a) Hungary / b) Constitutional Court / c) / d) 17-12-2009 / e) 127/2009 / f) / g) Magyar Közlöny (Official Gazette), 2009/184 / h) .
Keywords of the Systematic Thesaurus:
Institutions - Public finances - Taxation - Principles.
Fundamental Rights - Civil and political rights - Rights in respect of taxation.
Keywords of the alphabetical index:
Tax, income, calculation / Tax, spouse / Taxation, legal basis / Family allowance.
"Quasi taxation" of family allowance was against the Constitution.
I. With effect from 1 September 2009, family allowance was classified as non taxable emolument. The family allowance should have been split fifty-fifty between each individual living in a spouse or common-law spouse relationship in the same household, and in the case of single parents only half of the family allowance was taken into account for taxation. The family allowance was not classified as a non-taxable emolument in certain circumstances, such as payment of a higher level of family allowance to long-term sick or mentally-impaired children, or where the family allowance was claimed by somebody entitled to it in his or her own right, or where benefits were paid to foster parents.
II. The Court held the provision under which, as a general rule, family allowance was classified as a non-taxable emolument, unconstitutional. Under Article 70/I of the Constitution everyone in the Republic of Hungary must contribute to public revenues in accordance with their income and wealth. In the Court's view, the challenged provision extended taxpayers' tax liability to income that they had not actually received, since the parent not in receipt of family allowance was required to declare it as a non-taxed emolument, as well as the parent who was in receipt of it.
The Court directed the repeal of the legislation concerned with retroactive effect. However, the Court emphasised that joint taxation of spouses, when household income is divided by two, would not be unconstitutional.
Under that scheme, the income tax of a spouse would be calculated by applying the tax function to half of the sum of taxable incomes of the spouses. The resulting amount would then be doubled to determine the couple's tax liability.