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Decision no. 2014-435 QPC of 5 December 2014

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Mr Jean-François V. [Exceptional levy on high incomes]

On 2 October 2014 the Constitutional Council, in the conditions provided for by Article 61-1 of the Constitution, received an application for a priority preliminary ruling on the issue of constitutionality raised by the Conseil d'État (decision no. 382284 of 2 October 2014) on behalf of M. Jean-François V., raising the conformity of paragraph III of Article 2 of Law no. 2011-1977 of 28 December 2011 on finances, amended for 2012 with the rights and freedoms guaranteed by the Constitution.

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 General Tax Code;

Having regard to Law no. 2011-1977 of 28 December 2011 on finances, amended for 2012, including in particular Article 2;

Having regard to the Regulation of 4 February 2010 on the procedure applicable before the Constitutional Council with respect to applications for priority preliminary rulings on the issue of constitutionality;

Having regard to the observations of the applicant, registered on 7 October and 8 November 2014;

Having regard to the observations of the Prime Minister, registered on 24 October 2014;

Having regard to the documents produced and appended to the case file;

Having heard Mr Xavier Pottier, appointed by the Prime Minister, at the public hearing on 25 November 2014;

Having heard the Rapporteur;

1. Considering that paragraph I of Article 2 of the aforementioned Law of 28 December 2011 on finances, amended for 2012 introduced into the General Tax Code a section entitled "Exceptional levy on high incomes"; that the sole article contained in this section, Article 223-sexies, subjects taxpayers liable to income tax to an exceptional levy on high incomes; that pursuant to paragraph III of Article 2 of the Law of 28 December 2011: "A. – Paragraph I shall be applicable with effect from income tax for the year 2011 and until income tax for the year in which the public sector deficit is zero. This deficit shall be established under the conditions laid down by Article 3(2) of Council Regulation (EC) no. 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community. "

" B. – Paragraph II shall apply to capital gains achieved on sales concluded after 1 January 2011";

2. Considering that, according to the applicant, in subjecting to the exceptional levy on high incomes income that, prior to the publication of the Law of 28 December 2011, had been subject to a deduction in discharge of income tax obligations, the provisions of paragraph III of Article 2 of this Law violate the guarantee of rights proclaimed by Article 16 of the 1789 Declaration of the Rights of Man and the Citizen; that moreover, these provisions violate the principle of equality;

3. Considering that the application for a priority preliminary ruling on the issue of constitutionality relates to the phrase: "with effect from income tax for the year 2011 and" appearing in the first phrase of letter A of paragraph III of Article 2 of the Law of 28 December 2011;

4. Considering that pursuant to Article 16 of the 1789 Declaration: “A society in which the observance of the law is not assured, nor the separation of powers defined, has no constitution at all”;

5. Considering that Parliament is at any time at liberty, when ruling on the matters within its competence, to amend earlier legislation or to repeal it and replace it with new legislation as the case may be; that when doing so, it cannot however deprive constitutional requirements of legal guarantees; that in particular, it cannot impinge upon legally established situations "with effect from income tax for the year 2011 and" appearing in the first phrase of letter A of paragraph III of Article 2 or call into question the effects which may legitimately be expected from such situations without a sufficient reason of general interest;

6. Considering that paragraph I of Article 2 of the Law of 28 December 2011 has the aim of establishing an exceptional levy on high incomes on "taxpayers liable to income tax"; that this levy is applied to the total amount of income and capital gains liable to income tax, without applying the quotient rules laid down under Article 163-0 A of the General Tax Code, increased in accordance with subparagraph 1 of paragraph IV of Article 1417 of the General Tax Code; that it is calculated by applying a rate of "3% to the portion of reference taxable income above EUR 250,000 and lower than or equal to EUR 500,000 for taxpayers who are single, widowed, separated or divorced and to the portion of reference taxable income above EUR 500,000 and lower than or equal to EUR 1,000,000 for taxpayers subject to ordinary taxation" and a rate of "4% to the portion of reference taxable income above EUR 500,000 for taxpayers who are single, widowed, separated or divorced and to the portion of reference taxable income above EUR 1,000,000 for taxpayers subject to ordinary taxation"; that this levy is "declared, controlled and recovered according to the same rules and subject to the same guarantees and sanctions as those applicable to income tax";

7. Considering that in providing that paragraph I of Article 2 of the Law of 28 December 2011 "shall be applicable with effect from income tax for the year 2011", letter A of paragraph III of that Article has the objective of including within the amount liable to the exceptional levy on high incomes both income liable to income tax and other income falling within the definition of reference taxable income, including in particular investment income for which the deductions in discharge of income tax obligations provided for under paragraph I of Article 117-quater and paragraph I of Article 125 A of the General Tax Code as in force in 2011 were made during 2011;

8. Considering that by including within the amount liable to the exceptional levy on high incomes income earned in 2011 that has not been subject to a deduction in discharge of income tax obligations, the legislator did not violate the guarantee of rights proclaimed by Article 16 of the 1789 Declaration;

9. Considering however that the exceptional levy on high incomes was also applied by the contested provisions to income earned in 2011 that has been subject to the deductions in discharge of income tax obligations provided for under paragraph I of Article 117-quater and paragraph I of Article 125A of the General Tax Code; that taxpayers who earned income in 2011 that was subject to these deductions with discharging effect have a legitimate expectation resulting from the application of this legal taxation regime that, subject to the payment of other taxes existing at the time, they will be free from any other tax in relation to this income; that by applying this new levy to income that has been subject to these deductions in discharge of income tax obligations, the legislator called into question the effects which may legitimately be expected by taxpayers from the application of the regime providing for deductions in discharge of income tax obligations;

10. Considering that the legislator's intention to increase tax revenue does not constitute a sufficient reason of general interest in order to call into question the effects that may legitimately be expected from taxation with which the legislator has associated discharging effect for 2011; that accordingly, the phrase: "with effect from income tax for the year 2011 and" appearing in the first phrase of letter A of paragraph III of Article 2 of the Law of 28 December 2011 cannot be interpreted as permitting the inclusion within the amount liable to the exceptional levy on high income due in respect of income for 2011 of investment income that has been subject to the deductions in discharge of income tax obligations provided for under paragraph I of Article 117-quater and paragraph I of Article 125 A of the General Tax Code without causing an unjustified violation of the guarantee of rights proclaimed under Article 16 of the 1789 Declaration; that, subject to this reservation, the contested provisions do not violate Article 16 of the 1789 Declaration;

11. Considering that the contested provisions, which do not violate the principle of equality or any other right or freedom guaranteed by the Constitution, must be upheld as constitutional,

HELD:

Article 1.– Subject to the reservation stated in recital 10, the phrase: "with effect from income tax for the year 2011 and" appearing in the first phrase of letter A of paragraph III of Article 2 of the Law of 28 December 2011 on finances, amended for 2012, is constitutional.

Article 2.– This decision shall be published in the Journal Officiel of the French Republic and notified in the conditions provided for under Article 23-11 of the Ordinance of 7 November 1958 referred to hereinabove.

Deliberated by the Constitutional Council in its session of 4 December 2014, sat on by: Mr Jean-Louis DEBRÉ, President, Ms Claire BAZY MALAURIE, Ms Nicole BELLOUBET, Mr Guy CANIVET, Mr Michel CHARASSE and Ms Nicole MAESTRACCI.

Announced on 5 December 2014.