the second paragraph of Article 28 of the RPTA) multiple increases in the tax obligation of sole proprietors and small companies (which is what the National Council as an applicant draws attention to), due to which, after paying the tax, their further existence[7] is jeopardised, not only their business operations, according to the applicants. As I understood at the public hearing from the reply of the Dean of the European Law Faculty, Professor Dr. Alenka Temeljotov Salaj, what can also have an influence on this is the fact that the assessments of real property values [relevant] to business entities originate in a boom period not only with regard to the real property market, but also with regard to business profits in a period of high economic growth, whereby the tax obligation arises in a period of severe economic crisis, [which entails that] these business entities can now be (also in relation to one another) in a completely different situation than at the time when the [assessed] values were attributed to real property. The cessation of the business operations of sole proprietors and small companies, were it to happen, would actually also achieve the exact opposite of the purpose of taxation – the cessation of the tax source. With regard to the above, these allegations would require precise substantiation from the opposing party on the basis of which it would be possible to assess that nonetheless there exist reasons that justify both the differentiation between individual business entities that use commercial and industrial real property and, moreover, differentiation between the latter and those that use, e.g., real property pertaining to power plants (in this context, I also agree with the position in the Decision that the offered reason does not substantiate the differentiation). Neither the legislature nor the Government offered arguments on the basis of which it would be possible to reject the allegations of the applicants as unfounded in a constitutionally consistent manner. With regard to what was presented, they probably even could not offer them. Therefore, in my opinion, the second paragraph of Article 6 (with regard to Article 5) of the RPTA is inconsistent with the principle of equality determined by the second paragraph of Article 14 of the Constitution.
 
12. The challenged provision is, I concur, inconsistent with the second paragraph of Article 14 of the Constitution also due to the different taxation of dwellings on the basis of whether they are registered as being officially occupied or unoccupied. With regard to the fact that what is at issue is the taxation of real property, I concur with the finding that the fact that a taxable person does or does not have his or her permanent residence in a dwelling does not have a sensible connection with the subject of regulation itself. In order to substantiate such differentiation, the Government presented a reason that is not connected with the taxation itself, namely that the regulation simultaneously pursued [the objective] that dwellings would not remain empty but would be let for rent in order to fulfil the social function of property. In fact, the Constitutional Court did not adopt a position with regard to the conformity of the challenged regulation with Article 33 of the Constitution. However, the measure that is intended to pursue such objective entails, in my opinion, an interference with the right to private property as protected by Article 33 of the Constitution. The fact that the legislature wishes to achieve that the owner of a dwelling act in a certain manner, in this case that he or she rent out a dwelling, by imposing a substantially higher tax (more than threefold), exceeds [the determination of] the manner of the exercise of property (Article 67 of the Constitution). It entails an interference with the freedom to dispose of property. An interference with the right to private property can only be admissible if the conditions of the so-called strict test [of proportionality] are fulfilled, i.e. the test of legitimacy (the third paragraph of Article 15 of the Constitution) and the test of proportionality (Article 2 of the Constitution). Without dealing with the question of whether the higher taxation – in order ensure that empty dwellings are inhabited (without taking into consideration whether with regard to the actual circumstances their owners can in fact rent out [the empty dwellings]) – can actually be considered an admissible objective, it is evident, in my opinion, that such a regulation that imposes more than threefold higher taxation on officially unoccupied dwellings in comparison with officially occupied dwellings entails excessiveness in the pursuit of such an objective. Another question is whether [such regulation] is at all necessary, because the legislature could probably achieve such objective more easily with tax exemptions, which would entail that there would not be any interference at all. Therefore, in my opinion, this regulation is also inconsistent with Article 33 of the Constitution.
 
 
III
 
13. In addition to respect for the principles of legality and equality before the law, the third key element of the constitutionality of tax legislation is to ensure legal procedures in which taxable persons can effectively invoke their rights. Namely, the state imposes tax obligations thereon in these procedures. In conformity with the third paragraph of Article 10 of the RPTA, the tax assessment is effectuated on the basis of data on real property, the persons that are determined to be taxable persons, and the appraised market value of real property as registered in the real property register (as well as data on exemptions determined by Article 8 of the RPTA). In fact, the third paragraph of Article 10 of the RPTA regards the assessed (i.e. appraised) real property market value as data that, in conformity with the first paragraph of Article 14 of the RPMAA, is registered in the real property register. This is not in itself such objective data as is, e.g., the amount of the sum paid from income that is the basis for the personal income tax (and which can be, as such, quickly and evidently verified), but is data that originates in the procedure determined by the RPMAA. The first part of this procedure entails the mass appraisal of real property, while the second part of this procedure entails the attribution of the appraised value, which is the calculation of the value of an individual real property (the first paragraph of Article 14 of the RPMAA).[8] Such entails that the appraised value of an individual real property arose on the basis of established relevant facts and by the application of the provisions of the law and executive regulations that should have been founded within statutorily determined limits. This means that what is at issue is data that arises in the procedure in which regulations are applied to a concrete case and this data is crucial to the determination of the tax obligation. By the nature of the matter, the procedure attributing the appraised value to an individual real property entails administrative decision-making, the final result of which is the imposition of the obligation to pay a tax. For such reason, it is clear that individuals must have the possibility to make a statement (Article 22 of the Constitution) in the procedure in which the finding that is registered as such data is reached, and they must also be ensured an effective legal remedy in the sense of the principle of appellate review (Article 25 of the Constitution). Since what is at issue is administrative decision-making, also judicial protection must necessarily be ensured against the decision (which follows from the first paragraph of Article 23 of the Constitution and is also explicitly determined by the third paragraph of Article 120 of the Constitution, which requires judicial protection against the decisions and acts of the state administration).
 
14. The RPMAA does not regulate an effective legal procedure against the attribution of the appraised value in which an individual could invoke his or her rights in conformity with the constitutional procedural guarantees. Therefore, I explicitly supported [the idea] that in conformity with Article 30 of the CCA the Constitutional Court should also initiate the procedure for the review of the constitutionality of the RPMAA also due to this reason. Not only does the RPMAA not regulate such procedure, but the third paragraph of Article 11 expressly determines that no objection is possible against the notification of the final calculation of the value of a real property and that the latter can only be changed if data on the real property are modified in the real property register. The owner of [a concrete] real property thus cannot invoke even the fact that in his or her case the law in force was not correctly applied, let alone the fact that the law on the basis of which a tax obligation will be imposed on him or her might be unconstitutional – this applies both to the Act and the implementing regulations. This entails not only an interference with, but, in my opinion, also a hollowing out of the mentioned procedural guarantees, which is also what the applicants allege. Nonetheless, it is true that at first sight the legislature could eliminate this unconstitutional legal gap in the tax procedure, but with regard to the first instance of administrative decision-making it did not even try to do so (the third paragraph of Article 10 of the RPTA), whereby with regard to the appeal, I am as well of the opinion that it enacted, in the second paragraph of Article 14 of the RPTA, an inadmissible [merely] ostensible appeal. In conformity with the second paragraph of Article 14 of the RPTA, in the appellate procedure it is also admissible to invoke objections against the appraised market value of the real property. However, on the basis of the third paragraph of Article 10 of the RPTA and the provisions of Article 14 of the RPTA, it is clear at first sight that such objections can only be successful if such data are incorrectly summarised – in this case, the data referred to in the first paragraph of Article 14 of the RPMAA that are registered in the real property register or data whose change due to the nature of the matter causes a modification of the final data. As long as these data are equal to the data registered in the real property register, while the Surveying and Mapping Authority does not find, with regard to the third paragraph of Article 11 of the RPMAA, reasons to modify the data regarding the real property and thus also does not find reasons to modify the data on the attribution of the appraised value to the real property, the second instance authority will not be able to do anything but reject such complaint. The wording of the mentioned provisions also in my opinion does not allow for a different interpretation.
 
15. It seems that due to the objections of the professional public during the adoption of the Act, the legislature attempted to partially eliminate the unconstitutional legal gap in the RPMAA and the unconstitutionality of the third paragraph of Article 11 of the RPMAA by the second paragraph of Article 14 of the RPTA. Yet, it completely failed in doing so. Which is logical and could be expected. Namely, what is offered at first sight cannot be sustained here. What is at issue is not only that it is appropriate and rational that the state authorities that are experts in the application of the regulations on the mass appraisal of real property decide on the correct application of regulations when attributing a value to an individual real property. It also does not concern the fact that it is not possible to imagine the practical problems [that would arise] in several thousand procedures in order to decide on appeals in tax procedures (and subsequently, of course, also before the Administrative Court, and further up the hierarchy all the way to constitutional complaints before the Constitutional Court). In comparison with the total number of real properties, several thousand disputes really do not represent a large percentage, but in comparison with the number of pending procedures before the tax authorities and courts, this is a huge number. In the end, it would again be the judiciary who would be to blame for the state of the backlog in procedures, although, more than manifestly, the original sin lies with the legislation. And also in the end, it would again be the Constitutional Court that would be "the perpetual scapegoat" when the state would have to repay (over)paid taxes with high interest. In reality, it is about more than just the question of appropriateness and practical problems – it is about constitutionality: about the efficiency of legal procedures in cases when, by a decision that is executable even before its finality, because an appeal is non-suspensive in a tax procedure, an obligation to pay a tax is imposed on a taxable person without the constitutional procedural guarantees regarding such being respected. The ostensible appeal in the tax procedure is not a remedy for either the hollowed out right to make a statement in the first instance or for the lack of an effective appeal in the second instance of administrative decision-making in the procedure for attributing the appraised value to an individual real property. When, under the challenged regulation, a tax case would come before the Administrative Court, the latter would either, by itself, exclude the application of the unconstitutional implementing regulations (exceptio illegalis), on the basis of which in the current state of affairs I can then no longer imagine any tax assessment whatsoever in the concrete case, or it would, by a request for the review of the constitutionality of the RPTA (and the RPMAA) in conformity with Article 156 of the Constitution, initiate a procedure before the Constitutional Court and then we would find ourselves in exactly the same situation in which we are today. In fact, it would be in an even worse situation, because (due to the prohibition of retroactivity) in such case it would not be possible, after several years, to retroactively "revive" the regulations referred to in Article 33 of the RPTA, which would in fact entail a complete loss of the tax source (and the repayment of the possibly paid taxes with interest) in cases of substantiated allegations of the unconstitutionality of tax assessment decisions, because these would be based on an unconstitutional Act.
 
16. With regard to the above, I am of the opinion that the third paragraph of Article 11 of the RPMAA is unconstitutional and that in the RPMAA there exists an unconstitutional legal gap that does not ensure an effective legal procedure in [conformity with] the RPMAA, starting with the hollowing out of the right to make a statement determined by Article 22 of the Constitution. The hollowing out of the rights determined by Article 25 and the first paragraph of Article 23 of the Constitution is only a continuation of the above. The second paragraph of Article 14 of the RPTA is also in my opinion unconstitutional, because the ostensible appeal does not entail an effective legal remedy in the sense of Article 25 of the Constitution.
 
 
IV
 
17. I also concur with the reasons for which the unconstitutionality of the challenged regulation was established due to a lack of respect for the autonomous position of municipalities. I agree with the finding that the regulation in conformity with which a part of the tax would pertain to the state and a part to municipalities is in itself not unconstitutional. However, the implementation of such regulation in all the individual segments, including the transitional regulation, also in my opinion results in the established unconstitutionality.
 
 
Dr. Jadranka Sovdat
Judge
 
 
Notes:
[1] Also the petitioner can introduce such on this legal basis.
[2] At the public hearing it was stated that the Surveying and Mapping Authority has 100 million items of registered data!
[3] The Act Amending the Real Property Mass Appraisal Draft Act, which the Government submitted to the legislative (again urgent) procedure, states, e.g., that in the [comparable] regulation in the United Kingdom zones determined on a scale from A to H are used as the location factor (EVA 2013-1611-0174, dated 20 February 2014, p. 7); thus, there are eight such zones.
[4] See L. Šturm in: L. Šturm (Ed.), Komentar Ustave Republike Slovenije (Commentary on the Constitution of the Republic of Slovenia), Fakulteta za podiplomske državne in evropske študije, Ljubljana 2002, p. 172.
[5] Ibidem, p. 176.
[6] Cf. ibidem. Precisely on the mentioned trivial example of parking spaces is it clearly evident how it is not possible to change a parking space in a house into a business premise, because residential actual use and commercial actual use are essentially two different types of the state of the facts.
[7] In such case, an interference with the right to private property (Article 33 of the Constitution) and free economic initiative (the first paragraph of Article 74 of the Constitution) can also undoubtedly occur.
[8] With regard to which, the Act determines as the [legal] basis for its calculation only the Government decree, not first the law and only [then] the implementing regulations issued on such [legal] basis, which is what a decree is.
 
 
U-I-313/13-93          
27 March 2014
 
 
Concurring Opinion of Judge Dr. Etelka Korpič – Horvat
 
 
1. The [need for the] introduction of a real property tax is, general speaking, in theory undisputable[1] and is confirmed by the comparative legal regulations in other developed democratic states, in which this tax is something quite usual.[2] With the introduction of the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA), an important developmental step could finally be taken also in the Republic of Slovenia with regard to the taxation of real property, because the state and municipalities would acquire, in addition to the tax on the income of natural persons (the personal income tax) and on consumption (the VAT), another important, new, and permanent source of budgetary revenue for their functioning. Furthermore, the obsolete regulations regarding the payment of the compensation fee for building land use, the fee for the maintenance of forest roads, and the property tax referred to in Article 33 of the abrogated RPTA, which for now, following the Decision of the Constitutional Court, are to remain in force, would no longer be applicable.[3] Due to the stated reasons and also due to the financial consequences[4] that will arise due to the Decision adopted by the Constitutional Court in this case – at a time when the revenue of the state [intended] to eliminate the budgetary deficit is especially important – I was in favour of the RPTA remaining in force and that only the individual provisions thereof established by the Constitutional Court to be inconsistent with the Constitution would be abrogated.
 
2. However, when verifying the inconsistencies of the provisions of the Real Property Mass Appraisal Act (Official Gazette RS, Nos. 50/06 and 87/11 – hereinafter referred to as the RPMAA) with the Constitution, I realised that the essence and the beginning of the problem of the new regulation of the real property tax is not so much how this tax is determined by the RPTA as it is the RPMAA that is connected therewith and the inaccurate registers. The dissatisfaction of the owners of real property due to inaccurate data regarding their real property, the appraised market value, tax rates, and the calculated tax in the informative notifications, which was expressed in the form of long queues at the Surveying and Mapping Authority of the Republic of Slovenia (hereinafter referred to as the Surveying and Mapping Authority) and in their offices throughout the Republic of Slovenia, confirmed my predictions. The inaccurate data in the informative notifications received by the owners of real property on the basis of the first paragraph of Article 27 of the RPTA are, in my assessment, a reflection of: (1) the inaccurate, imperfect inventory of dwellings that was carried out in 2001 and which was not in any manner carried out for tax purposes; and (2) the inaccurate registers that the Surveying and Mapping Authority had at its disposal. The inaccurate, poor inventory of the characteristics of real property harms not only taxable persons, but also the state in all the cases when the owners of real property did not submit exact data, when the inaccuracies regarding the characteristics of the real property were not identified during the inventory carried out, causing the value of real property to thus be lower than it should be in conformity with the regulations on the mass appraisal of real property. In addition, the data that the Surveying and Mapping Authority had at its disposal were in numerous cases not harmonised with the data from the land cadastre and the cadastre of buildings, the land register, and the real property register, as well as data from other public registers. Before issuing the notifications, the state did not ensure that the registers were harmonised and accurate. I am of the opinion that it could have arranged in advance at least such data that it could have predicted would more frequently prove to be inaccurate and in time draw the attention of the owners of the real property thereto. I present an example in the third paragraph of this [separate] opinion. It is true that one could as well allege that the owners of real property acted with insufficient diligence when arranging the data regarding their real property, because everyone must ensure that their property is legally and correctly arranged. Only the announced introduction of the real property tax caused the owners of real property to be interested in arranging the data on their real property. The arrangement of [the data contained in] registers is in fact not a constitutional issue; however, the exactness and the completeness of the arranged data is a fundamental criterion for the implementation of the project of taxing real property, whereby the taxation itself can interfere with human rights and fundamental freedoms, especially with the right to equality (the second paragraph of Article 14 of the Constitution) and also, because what is at issue is a property tax on the ownership of real property, with the right to private property (Article 33 of the Constitution).
 
3. As I have stated, the state could have eliminated at least those inaccuracies and nonconformities contained in the registers that affect a greater number of taxable persons before the mentioned notifications were issued by merely warning the owners that they should arrange certain elements or data that refer to their real property. As an example of unarranged data that in my opinion unnecessarily extended the queues at the Surveying and Mapping Authority, I would like to mention the registration of permanent residence in order for real property to be classified as officially occupied or officially unoccupied [real property]. For instance, if data contained in the register did not contain data regarding the number of the dwelling, such real property was deemed to be officially unoccupied, even though the owner of the dwelling in a multi-dwelling house (owned in condominium) permanently resided in his or her real property.[5] Consequently, such real property without the number of the dwelling being indicated was subject to a significantly higher tax rate – 0.50% and not 0.15% – than would otherwise apply to an officially occupied real property.
 
4. I am of the opinion, however, that an important positive effect of the process of introducing the real property tax is that the data on the real property of both natural persons and legal entities were put in order, as well as, above all, [data on the real property] of municipalities and the state. This is even truer also due to the fact that these data are not regulated at the level of the state, which causes problems in various fields. From the audit report of the Court of Audit on the Draft of the Annual Financial Statement of the Budget of the Republic of Slovenia for 2012[6], it follows that the aggregate balance sheets of the budget of the state are even today still not complete. Therefore, it is important that, regardless of the content of the Decision of the Constitutional Court, the process of the regulation of registers and data continues, because the regulation of real property – of either natural persons or legal entities – has positive effects as regards the more effective functioning of the state and other public entities under public and private law.
 
5. Allegedly, the RPMAA regulates, for the purposes of taxation, the so-called mass appraisal of real property in the Republic of Slovenia. It thus allegedly determines the rules on the basis of which the taxable base for the assessment of the tax regarding individual taxable persons is determined. The Constitutional Court assessed that these rules are unclear and insufficiently precise, because the legislature left the regulation of the real property tax to numerous implementing regulations. Therefore, I concur with what is stated in Section B – III of the Decision, where first the upper premise of the decision-making is presented, i.e. Article 147 of the Constitution, which determines that the state imposes taxes by law. In conformity with the principle of legality, the tax obligation must be clearly evident from the law that imposes the tax, not only from the implementing regulations (paragraph 47 of the reasoning of the Decision). I would only like to explain in more detail the issues that, in my opinion, are so important when prescribing the real property tax that they affect the rights and obligations of taxable persons when determining their tax obligations and which must thus be regulated by the RPMAA itself (or by some other law that regulates the taxation of real property).[7] The legislature must neither authorise – let alone leave the regulation of such issues – to the executive branch of power. What issues in the RPMAA are actually at issue? What is at issue is the determination of those issues that define the taxable base; i.e. the mass appraisal of real property, which is established by means of valuation models and methods, as well as data on the characteristics of real property. The models, methods, and data on real property are key to the determination of the taxable base, i.e., in conformity with Article 5 of the RPTA, the appraised market value of real property.[8] In the RPMAA, these are determined too loosely, unclearly, and insufficiently, and to an excessive degree the prescription thereof is left to the executive branch of power. For such reason, I concurred that the valuation models (paragraphs 48–51 of the reasoning) and methods (paragraphs 52 and 53 of the reasoning), as well as data on real property (paragraph 50 of the reasoning) must be determined by law. The statutory prescription of such issues ensures to substantially greater degree that these elements (the models, methods, and data on real property) will be applied in the same manner for all taxable persons, whereby their equal treatment is also ensured. There is a special procedure prescribed for the adoption of a law by the legislature, the informedness [of taxable persons] regarding the statutory issues is greater, and it is more difficult for a law to be changed, which ensures higher legal certainty for taxable persons. I would also like to stress in this context that, in my opinion, the methods of taxation should not be too complicated. On the one hand, if the methods are too difficult to understand, the possibility of errors and even unconstitutional interpretations in their application increases, and, on the other hand, the verification of the correctness of the determination of the taxable base, and thus of the tax obligation, is made more difficult for taxable persons.
 
6. The possibility of verifying the correctness of the determination of the taxable base is connected with the question of ensuring the right to make a statement determined by Article 22 of the Constitution and the right to a legal remedy determined by Article 25 of the Constitution. Undoubtedly, these two rights are important constitutional rights that in principle must be ensured in different procedures. Although the real property tax is predominantly based on data from official records and data that are provided by taxable persons themselves, due to which on the basis of the second paragraph of Article 73 of the Tax Procedure Act (Official Gazette RS, Nos. 13/11 – official consolidated text, 32/12, 94/12, and 111/13 – hereinafter referred to as the TPA-2)[9] the assessment decision could be issued to taxable persons without a special preliminary procedure, I am of the opinion that it would be sensible, until data are harmonised with the state of the facts, that the legislature preliminarily grants taxable persons the right to make a statement in order to protect their rights and interests. Subsequently, because what is at issue are static data that do not change often and that in the predominant part are provided by taxable persons themselves, this need will no longer exist. This of course does not mean that the state could not possibly be considerate towards its citizens and could not informatively notify taxable persons, as it did in 2014, of the amount of their taxable burden.
 
7. I am of the opinion, nevertheless, that taxable persons must have the possibility to challenge, by an appeal, the inaccuracy of data and the incorrectly selected method and model in terms of which their real property is classified. The second paragraph of Article 14 of the RPTA[10] determines that the tax authority send a copy of the appeal to the Surveying and Mapping Authority, if the appeal also refers to data on real property, data on the persons that are determined as taxable persons, or on the appraised market value of real property. As the Constitutional Court established, the statutory provision is unclear with regard to [the question of] what kind of verification taxable persons can request in the part of the appeal that refers to the appraised market value of the real property; it concluded that this part of the appeal can refer to the selected model and the selected method (paragraph 68 of the reasoning). I concur with such finding.
 
8. The reasons due to which I am of the opinion that taxable persons must have the possibility to challenge the inaccuracy of data and the incorrectly selected method and model in terms of which their real property that is the subject of taxation is classified are the following. It is undisputable that a certain tax obligation [imposed] by the assessment decision will monetarily affect taxable persons [who are the owners of the relevant] real property. Therefore, it is important that an effective legal remedy is ensured to taxable persons.[11] A legal remedy is effective when taxable persons know exactly what they can request thereby from the competent authorities in relation to the correctness of the tax assessment in the context of the test of the content of the tax decision. For such reason, the assessment decision must contain the reasoning, from which it must clearly follow what was taken into consideration in [the determination of] the taxable base. Otherwise, appeals could be based only on the opinion of taxable persons that their tax burden is too high. The reasoning of decisions should thus contain the valuation of individual real property, [which are] based on clearly presented relevant data on the characteristics of [the relevant] real property acquired from the Surveying and Mapping Authority (the year of construction, location, size, etc.) and for which the tax is assessed with regard to the classification in terms of a model (e.g. HIS for houses), as well as the application of the selected valuation method (the method of comparable sales, the capitalisation of profit method, and the buying-value method). From decisions it must be clearly evident which model and which method were applied for a specific real property that is subject to taxation. Taxable persons must thus have the possibility to appeal against the application of inaccurate data regarding a [certain] characteristic of the real property and the incorrect classification of the real property in terms of the model, as well as against the incorrect application of the method. However, taxable persons cannot challenge the valuation model or method itself, because such entail professional standards of the mass (and not individual) valuation of real property, as is determined by the current RPMAA.
 
9. Due to the stated reasons, the possibility to submit an appeal ensures that the risk that taxable persons are not treated equally is reduced to an acceptable level and enables taxable persons to understand why the assessed value of their real property is higher than that of their neighbour's.
 
10. The second procedure that in my opinion should be carried out separately from the tax procedure is the procedure for the determination of the characteristics of real property in conformity with the RPMAA that is carried out by the Surveying and Mapping Authority. What is at issue is an administrative matter, therefore these procedures should be conducted in conformity with the provisions of the General Administrative Procedure Act (Official Gazette RS, No. 24/06 – official consolidated text, 126/07, 65/08, 8/10, and 82/13). Due to the appeal in the tax procedure being non-suspensive,[12] data [provided by] taxable persons and data from public registers should be, in my opinion, harmonised already before the beginning of the tax procedure or before the issuance of the assessment decision.
 
11. In terms of its content (as regards not only the subject of taxation, but also the objectives, exemptions, or tax relief for certain groups of owners), the RPTA does not differ substantially from the laws that regulate the taxation of real property in other states in the European Union. The Constitutional Court has stressed numerous times that the determination of taxes is in the competence of the legislature.[13] It is in the competence of the legislature [to decide] what [type of] system of taxation it adopts and whether it will pursue therewith only financial or also non-financial objectives. If we examine such regulation from a comparative law perspective, the majority of the states in the European Union also pursue non-financial objectives by their respective real property taxes. Based on the argument that such tax entails a property tax (an ad rem tax), certain theorists advocate [the idea] that non-financial objectives (economic, social, and others) should be excluded as much as possible; with regard to property taxes, especially concern for the public utility infrastructure [provided] to real property itself should be in the foreground, and not so much concern for the economic development and social policy of the state.[14] Non-financial objectives require, as a general rule, more administration, but can give rise to inequality between taxable persons and, therefore, numerous disputes can arise. The costs of collecting the tax can thus be higher than the benefits of such tax.
 
12. With regard to the taxation and tax rate determined by the RPTA for commercial and industrial real property, I am of the opinion that the original problem lies not so much in the determination of the tax rate[15] but, above all, in the determination of the taxable base. Contrary to residential real property, which is valued by the method of comparable sales, commercial and industrial real property are namely valued in three different manners: offices and shops in accordance with the method of comparable sales, industry and heavy industry in accordance with the buying-value method, whereas ports, gas stations, power plants, and mines [are valued] in accordance with the capitalisation of profit method.[16] According to Prof. Dr. Temeljotov Salaj, the use of different valuation methods of such real property leads to very different taxable bases, which substantially influences the final amount of the tax. For such reason, this substantiates what the applicants emphasise, [namely] that, on the one hand, public charges pertaining to real property will disproportionally be increased for sole proprietors and for small and medium-sized companies, whereas, on the other hand, such charges will decrease for large shopping centres and ports. Regardless of the above, the hitherto taxation, which varied significantly between individual municipalities, will have an influence on the increase or decrease in their tax burdens. I am of the opinion that the differences in the tax burden could also be reduced by determining a uniform method of valuation based on the method of the capitalisation of profit.[17] The logic of its application follows from a fundamental characteristic of commercial and industrial real property: they are intended to create profit and they are, especially with regard to industrial real property, inseparably connected with the performance of the activity itself.[18] The fundamental difference between residential and commercial real property is also that a residential real property primarily represents, for the owner, his or her home and, secondarily, also a lifelong investment, whereas a commercial real property primarily represents, for the owner, a means for the owner to carry out his or her activity without being disturbed and with costs being as low as possible. As stated by Prof. Dr. Lavrač at the public hearing, owners of commercial real property are thus significantly more adaptable in their decisions regarding business premises[19] than owners of residential real property. This criterion is, in his opinion, also the only reason that could substantiate, from a professional point of view, a lower tax rate for residential real property in comparison to the tax rate for commercial real property. I must remark, however, that when taxing business entities, special care must be taken to not existentially jeopardise the (still) healthy core of the economy. Since the Surveying and Mapping Authority has to date not yet provided a register of legal transactions involving the rental of [real property][20], which would enable the acquisition of authentic and up-to-date data on the profit gained by commercial real property, the Constitutional Court could not carry out the assessment of whether the challenged taxation of commercial and industrial real property interferes with the right to private property determined by Article 33 of the Constitution and with free economic initiative determined by Article 74 of the Constitution. Therefore, this question regarding the new real property tax remains open for the time being, and in light of the Decision of the Constitutional Court that not even the determination of the taxable base passes constitutional review, it also has not yet become relevant.
 
13. I am of the opinion that regardless of whether the taxation of real property follows financial or non-financial objectives, one must take into consideration the circumstances in which the tax is being introduced. For the Republic of Slovenia, it is known that a high percentage of the population owns real property. The majority acquired it by means of their own work. Higher tax burdens could cause distress to those who are poorer or even jeopardise their existence. Likewise, also for the rest of the population, the real property tax should not entail punishment for their work.
 
14. From the example of the introduction of the real property tax, it is once again evident, as we are realising with regard to the implementation of the provisions of the Fiscal Balance Act (Official Gazette RS, No. 40/12 – hereinafter referred to as the FBA),[21] how dangerous and risky it is to adopt laws in the expedited procedure, especially those that interfere with the property sphere of citizens.
 
 
Dr. Etelka Korpič – Horvat
Judge
 
 
 
Notes:
[1] See, e.g., K. Tipke and J. Lang, Steuerrecht, Verlag Otto Schmidt, Köln 2013, p. 801; T. Banovec, Nepremičnine, izzivi, sporazumi in nesporazumi, protislovja in paradoksi, vizija, energija in ekologija, Poslovanje z nepremičninami, 18th Traditional Conference (18. tradicionalni posvet), Portorož, 2007, pp. 41–54.
[2] Bulletin of the National Assembly, dated 18 October 2013, EVA 2013-1611-0071, pp. 12–17.
[3] All the mentioned charges are (were) the revenue of municipalities.
[4] In conformity with the draft of the challenged Act, the income of the budget of the state would be increased by approximately EUR 183 million in 2014 and by approximately EUR 202 million in 2015 (Bulletin of the National Assembly, dated 18 October 2013).
[5] The obligation to enumerate residential units, determined by the law regulating housing, and business premises with a reference number within the building was determined by Article 80 of the Real Property Recording Act (Official Gazette RS, No. 47/06).
[6] Draft of the Annual Financial Statement [of the Budget] of the Republic of Slovenia for 2014, Court of Audit, Audit Report (Revizijsko poročilo), p. 87.
[7] It is clear that statutory provisions should also be clear and complete, which is one of the fundamental principles of a state governed by the rule of law determined by Article 2 of the Constitution, although this is not specifically stated in the Decision (see Decision No. U-I-155/11, dated 18 December 2013 (Official Gazette RS, No. 114/13)).
[8] The term "appraised market value of real property" is also established in other states, however, it can be misleading due to the word market. What is at issue is the assessment of the value of real property for the purposes of the determination of the taxable base and not for selling the real property. The market value of a real property can merely and only then be established once the real property is sold. It can be sold for [a price] higher or lower than the appraised market value. Therefore, it is unlikely that the taxable base will match the market value of the real property.
[9] The second paragraph of Article 73 of the TPA-2 determines that the tax authority can issue an assessment decision without a special assessment procedure if it establishes that the data from the tax declaration are complete and correct or if it has (?) or can collect the official records necessary for [issuing] the decision, so that no hearing involving the party is necessary in order to protect his or her rights and interests.
[10] An appeal in conformity with the law regulating the tax procedure is admissible against the decision on the assessment of the real property tax (the first paragraph of Article 14 of the RPTA).
[11] This was also stated by the Constitutional Court in Decisions No. U-I-297/95, dated 28 October 1998 (Official Gazette RS, No. 76/98, and OdlUS VII, 198), and No. U-I-34/95, dated 29 October 1997 (Official Gazette RS, No. 73/97, and OdlUS VI, 138).
[12] The non-suspensive effect of the appeal in the tax procedure follows from the nature of the matter, because otherwise problems with collecting the tax on time would arise (Article 87 of the TPA-2). In Decision No. U-I-297/95, also the Constitutional Court already adopted a position on the constitutional admissibility of the non-suspensive appeal in a tax procedure. It assessed that it is the element of effectiveness that in the event of the non-suspensiveness of the appeal in the tax procedure does not exist. However, the challenged provision also passes the strict test of proportionality, due to which an interference with the right to a legal remedy is not constitutionally inadmissible. In [the mentioned] Decision, the Constitutional Court leaned on the importance of fiscal revenue, because through taxes the state acquires the resources to carry out its tasks and, therefore, this is what the exercise of the rights of others substantially depends on.
[13] See, e.g., Decisions No. U-I-299/96, dated 12 December 1996 (Official Gazette RS, No. 5/97), No. U-I-244/98, dated 17 June 1999 (OdlUS VIII, 164), and No. U-I-233/97, dated 15 July 1999 (Official Gazette RS, No. 61/99, and OdlUS VIII, 188).
[14] Cf., e.g., K. Tipke and J. Lang, op. cit., p. 70, where with regard to real property taxes [the authors] underline the principle of equality between the tax and the services related to real property provided in return by local communities (Äquivalenzprincip).
[15] The final tax burden is correspondingly higher if we also take into consideration the uniform 0.75% tax rate, which is the highest one (which power plants, with a 0.40% tax rate, are exempt from).
[16] From Annex 1 to the Decree on the Determination of Real Property Valuation Models (Official Gazette RS, No. 95/11) – Value Zones, Value Levels, and Value Tables, it follows that the models for dwellings, houses, garages, shops, and offices, as well as for building plots, built-up plots of land, agricultural plots of land, forest plots of land, and other plots of land are based on the comparable sales method. The models for power plants, mines, ports, and gas stations are based on the capitalisation of profit method. The models for industrial buildings, heavy industry buildings, vineyard cottages, agricultural buildings, buildings for public use and other buildings, as well as special real property, are based on the buying-value method.
[17] Cf. International Valuation Guidance Note No. 13: Mass Appraisal for Property Taxation, p. 10, which only applies the method of the capitalisation of profit as the valuation model for commercial and industrial property.
[18] For instance, for a port or a mine it is already by the nature of the matter very difficult to modify their purpose.
[19] For instance, a change in the location of business premises or decision-making on the purchase or rental of business premises.
[20] The legal basis for the introduction of a register of legal transactions involving the rental of buildings and parts of buildings in the framework of the register of the real property market is provided for by Article 20 of the RPMAA.
[21] I assess that the benefit from the FBA will be equally poor.
 
 
U-I-313/13-94          
25 March 2014
 
 
Concurring Opinion of Judge Dr. Mitja Deisinger
 
 
I voted in favour of Decision No. U-I-313/13 (hereinafter referred to as the Decision), while with my concurring opinion I wish to present additional arguments for certain standpoints contained in the Decision.
 
 
The taxable base
 
In Section B – III, in the conclusive paragraph 55 of the Decision, the Constitutional Court established that the determination of the taxable base by the blanket [provision of] Article 5 of the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA) and the Real Property Mass Appraisal Act (Official Gazette RS, No. 50/06 and 87/11 – hereinafter referred to as the RPMAA) is inconsistent with Article 147 of the Constitution in the part that refers to their application for tax purposes. Such entails, at the same time, that when remedying the established inconsistency, the legislature cannot, by the new law or by amending the RPMAA, only transpose into law the provisions from implementing regulations, but it must regulate the taxable base in a clear and precise manner. The current regulation is namely not only inconsistent with Article 147, but also with Article 2 of the Constitution. The Constitutional Court has already in numerous decisions established that the clarity and precision of regulations in a state governed by the rule of law entail that provisions must be clear, understandable, and unambiguous. This applies in particular to regulations that directly regulate the rights and the legal situation of a broad circle of citizens.[1] The regulations in the abrogated Act and in the RPMAA undoubtedly do not attain this constitutional standard. At the public hearing on 27 February 2014, Mr Franc Ravnikar, representative of the Surveying and Mapping Authority of the Republic of Slovenia (hereinafter referred to as the Surveying and Mapping Authority), explained that the real property register contains approximately 100 million pieces of data. Due to such a [high] number of data, there necessarily arises a high number of mistakes, which was also empirically confirmed when the Surveying and Mapping Authority sent taxable persons informative notifications. It is entirely clear that individual taxable persons cannot verify the correctness of the established average market value of real property that serves as the taxable base. This is prevented by the complicated and complex valuation system. This means that such a system cannot fulfil the requirements for establishing a tax obligation, because it is inconsistent with Article 2 of the Constitution. Data for mass appraisal can thus serve other purposes and registers, whereas for [the determination of] the taxable base the legislature must select, from the database, objective data that any taxable person is able to verify (e.g. the floor space of the real property, the year of construction, auxiliary premises, garages, business premises, etc.).
 
The established unconstitutionality contained in the RPMAA regarding the taxable base (point 2 of the operative provisions of the Decision) can be remedied in the RPMAA itself or in a new law on real property tax (see the reasoning of the Decision in paragraph 89). The latter solution is demonstrably even more appropriate because the new law could only transparently determine one part of the objective elements for the calculation of the taxable base. Regarding such, the legislature should take into consideration that the real property tax is the municipalities' own source of tax revenue, that it is a property tax (an ad rem tax), that the tax must not disproportionally interfere with private property and free economic initiative, that tax burdens per capita in Slovenia are the highest in the world, and that the proportion of real property owned [by individuals] is amongst the highest in the European Union.
 
 
The taxation of commercial premises
 
In the requests for the review of constitutionality, the National Council (in point G) and a group of deputies of the National Assembly (in point D) claimed a violation of Articles 2, 33, and 74 of the Constitution due to the taxation of real property for business and economic activities. In the abrogated Act, in addition to the determination of the appraised market value of real property as the taxable base, the legislature also additionally increased the tax burden by the provision on tax rates in the second paragraph of Article 6 of the RPTA. It is evident from paragraph 64 of the reasoning of the Decision that the third and fourth indents of point 1 of the second paragraph of Article 6 of the RPTA are inconsistent with the second paragraph of Article 14 of the Constitution and that the [Constitutional] Court did not deal with the question of tax rates and the violations of Articles 33 and 74 of the Constitution. Nonetheless, attention must be drawn to the fact that when determining the rates for business, industrial, and real property pertaining to power plants, the legislature acted arbitrarily and contrary to Article 2 of the Constitution. This arbitrariness is expressed in the taxation of commercial real property, which is subject to a 0.75% tax rate, except for real property pertaining to power plants. At the public hearing, Prof. Dr. Temeljotov Salaj drew attention to this inappropriately high taxation.[2] The group that includes the largest commercial properties and all industrial real properties also includes the business premises of small and micro businesses, sole proprietors, craftsmen, and farmers, as well as bed and breakfast establishments. After the informative notifications were issued, it was demonstrated, according to the warning of the Chamber of Craft and Small Businesses of Slovenia (hereinafter referred to as the CCSBS), that this would entail a disproportionate burden for 95% of these small businesspersons; on average, the obligations would namely increase by 234% and in certain cases even by 1,000% or 2,000%. At the session of the [National Assembly’s] Committee on Finance and Monetary Policy, Mr Branko Meh, president of the administrative board of the CCSBS, drew attention to the following fact: "if the 0.75% tax rate remains in force, numerous craftsmen and businesspersons will be obliged to close their companies and will start to work illegally".[3]
 
In addition to the cessation of the activities of a high number of craftsmen and small businesspersons due to the tax [imposed] by the RPTA, also more than 230,000 jobs in small businesses would be jeopardised, which could result in a social catastrophe. After ceasing to perform their activities, these taxable persons would have to continue paying the tax in the amount of 0.75%, although it would be precisely the tax that prevented their operations from continuing. Such a tax rate would also apply to all business premises on which there is now no activity and which are not rented out. Obviously, taxes would be unrecovered in such cases. In the review of constitutionality, such a tax burden that, with regard to business premises, equates small business ventures with large business and industrial facilities entails an interference with free economic initiative determined by Article 74 of the Constitution[4] and a violation of the economic exploitation of the private property of real property determined by Article 33 of the Constitution.[5]
 
 
Financial consequences
 
Due to the abrogation of the unconstitutional RPTA, the revenue of the budget of the state will decrease. The question that is raised then is what the resulting financial consequences for the state will be.
 
The budget of the state, amounting to approximately EUR 8.4 billion, would lose 50% of the tax (the second indent of Article 9 of the RPTA). The Prime Minister explained that according to the informative calculations, EUR 407 million of tax would allegedly be collected, which would be reduced, already due to the proposal of the Government to abolish [the category of] officially unoccupied real property (which is, with regard to paragraph 61 of the reasoning of the Decision, unconstitutional), by EUR 30 million,[6] therefore the total would be EUR 377 million. A 50% share of the tax collected in such a manner would amount to approximately EUR 188 million. Such budgetary revenue is of course based on the presumption that all the taxes [charged] on the basis of the RPTA would be paid, which would certainly not happen. The real budgetary revenue would for such reason be lower, therefore it would be necessary to also find other budgetary reserves.
 
In the field of taxation there exists the possibility that the mentioned loss of income in the budget would be compensated for. From the data of the Tax Administration of the Republic of Slovenia it follows that, as of 31 December 2013, the tax debt of natural persons and legal entities amounted to EUR 1,472,787,087.[7] Therefore, the state does not have to impose new taxes; by recovering at least one part of the tax debt it can compensate for the loss of the real property tax. If Slovenia were to recover only 12% of these taxes, the budgetary revenue this year would be equal to the revenue from the real property tax. Such entails, at the same time, that by recovering at least 50% of the tax debt we would compensate for the [lack of the] real property tax not only for this year, but also for the following four years.
 
Municipalities will not remain without revenue (point 4 of the operative provisions of the Decision); they will acquire revenue, in conformity with Article 142 of the Constitution, by financing from their own revenue sources. As is evident from point 3 of the operative provisions of the Decision, municipalities will receive, from 1 April 2014, the total yearly amount of the compensation fee for building land use. In 2013, the assessment of the income from the fees amounted to EUR 200,455,465.38, whereas EUR 39,354,246.78 of fees remained unrecovered.[8] Furthermore, there will be no expense for the payment of the tax on municipal public buildings.
 
By the general abolition of the taxation of public buildings in the RPTA, also the transparency of the revenue in the budget of the state will be achieved. In conformity with the RPTA, budget users would namely pay tax on public buildings in which they operate and the budget of the state would have to pay such obligation. Such regulation would be inconsistent with Article 148 of the Constitution.
 
 
Dr. Mitja Deisinger
Judge
 
 
Notes:
[1] Decision of the Constitutional Court No. U-I-119/98, dated 17 April 1998 (Official Gazette RS, No. 35/98, and OdlUS VII, 77).
[2] Prof. Dr. Alenka Temeljotov Salaj presented the following explanation: "The burden of a 0.75% tax rate imposed on, for instance, commercial and industrial real property is entirely inappropriate, especially in this time of economic crisis, when according to the analyses from 2013 of the Chamber of Commerce and Industry and the Chamber of Craft and Small Businesses, small, medium-sized, and large companies already now draw attention to the extreme uncompetitiveness of Slovene companies, because due to high charges – all charges, not only taxes, but also social contributions and fees – their products exceed the market prices of comparable products on the world market. An additional high real property tax can lead to stagnation in the sense of the reduction of production resources or other activities on the market and [can] also [lead], as a consequence, to the closure of manufacturing facilities and to an increase in the unemployment rate."
[3] http://www.finance.si/8358397/OZS-Z-nepremi%C4%8Dninskim-davkom-se-bodo-obremenitve-povpre%C4%8Dno-pove%C4%8Dale-za-234-odstotkov (accessed on 10 March 2014).
[4] Metod Dragonja, Minister of the Economy, specifically underlined: "Additional tax burdens are not in line with stimulating the economy … and that he will at least propose a transitional decrease in the tax rate for micro and small companies." Delo, 19 March 2014, p. 9.
[5] See Decision of the Constitutional Court No. U-I-91/98, dated 16 July 1999 (Official Gazette RS, No. 61/99, and OdlUS VIII, 196).
[6] http://www.finance.si/8359127/Sredi-julija-prve-odlo%C4%8Dbe-nepremi%C4%8Dninskega-davka (accessed on 19 March 2014).
[7] Letter from the Tax Administration of the Republic of Slovenia No. 0100-952/2014-3, dated 10 March 2014.
[8] Ibidem; see also the annex to the letter mentioned in the previous note, entitled Assessments of the Compensation Fee for Building Land Use and an Overview of the Situation Regarding the Compensation Fee for Building Land Use.
 
 
U-I-313/13-95          
25 March 2014
 
 
Concurring Opinion of Judge Mag. Marta Klampfer
 
 
1. I voted for the Decision by which the Constitutional Court abrogated the Real Property Tax Act (Official Gazette RS, No. 101/13 – hereinafter referred to as the RPTA) and established the inconsistency of the Real Property Mass Appraisal Act (Official Gazette RS, No. 50/60 and 87/11 – hereinafter referred to as the RPMAA) with the Constitution insofar as it refers to the mass appraisal of real property for the purpose of its taxation. I also concur with the reasoning of the Decision. However, I do have several serious reservations with regard to the definition of the term "building plots", which entails an important element for the further establishment of the real property tax on such real property, which is what I will point out in this concurring opinion.
 
2. In paragraph 49 of the reasoning, the Constitutional Court also adopted a position with regard to the method of the determination of land use allocations for the construction of buildings, which the RPMAA leaves to be regulated by an implementing regulation, whereby the Act only defines the term "building plots" as plots of land on which construction is in fact possible and which are determined by municipalities. Since from the Act it is not clear what "construction is in fact possible" means, the original contents defined only by the third paragraph of Article 3 of the Rules on Determining Building Plots (Official Gazette RS, No. 66/13) do not have an appropriate statutory basis. For such reason, they do not fulfil the requirements of the principle of legality determined by Article 147 of the Constitution.
 
3. I concur with the mentioned finding, however I am of the opinion that a little more attention must be devoted to the definition of the term "building plots", because there is a terminological confusion with regard to the mentioned definition. One of the principles of a state governed by the rule of law requires, inter alia, that norms are defined clearly and precisely, so that they can be implemented, that norms do not allow for arbitrary conduct, and that they unambiguously and in a sufficiently precise manner define individual terms. With regard to the regulation that refers to public charges and especially tax obligations whose essential elements are the tax rate and the taxable base, the requirement of clear and definite norms is of particularly high importance.
 
4. The second paragraph of Article 6 of the RPTA determines a 0.50% tax rate for building plots. By this provision, a new statutory term was enacted that until now was not present in the legislation in the field of spatial planning. In Article 7, the RPMAA from 2006 regulated the formation of real property valuation models. However, this Act did not determine individual valuation models, but on the basis of [its] Article 11 left it to the Government to adopt, on the basis of the final proposal of valuation models, the regulation determining valuation models. In November 2011, the Government adopted the Decree on the Determination of Real Property Valuation Models (Official Gazette RS, No. 95/11 − hereinafter referred to as the Valuation Models Decree), which among individual valuation models also determined, in Article 2, the valuation model for building plots. This is how the term "building plots" appeared in the Valuation Models Decree, whereas the Act Amending the Real Property Mass Appraisal Act (Official Gazette RS, No. 87/11 – RPMAA-A), which entered into force on 17 November 2011, attempted to define, in the fifth paragraph of Article 7 of the RPMAA, the term "building plots".
 
5. All the time until this amendment of the RPMAA entered into force, spatial [planning] legislation regulated terms such as built-up and non-built-up building land. The term building land is defined in Article 2 of the Spatial Planning Act (Official Gazette RS, Nos. 3/07, 108/09, 57/12, and 109/12 – hereinafter referred to as the SPA). In conformity with the cited statutory provision, building land is a land parcel or multiple land parcels or the parts thereof on which a building is constructed, or a land parcel that is intended, in the municipal spatial plan, for the construction of buildings. Since the Constitutional Court assessed, already by Decision No. U-I-39/97, dated 16 December 1999 (Official Gazette RS, No. 1/2000, and OdlUS VIII, 282), that the regulation of the payment of the compensation fee for building land use is not inconsistent with the Constitution, because the possible abolition of this fee for building land use could seriously jeopardise, due to the deficiencies in its legal implementation before the introduction of the new real property tax, the performance of the constitutional tasks of municipalities, the legislature added, in the Act Amending the Construction Act (Official Gazette RS, No. 47/04 – hereinafter referred to as the CA-1A), which was adopted precisely for the purposes of the assessment of the compensation fee for building land use, new Articles 218a through 218d, by which it determined the [legal] bases for the amendment of municipal ordinances regarding the compensation fee for building land use and the assessment of the compensation fee for building land use. As follows from the reasoning of the Proposal for the Adoption of the CA-1A (Bulletin of the National Assembly, No. 20/04, EPA 1156-III), these provisions allegedly represent a transitional regime that is to remain valid until the real property tax enters into force.
 
6. In such manner, the Construction Act (Official Gazette RS, Nos. 102/04 – official consolidated text, 14/05 – rect., 126/07, 108/09, 57/12, and 110/13 – hereinafter referred to as the CA-1) defined, in Article 218, what is built-up and what non-built-up building land. In conformity with this Article, those plots of land for which it was determined, by an implementing spatial act, that construction is admissible on them entail non-built-up building land. A more precise definition of non-built-up building land was provided by the second indent of the first paragraph of Article 218b of the CA-1. Such land parcels were defined as non-built-up building land for which it was determined, by an implementing spatial act, that the construction of a certain type of building is admissible on them, provided that drinking water and energy supply is ensured to them, as well as the discharge of sewage, waste disposal, and access to a public road, and provided that they are located inside an area for which the municipality decided, by an ordinance on the compensation fee, that the compensation fee for non-built-up building land use must be paid. The definition of built-up and non-built-up building land was thus clear enough in the Act and served municipalities in the assessment of the compensation fee for building land use in the transitional period until the new real property tax entered into force. On the day of the entry into force of the RPTA, these statutory provisions of the CA-1 ceased to be in force, on the basis of Article 33 of the RPTA. For such reason, a question was raised concerning the term "non-built-up building land" as regards the term applied by the real property valuation models, i.e. "building plots".
 
7. For the purposes of the implementation of the law on the real property tax, i.e. with the intention to tax building plots, the legislature amended, in 2011, Article 7 of the RPMAA so that it attempted to define what are deemed "building plots". The fifth paragraph of Article 7 of the RPMAA determined that building plots are those plots of land on which the construction of buildings is in fact possible and which are determined by municipalities. The legislature left the manner of the determination of land use allocations for building plots to be regulated by an implementing act adopted by the minister responsible for the environment and spatial planning. On the basis of this statutory provision, the Minister of Infrastructure and Spatial Planning adopted, in August 2013, Rules by which he determined the manner of the determination of building plots for the purposes of the mass appraisal of real property. The Rules contain the definition of building plots. These are parcels or parts of parcels that form unified plots of land, provided that the plots of land are located in an area of building land, that they are not excluded as plots of land not suitable for the construction of buildings, and provided that they fulfil one of the conditions set in the first, second, and third indent of point 3 of the third paragraph of Article 3 of the Rules.
 
8. In the mentioned three indents of the cited provision of the Rules, the conditions that terminologically define "building plots" are determined. Therefore, what is at issue is real property valued by means of different prices per square meter and that are valued significantly higher than agricultural and forest plots of land. According to the clearest definition, all plots of land for which a final building permit for the construction of a building is acquired are thus such [plots of land] (the third indent of the cited Rules). This regulation is clear and municipalities will probably have no problem reporting such data to the Surveying and Mapping Authority of the Republic of Slovenia. However, there will be a few more problems already with the second definition of building plots. Plots of land connected to the public utility infrastructure in conformity with the law that regulates spatial planning on which, in conformity with the spatial implementing conditions from the municipal spatial plan or in conformity with the criteria and conditions from spatial regulatory conditions, the construction of buildings is admissible and to which legal regimes that refer to conservation, protected, degraded, endangered, and other areas do not apply, so that construction on them would not be possible, are, in conformity with the second indent of the cited provision of the Rules, also classified as building plots. With regard to this definition of building plots, different possible interpretations are already appearing among individual municipalities. However, with regard to the definition of plots of land in conformity with the first indent of the cited provision of the Rules, municipalities will have complete discretion in how they report data regarding building plots to the Surveying and Mapping Authority of the Republic of Slovenia. This [provision] determines that also plots of land for which a detailed municipal spatial plan is adopted on the basis of the law that regulates spatial planning, for which a municipal location plan is adopted on the basis of the law that regulates spatial planning, or for which an area development plan or regulatory plan is adopted on the basis of the law that regulates settlements and other interferences with space and on which the construction of buildings is possible in conformity with the content [of such plan], are [deemed to be] building plots. However, this condition for the definition of building plots leaves municipalities, at the same time, a considerable amount of discretion in interpreting which plots of land they define as building plots.
 
9. This terminological confusion and the need for a more operational regulation of the keeping of records on building plots also led the Government to amend Article 7 of the RPMAA. In the Draft Act Amending the RPMAA, dated 20 February 2014, the Government itself established that the hitherto regulation of the determination of building plots was deficient in the part regarding informing the public of the determination of such plots of land in conformity with the Rules. The Government remedied this deficiency by a provision in the law that imposes on municipalities the obligation to publicly publish which plots of land are determined to be building plots and thus give all citizens and owners of plots of land the possibility to learn thereof and, in the event they do not agree therewith, to submit a petition for a change in the decision to the municipality. At the same time, the Ministry of Infrastructure and Spatial Planning was determined as the supervisory authority competent to carry out an expert revision in the municipality. In the event it establishes that the municipality did not carry out the determination of building plots or that it did not carry out such professionally and correctly, it shall impose on the municipality the duty to remedy the deficiencies and mistakes. Regardless of the mentioned improvements in the Draft Act Amending the RPMAA, I am still of the opinion that the inconsistencies regarding the term "building plots" itself have not been remedied.
 
10. Despite the proposed amendments of the fifth paragraph of Article 7 of the RPMAA, I still constantly ask myself what can be classified under the term "building plots", which are attributed a higher appraised market value than other agricultural and forest plots of land and are subject to a significantly higher tax rate of 0.50%. Therefore, I am of the opinion that the legal term "building plots" must be defined clearly and unambiguously, because only in such a manner can one ensure the transparent and non-arbitrary reporting of data regarding which plots of land are those that are intended for the construction of buildings, [i.e. data] that municipalities must transmit to the Surveying and Mapping Authority of the Republic of Slovenia. In conformity with the Decision of the Constitutional Court, these terms must be defined by law and not by an implementing regulation.
 
11. One of the principles of a state governed by the rule of law determined by Article 2 of the Constitution requires, inter alia, that norms be defined clearly and precisely, so that they can be implemented, that they do not allow arbitrary conduct of the executive branch of power and the authorities of local communities, and that they unambiguously and sufficiently precisely define individual terms that represent such an important legal term as, for example, the taxable base. From the constitutional principle of equality (the second paragraph of Article 14 of the Constitution) there follows the fundamental principle of tax law – the principle of tax justice or the principle of the even distribution of the tax burden between taxable persons. Only a clear and unambiguous definition of the term "building plots" in the law will be able to ensure the just and equal taxation of the owners of plots of lands on which construction will in fact soon occur, as well as the owners of plots of lands whose actual use is agricultural or forest plots of land, whereby their land use allocation are determined as building plots.
 
 
Mag. Marta Klampfer
Judge
 
U-I-313/13-96          
27 March 2014
 
 
Concurring Opinion of Judge Dr. Ernest Petrič
 
 
Firstly, I would like to underline that I entirely concur with the [part of the] operative provisions of the Decision that follows from the review of the constitutionality of the Real Property Tax Act (Official Gazette RS, No. 101/13) in light of Article 147, the second paragraph of Article 14, and Article 25 of the Constitution, as well as from the perspective of the provisions of the Constitution that regulate the self-governing position of local communities and their functional and financial autonomy guaranteed by the Constitution (Articles 138, 140, and 142 of the Constitution). I also concur with the operative provision regarding the review [of the constitutionality] of the Real Property Mass Appraisal Act (Official Gazette RS, Nos. 50/06 and 87/11). In both instances I also concur with the reasoning. However, I am of the opinion that the Constitutional Court could have devoted more attention to a review of the Real Property Tax Act also from the viewpoint of Articles 2 and 33 of the Constitution, which is in fact also what the applicants called for, especially the group of deputies of the National Assembly and the National Council. Also the assessment of tax rates from the viewpoint of the accumulation of tax obligations would be sensible, because Slovenia is a state that belongs in the circle of those [states] in which the aggregate tax obligations are extremely high. The assessment of the provisions regarding ensuring the payment of unpaid tax obligations (Article 15 of the Real Property Tax Act) would also be sensible. I am of the opinion that what is at issue in both instances is an excessive interference with the right to private property (Article 33 of the Constitution), a part of which is the human right to freely dispose of private property, established as long ago as during the French Revolution.
 
I am definitely of the opinion that the real property tax is, in principle, an appropriate source of taxation also in Slovenia, however only if [it is determined by] a law regulating the taxation of real property that is in conformity with constitutional principles and norms and in conformity with tax principles. Among the latter, I have in my mind foremost the principle of tax justice, which follows from the constitutional principle of equality before the law (Article 14 of the Constitution). This principle requires that the taxable base be determined in such a manner that arbitrariness and obvious disproportionalities (i.e. injustice and inequalities) are excluded when the base for the assessment of the tax obligation is determined. Although the taxable base is determined abstractly in conformity with determined models and methods, and a certain appraised value is determined, this appraised value must, nevertheless, essentially reflect their value, because what is at issue is the real property tax. It must reflect the real value of real property. And, above all, the appraised value must be verifiable (in an appropriate, simple, transparent, and effective procedure) with regard to the actual market value. Obvious differences with regard to the determination of the value of real property as the taxable base with high deviations from the real market value are arbitrary and contrary to the principle of tax justice, and consequently contrary to the principle of equality before the law. The determination of the taxable base such as exists in the current challenged regulation, which led to a series of arbitrary and even absurd examples of the determination of the taxable base, not only caused people to feel displeasure, but also jeopardised their trust in the law, in a state based on the rule of law, in the Constitution, and in equality before the law (Article 14 of the Constitution).
 
Tax justice following from the principle of equality before the law, which is to ensure the just, equal distribution of the taxable burden, is not only important within a certain type of tax, but also with regard to the aggregate tax burden of taxable persons, either natural persons or legal entities. In this respect, the real property tax is especially sensitive, because real property is property that taxable persons created (saved) by investing their income, which had as such already been subject to tax, into real property or property that they acquired by inheritance (on which they also paid tax). If an owner creates profit with real property, also his second tax obligation follows therefrom (e.g. the tax on rental income from property). The real property tax is thus an additional tax [that is added] to other existing tax obligations. For such reason, a balanced tax burden must also be reflected in a low real property tax rate, and especially so in the concrete Slovene circumstances where other possible sources of taxation (luxury, other forms of property) remain free of tax. In the concrete Slovene circumstances and from the viewpoint of tax justice, the legislature must not disregard the fact that taxes that do not affect – such as the real property tax – the more vulnerable sections of the population (e.g. retired persons) are in our state only rare exceptions. Even in the current model for the valuation of real property this questionable attitude towards so-called luxury has been confirmed. Those characteristics of real property that give it the status of a luxury are namely not included in the valuation, e.g. swimming pools and Jacuzzis. The legislature must take into consideration that the real property tax is a property tax (ad rem tax), which means that the subject of taxation is property as such. In fact, the legislature can also pursue other legitimate objectives with property taxes – but only insofar as they pass the test of proportionality and if the differentiations are not based on the personal characteristics or the situation of taxable persons. This is in fact underlined in paragraph 61 of the reasoning of the Decision, but too narrowly, because the reasoning only refers to the problem of permanent residence in a real property as the criterion for the differentiation of taxation between so-called officially occupied and officially unoccupied real property.
 
Especially when taxing real property, which is in fact a part of the modern tax policy, the legislature should be reserved with regard to the tax rate ([due to possible] interference with Article 33 of the Constitution). The real property tax should be implemented in a manner such that it functions especially as a proportionate repayment to local communities for the benefits that these communities and the local environment ensure for the use and enjoyment of real property. Therefore, also in comparable states the real property tax is more or less a direct tax source of local communities or they have an important influence on its determination.
 
The tax regulation must limit, as much as possible, the possibility of arbitrariness, which is caused by the so-called zoning of the state with regard to the hypothetical value of real properties, which are classified into 19 value zones. A consequence of this in practice is that, for instance, two identical real properties that are in fact separated only by a path between them can be valued significantly differently. This, of course, causes a feeling of injustice and arbitrariness, without the possibility of a simple and effective procedure for rectifying the alleged and actual arbitrariness.
 
The manner of the adoption of tax legislation, except the obligation that taxes may only be determined by law (Article 147 of the Constitution), is in fact not a subject of constitutional review. However, such a complex law that affects all real property owners, i.e. the majority of the population in the state, requires – if sensible, effective, and just taxation of real property is to be introduced that does not lead to arbitrariness and thus is in conformity with the principle of tax justice – a legislative procedure in which there is enough possibility for well-considered decision-making that also enables taxable persons to be informed of their duties and rights. The adoption of such legislation as the real property tax in an expedited procedure is not merely inappropriate. Since it may cause [the adoption of] constitutionally disputable solutions and may introduce a regulation that is questionable from the viewpoint of the provisions of the Constitution, as is the case in the case at issue, the adoption of such law by the expedited procedure is also constitutionally questionable and it is certainly inappropriate. An important aspect of legal certainty also lies in ensuring an appropriate transitional period that enables both the state and its authorities as well as taxable persons to prepare for the introduction of the tax. Rushing in the adoption of such a complex tax legislation as the real property tax leads in our circumstances to the situations that we have witnessed and that do not contribute to the strengthening of the recognition of a state governed by the rule of law.
 
 
Dr. Ernest Petrič
Judge
Type of procedure:
review of constitutionality and legality of regulations and other general acts
Type of act:
statute
Applicant:
A group of deputies of the National Assembly, the National Council, the Urban Municipality of Koper, and others
Date of application:
16.12.2013
Date of decision:
21.03.2014
Type of decision adopted:
decision
Outcome of proceedings:
annulment or annulment ab initio establishment – it is inconsistent with the Constitution/statute
Document:
AN03688