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Decision no. 2014-698 DC of 6 August 2014

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Law supplementing the financing of Social Security for 2014

In the conditions provided for by Article 61-2 of the Constitution, the Constitutional Council was seized of an application relating to the Law supplementing the financing of social security for 2014 on 24 July 2014 by Mr Christian JACOB, Mr Yves ALBARELLO, Mr Julien AUBERT, Mr Olivier AUDIBERT-TROIN, Mr Sylvain BERRIOS, Mr Étienne BLANC, Ms Valérie BOYER, Mr Dominique BUSSEREAU, Mr Jérôme CHARTIER, Mr Guillaume CHEVROLLIER, Mr Alain CHRÉTIEN, Mr Dino CINIERI, Ms Marie-Christine DALLOZ, Mr Lucien DEGAUCHY, Mr Rémi DELATTE, Mr Jean-Pierre DOOR, Ms Marianne DUBOIS, Ms Virginie DUBY-MULLER, Mr Daniel FASQUELLE, Mr Georges FENECH, Mr François FILLON, Ms Marie-Louise FORT, Mr Yves FOULON, Mr Claude de GANAY, Mr Sauveur GANDOLFI-SCHEIT, Mr Hervé GAYMARD, Ms Annie GENEVARD, Mr Guy GEOFFROY, Mr Bernard GÉRARD, Mr Alain GEST, Mr Daniel GIBBES, Mr Georges GINESTA, Mr Claude GOASGUEN, Mr Philippe GOSSELIN, Ms Claude GREFF, Ms Anne GROMMERCH, Mr Serge GROUARD, Mr Jean-Claude GUIBAL, Mr Patrick HETZEL, Mr Denis JACQUAT, Mr Christian KERT, Mr Marc LAFFINEUR, Mr Jean-François LAMOUR, Ms Isabelle LE CALLENNEC, Mr Marc LE FUR, Mr Pierre LELLOUCHE, Mr Jean LEONETTI, Mr Pierre LEQUILLER, Mr Céleste LETT, Ms Geneviève LEVY, Mr Véronique LOUWAGIE, Mr Hervé MARITON, Mr Olivier MARLEIX, Mr Philippe MEUNIER, Mr Jean-Claude MIGNON, Mr Yannick MOREAU, Mr Pierre MOREL-A-L'HUISSIER, Ms Dominique NACHURY, Mr Patrick OLLIER, Mr Bernard PERRUT, Mr Edouard PHILIPPE, Mr Jean-Frédéric POISSON, Mr Didier QUENTIN, Mr Frédéric REISS, Mr Franck RIESTER, Ms Sophie ROHFRITSCH, Mr Martial SADDIER, Mr François SCELLIER, Mr Jean-Marie SERMIER, Mr Thierry SOLÈRE, Mr Claude STURNI, Mr Lionel TARDY, Mr Jean-Charles TAUGOURDEAU, Mr Jean-Marie TETART, Mr Dominique TIAN, Mr Patrice VERCHÈRE, Mr Philippe VITEL and Ms Marie-Jo ZIMMERMANN, Members of the National Assembly.

THE CONSTITUTIONAL COUNCIL,

Having regard to the Constitution;

Having regard to Ordinance no. 58-1067 of 7 November 1958 as amended, concerning the Basic Law on the Constitutional Council;

Having regard to the Social Security Code;

Having regard to the Civil and Military Retirement Pensions Code;

Having regard to the Rural and Marine Fishing Code;

Having regard to the Labour Code;

Having regard to opinion no. 2014-03 of 5 June 2014 of the High Council of Public Finances on draft supplementary finance bills and the supplementary financing of social security for 2014;

Having regard to the observations of the Government, registered on 31 July 2014;

Having heard the Rapporteur;

1. Considering that the applicant Members of the National Assembly have referred to the Constitutional Council the Law supplementing the financing of social security for 2014; that they question its sincerity and the constitutionality of Articles 1 and 9 thereof;

– THE SINCERITY OF THE LAW SUPPLEMENTING THE FINANCING OF SOCIAL SECURITY:

2. Considering that the applicants assert that the Law supplementing the financing of social security is not sincere in that Articles 1, 2 and 3 will result in lower income for the social security budget, which will not be offset by any other equivalent income, violating the principle of full financial compensation for social security contribution exemptions; that this would lead to a deterioration of the macro-economic outlook; that they also assert that the discussion of the draft law did not make it possible to establish whether the sources of funding for this lost income would be developed in the bill supplementing the financing of Social Security for 2015 or in the finance bill for 2015 or to obtain any precise indications as to how the lost income would be made up, thereby violating the requirement of certainty in the discussion of the general terms of financial equilibrium for social security; that this undermines the sincerity of the Law supplementing the financing of social security for 2014;

3. Considering that pursuant to the second subparagraph of paragraph II of Article L.O. 111-3 of the Social Security Code, a law supplementing the financing of social security "shall be comprised of two distinct parts. The first part shall correspond to the part of the law on financing for the year including provisions relating to income and the general equilibrium. The second part shall correspond to the part of the law on financing for the year including the provisions relating to expenditure"; that according to the first phrase of subparagraph 2 of paragraph I of that Article, a law supplementing the financing of social security shall stipulate, with regard to the current year, "in a sincere manner the general conditions of the financial equilibrium of social security, taking account in particular of general economic conditions and their foreseeable evolution"; that it follows that the sincerity of the law supplementing the financing of social security is conditional upon the lack of any intention to distort the broad framework of the balance struck by it for the current year;

4. Considering in the first place that it is not evident either from the opinion of the High Council of Public Finances or the other information submitted to the Constitutional Council that the economic projections for 2014 on which the Law referred is based are affected by any intention to distort the broad framework of its balance;

5. Considering secondly that, on the one hand, the provisions relating to income from the social security schemes provided for under Articles 1, 2 and 3 of the Law supplementing the financing of social security for 2014, which are only required to enter into force from 1 January 2015, cannot have the effect of altering the general conditions of financial equilibrium for the basic mandatory social security schemes for the current year; that on the other hand it will fall to the Government to take account, within the Law on the financing of social security for 2015, of the provisions of the law referred that will have an effect on income from social security schemes in future years and, if necessary, to supplement them with further provisions relating to income in order to ensure the sincerity of the general conditions of financial equilibrium for basic mandatory social security schemes for the coming year;

6. Considering that according to the above, the objections alleging that the Law supplementing the financing of social security for 2014 is insincere must be rejected;

- ARTICLE 1:

7. Considering that Article 1 has the objective of establishing a diminishing reduction of social security contributions on salaries; that to this effect, paragraph I of Article 1 restores a chapter I-quater, including an Article L. 131-10, into title III of book I of the Social Security Code; that this Article L. 131-10 provides for a diminishing reduction of contributions due from salaried workers in relation to social insurance, which are based on gains and remuneration of up to 1.3. times the growth-indexed minimum wage; that it also states the conditions under which the amount of this reduction is calculated and the remuneration to which it is applied; that paragraph III of Article 1 extends the benefit provided for under Article L. 131-10 of the Social Security Code to the scheme applicable to agricultural employees by amending Article L. 741-15 of the Rural and Marine Fishing Code; that paragraph II of Article 1 amends Article L. 61 of the Civil and Military Retirement Pensions Code by providing for a diminishing reduction of the rate of contributions due from agents governed by that Code whose pay is lower than an enhanced index; that paragraph IV of Article 1 provides that paragraphs I to III shall apply to contributions due in relation to remuneration paid after 1 January 2015;

8. Considering that, according to the applicants, the introduction of a diminishing reduction of social security contributions on salaries breaches the distinction between social contributions and taxes of any kind as established under Article 34 of the Constitution and has the effect of distorting the object of the social contributions; that the applicants also assert that in reserving the diminishing reduction of social security contributions only to employees whose "full-time equivalent" remuneration falls between 1 and 1.3 times the growth-indexed minimum wage, notwithstanding that these employees will continue to benefit from unchanged levels of social services, the legislator violated the principle of equality before the law;

9. Considering that Article 34 of the Constitution provides: "Statutes shall determine the rules concerning··· the base, rates and methods of collection of all types of taxes" and "shall lay down··· the basic principles··· of social security";

10. Considering that Article 6 of the Declaration of the Rights of Man and the Citizen of 1789 provides that: “The law··· must be the same for all, whether it protects or punishes”; that the principle of equality does not prevent the legislator settling different situations in different ways, or from derogating from equality for the general interest, provided that in both cases the difference in treatment that results is directly related to the subject of the law established thereby;

11. Considering that pursuant to Article 13 of the 1789 Declaration: "A common contribution is essential for the maintenance of the public forces and for the cost of administration: this should be equitably distributed among all the citizens in proportion to their means”; that, in particular, to ensure the principle of equality is upheld, the legislator must base its judgment on objective and rational criteria according to the proposed objectives; that this judgment must however not jeopardise equality in the payment of public dues;

12. Considering that the contested provisions relate to social contributions for old-age insurance and sickness insurance due from employees covered by the mandatory social security scheme for employees and from employees covered by the mandatory social security scheme for agricultural employees; that these salary contributions for old-age insurance due from employee workers and from agricultural employee workers are mandatory payments establishing rights to payments and benefits granted by the old-age scheme of the mandatory social security scheme for employee workers and by the old-age scheme of the mandatory social security scheme for agricultural employee workers, which are subject to a maximum limit and determined in particular with reference to the duration of contributions and the salaries on which these contributions were made; that these sickness insurance salary contributions due from employee workers and agricultural employee workers are mandatory payments establishing rights to payments and benefits granted by the sickness scheme of the mandatory social security scheme for employee workers and by the sickness scheme of the mandatory social security scheme for agricultural employee workers;

13. Considering that, with the aim of increasing the purchasing power of employees with modest salaries, the legislator provided for a diminishing reduction of the social security salary contributions of employees whose "full-time equivalent" remuneration falls between 1 and 1.3 times the growth-indexed minimum wage; that at the same time it maintained the basis for these contributions and the payments and benefits to which they establish entitlement unchanged for all employees; that accordingly, under the contested provisions, the same social security scheme would continue to finance the same benefits for all insured persons notwithstanding the fact that almost one third of them do not pay the full amount of salary contributions establishing entitlement to the benefits operated by this scheme; that the legislator thus established a difference in treatment that is not based on any difference between the circumstances of the persons insured by the same social security scheme, bearing no relationship with the object of the social security salary contributions; that it follows from the above that the provisions of Article 1 of the law referred, which violate the principle of equality, must be ruled unconstitutional;

- ARTICLE 9:

14. Considering that Article 9 concerns the freezing for 2014 of the annual revaluation of the retirement pensions paid by the basic social security schemes only in cases in which the amount of the retirement pensions received by any individual person exceeds a particular threshold;

15. Considering that, according to the applicants, by limiting the application of the annual revaluation rule to certain pensions, the provisions of Article 9 create a threshold effect between insured persons in comparable circumstances; that this results in a violation of the principle of equality;

16. Considering that paragraph I of Article 9 suspends the application of the rule providing for the annual revaluation of retirement pensions operated by the basic social security schemes in 2014; that the provisions of paragraph II of the same Article provide for an exception to this rule on revaluation where the total amount of old-age pensions due to direct beneficiaries or survivors under statutory schemes or schemes rendered mandatory by law received by any given insured person does not exceed 1,200 euros per month on 30 September 2014; that they also provide in respect of insured persons, the total amount of whose pensions is greater than 1,200 euros but does not exceed 1,205 euros, for a revaluation of the retirement pension operated by the basic scheme according to an annual coefficient reduced by one half; that they provide finally for the application of similar revaluation rules to retirement schemes for which all or part of the pension is expressed in points; that the provisions of paragraph II of the same Article prohibit the adjustment of the annual revaluation coefficient at the second revaluation deadline following the enactment of the law referred;

17. Considering that by reserving the annual revaluation of retirement pensions operated by basic schemes only to pensioners in receipt of retirement pensions falling below a certain threshold, the legislator intended to protect more modest retirement pensions; that to this effect, it took account of the total amount of pension income for the purpose of applying a rule on the revaluation of only pensions operated by mandatory basic social security schemes; that this measure only applies to the revaluation for the year 2014; that it has a maximum impact of 7 euros per month for each pensioner affected; that accordingly, Article 9 does not breach the principle of equality in the payment of public dues; that accordingly, the provisions of Article 9 must be ruled constitutional;

– THE PLACE OF OTHER PROVISIONS IN THE LAW REFERRED:

. The provisions adopted during the first reading:

18. Considering that the first subparagraph of Article 47-1 of the Constitution provides that: "Parliament shall pass social security financing bills in the manner provided by a basic law";

19. Considering that paragraph V of Article 2 amends Article L. 2241-2 of the Labour Code to provide that data concerning "the impact on employment and salaries of the reduced social contributions and the tax cuts and tax credits granted to sectoral undertakings" shall be examined at least once per year during wage bargaining at sectoral level;

20. Considering that these provisions do not have the objective of improving the information available and the control by Parliament over the application of laws on the financing of social security; that accordingly, they have no place in a law on the financing of social security;

. The provisions adopted after the first reading:

21. Considering that, according to the scheme of Article 45 of the Constitution, including in particular its first subparagraph, any additions or amendments that may be made by members of Parliament or by the Government to a draft or proposed bill after the first reading must be directly related to a provision under discussion, i.e. where the bill has not been approved in identical form by both houses; that this requirement does not however apply to amendments intended to ensure compliance with the Constitution, to ensure coordination with texts during examination or to correct substantive errors;

22. Considering that subparagraph 4 of paragraph I of Article 2 amends paragraph Ia of Article L. 241-10 of the Social Security Code on the lump-sum deductions of employer's contributions for the hours worked by the employees referred to in Article L. 7221-1 of the Labour Code; that letter C of paragraph VI of Article 2 provides that these new provisions shall enter into force in respect of remuneration paid after 1 September 2014;

23. Considering that the amendment introducing the aforementioned provisions was made during the new reading before the National Assembly; that at this stage of the procedure these additions were not directly related to any provision still under discussion; that they were not intended to ensure compliance with the Constitution, to ensure coordination with texts during examination or to correct substantive errors; that it follows that subparagraph 4 of paragraph I and letter C of paragraph VI of Article 2 were adopted according to a procedure which was unconstitutional; that they must be ruled unconstitutional;

24. Considering that there are no grounds for the Constitutional Council to raise any other question of compatibility with the Constitution ex officio,

HELD:

Article 1.- The following provisions of the Law supplementing the financing of social security for 2014 are ruled unconstitutional:

- Article 1;

- subparagraph 4 of paragraph I, paragraph V and letter C of paragraph VI of Article 2.

Article 2. Article 9 of the Law is constitutional.

Article 3.- This ruling shall be published in the Journal Officiel of the French Republic.

Deliberated by the Constitutional Council in its session of 6 August 2014, sat on by: Mr Jean-Louis DEBRÉ, President, Mr Jacques BARROT, Ms Claire BAZY MALAURIE, Ms Nicole BELLOUBET, Mr Guy CANIVET, Mr Michel CHARASSE, Mr Renaud DENOIX de SAINT MARC, Mr Valéry GISCARD d'ESTAING, Mr Hubert HAENEL and Ms Nicole MAESTRACCI.