Public Finances – Taxation – Principles; Municipalities
Jurisdiction for prescribing public utility taxes
Authority to levy taxes
RULING No. 848/2017
13 of December of 2017
The Ombudsman challenged the constitutionality of a number of norms regarding the Municipal Civil Protection Fee (taxa, hereinafter TMPC) established and charged by Lisbon Municipal Council, on the grounds that this so called “fee” was not in fact not a fee, but a tax, in which case, and under the Constitution of the Portuguese Republic (CRP), it had to be created by a law passed by the Parliament. The Constitutional Court upheld this understanding and declared the unconstitutionality with generally binding force of the norms contained in Articles 59 (1) and (2), 60(1) and (2), 61 (first part only), 63(1) and (2) and 64(1), all of the General Regulations governing Fees, Prices and other Revenues of the Municipality of Lisbon (RGTPRML), as republished by Notice no. 2926/2016, published in Series 2 of Diário da República no. 45 of 4 March 2016.
I – The Court said that the fact that a municipality qualifies a levy that it has created as a “fee” (taxa) is not decisive for determining the levy’s actual legal nature, particularly for the purpose of knowing whether or not it should be included within the framework of the exclusive legislative competence of the Parliament provided for in Article 165(1)(i) of the CRP. The levy’s nature will always be derived from the interpretation of its applicable legal regime, and neither the nomen iuris given by the legislator, nor the mere affirmation that the latter is the consideration due for the provision of an item or use of a service by the tax payer, is relevant in this respect.
II – The generic terms in which the General Regime governing Local Authority Fees (RGTAL, approved by Law no. 53-E/2006 of 29 December 2006) provides for the “municipal fees [that] apply to utilities [and comparable items and services] provided to private persons or generated by the activities of municipalities, particularly […] the provision of services in the field of the prevention of risks and civil protection” does not preclude the need to analyse each specific levy in order to ascertain whether it should be considered a true fee (taxa).
III – In the past, the Constitutional Court had taken the view that, in the bilaterality test to which levies must be subjected in order to be qualified as ‘fees’, there is no need for a rigorous economic equivalence between the amount of the fee and the item or service being provided, but that a certain degree of proportionality is required if the levy is an actual rate (taxa).
IV – The so-called “Lisbon Municipal Civil Protection Fee” (TMPC) provided for in the RGTPRML, was partially based on the value of the real estate.
V –The Court took the view that the abstract nature of the municipality’s action in the civil protection field, to which the TMPC applied, did not allow for the establishment of an effective or presumed relationship between those actions and the specific persons or groups benefiting from them. The passive subjects of this fee – the ratepayers – were thus determined arbitrarily, and the justification that consisted of aggregating the costs of all the various municipal civil protection activities into a “service” provided by the municipality was a fictional device based on an undifferentiated range of acts without individualised recipients.
VI – The rules governing the applicability of the TMPC revealed a structure that overlapped the Municipal Tax on Real Estate Properties (IMI). This made it clear that the levy was not based on an economic correlation with the services provided by the municipality, which in turn meant that the TMPC did not possess the nexus that characterises bilateral levies because it made it impossible to be guided by an idea of proportionality between the “fee” and the provision of services. The basis was instead the taxpayers’ capacity to pay the fees, as determined by the fact that they hold the property rights to buildings.
VII – Unlike other levies which the Court found to be “fees” (see Rulings nos. 65/2007, 316/2014, and 179/2015), there was no clear functional proximity between the “service” and the subjects subjected to the levy, so as to narrow down the universe of beneficiaries in order to allow for the identification of a sufficiently strong presumption of a benefit. In the TMPC, the spectrum of supposed beneficiaries was too wide and the outlines of the proposed presumption were undefined, to such an extent that it was not possible to affirm that the “fee” was not arbitrary, given that the relationship between the provision of services and the payment of the fee was vague and indirect.
IX – This meant that none of the objective elements of the TMPC revealed the commutative relationship that would have had to be presupposed for it to be a true fee, nor could that relationship be validly identified using analogies with the features of synallagmatic contracts (e.g. by assimilating the concept of insurance). The Court therefore found that the levy in question did not constitute a fee.
X – The TMPC was also partly calculated in accordance with the taxable asset value of buildings that presented “an added risk related to their run-down, empty or ruined state” [Article 59(2), RGTPRML].
XI – Although buildings that are run-down, empty or in ruins do represent an added risk of the need for an (hypothetical) intervention by the civil protection services, the Court said that the TMPC was not determined in accordance with that concrete risk. On the pretext of the existence of a situation in which there is an (abstract) added risk, the amount of the levy was simply increased; and yet it continued to be based solely on the capacity to pay revealed by the fact that an entity holds real property rights.
XII – Consequently, and although the TMPC concerned a hypothesis that can be seen as entailing added risks, the latter did not determine the amount of the rate, which was instead based on the value of the real estate and not on the concrete provision of civil protection services.
XIII – The Court said that this meant that the objective elements of the TMPC, as identified in point X, could not therefore not be used as the basis for finding the commutative relationship which must be presupposed in a true rate.
XIV – The TMPC was not a fee, nor a “financial contribution”, as alternatively pleaded by the City Council. The Court rejected this argument, saying that inasmuch as there was no other legal act containing a generic empowerment that would allow municipalities to approve other types of levy, there were only two possibilities: either a certain levy can be considered to match the concept of “fee” set out in the RGTAL; or, if this is not the case and the levy is a “tax” the underlying norms would have to be seen as incompatible with Article 165(1)(i) of the Constitution.
XV – The Court therefore found that the norms which provided for the TMPC as set out in Articles 59(1) and (2), 60(1) and (2), 61(first part only), 63(1) and (2) and 64(1) of the RGTPRML, were organically unconstitutional because they violated the provisions of Articles 103(2) (taxes can only be created by laws) and 165(1)(i) (legislative competences partially reserved to Parliament) of the CRP.