July 05, 2011
Last week, the European Court ruled against France in a case concerning a tax demand claimed from the Jehovah’s Witnesses. The amount: over 57.5 million Euros. In Association Les Témoins de Jéhovah c. France, the Court focuses on the impact of the taxation on the association’s main source of funding – and on its subsequent ability to assure its members the free exercise of religion – as well as on the lack of precision of the law under which the association was taxed. In the background of the case, there are however various elements worth keeping in mind if one wants to get a fuller sense of the case and the issues ultimately at stake.
In 1995, a parliamentary report entitled “Sects in France”, classified the Jehovah’s Witnesses as a sect. The association claimed that the report was followed by a series of measures aimed at its marginalization. It was in this context that Les Témoins de Jéhovah were subjected to a tax audit. During the discussions of the parliamentary report at the National Assembly, the Budget Minister stated that the tax audit could be the first step of a process that disrupts the sect profoundly or leads to its dissolution (para. 10).
On the basis of the information collected in that audit, the association was required to declare the manual gifts received from 1993 to 1996. The association refused to submit the declaration asking instead for the application of the tax exemption applicable to gifts and legacies to liturgical associations, unions of liturgical associations and authorized religious congregations. Following the refusal to submit the requested declaration, the association was subjected to an automatic taxation procedure with regard to the manual gifts disclosed to the tax authorities in the course of the audits. In 1998, Les Témoins de Jéhovah were notified of a supplementary tax assessment for about 45 million Euros.
In assessing whether there has been interference with the association’s freedom of religion, the Court makes an interesting analysis centered on the financial impact of the taxation and on the ensuing implications for the association’s and its followers’ religious activities. The French government argued that the taxation did not have any effect on the applicant’s freedom of religion adding that, if the payment of the debt ultimately led to the association’s dissolution, nothing would prevent its reconstitution. The Court disagreed with the government given the amount claimed by the tax authorities. The Court considered that the taxation of manual gifts had the effect of cutting vital resources of the association, which in practice was no longer able to assure its members the free exercise of religion. The taxation in question thus threatened the association’s continuance, or at least seriously hindered the internal organization, the functioning of the association and its religious activities. In brief, in view of the impact of the taxation on the association’s resources and on its ability to conduct its religious activities, the Court concluded there has been interference.
In the next stage, however, the Court cautiously limits its analysis to the first part of the inquiry usually carried out to determine whether the interference is justified. The interference was unacceptable basically because it was not “prescribed by law.” The analysis thus focuses on whether the tax provision in question – Article 757 of the General Tax Code according to which manual gifts “disclosed” to tax authorities were subject to gift tax – was clear enough to be foreseeable. In a nutshell, it was not. The Court concluded it was impossible to know whether Article 757 was applicable to legal entities and thus to Les Témoins de Jéhovah as the provision gave no details about the targeted “donee”. Legislative history showed that it concerned only individuals. As for the concept of “disclosure” of gifts, the Court observed that this was the first case where the submission of accounting records in the context of a tax audit was said to be the equivalent of “disclosure”. For the Court, such an interpretation would have been difficult for the association to foresee.
Judge Costa spells out his hesitation in a separate opinion observing that, had certain questions had to be dealt with, they would have been delicate and maybe even “serious” in the sense of Article 30 of the Convention (relinquishment of jurisdiction to the Grand Chamber). He makes clear that he has adhered to the majority basically because he believes the foreseeability condition was not met. As Nicolas Hervieu put it recently in Combats pour les droits de l’homme, the Court seems to be ruling “a minima,” avoiding any “less neutral” appreciation of the French government’s behavior toward the Jehovah’s Witnesses. Indeed, the Court managed to offer protection to the Jehovah’s Witnesses in France based on a rather technical (and minimal) analysis of the clarity and foreseeability of the tax law. The Court has yet to rule on the association’s request for cancellation of the supplementary tax assessment, restitution of the amounts seized during the tax audit and non-pecuniary damage, costs and expenses.