a)  Hungary / b)  Constitutional Court / c) / d)  10-05-2011 / e)  37/2011 / f) / g)  Magyar Közlöny (Official Gazette), 2011/49 / h)  CODICES (Hungarian).
Keywords of the systematic thesaurus:
General Principles - Rule of law.
General Principles - Legality.
Institutions - Public finances - Taxation - Principles.
Fundamental Rights - Civil and political rights - Right to dignity.
Fundamental Rights - Civil and political rights - Non-retrospective effect of law - Taxation law.
Keywords of the alphabetical index:
Tax, punitive / Legislation, retroactive / Competence, restricted, Constitutional Court.
On the basis of its competence to protect human dignity, the Constitutional Court reviewed the constitutionality of a tax provision. The Court argued that the retroactive effect of the 98 per cent tax was an affront to human dignity.
The Constitutional Court had already annulled the 98 per cent tax in October 2010. In its Decision 184/2010 the Court found the tax unconstitutional on the basis that it taxed payments received according to former statutory regulations and on the basis that it was confiscatory.
After this Court decision a constitutional amendment (Article 40/I.2) was adopted allowing any income from public funds to be taxed retroactively for a maximum of five years. In a parallel move, Parliament passed a constitutional amendment which prohibited the Constitutional Court from reviewing financial laws, unless such laws affect the right to life and dignity, the protection of personal data, freedom of conscience and rights concerning Hungarian citizenship.
Parliament also adopted Act CXXIV of 2010 according to which, with effect from 2005, public sector employees must pay extra taxes (i.e. 98 per cent) on severance payments which exceed the HUF 3.5 million threshold. There is a cap for managers of state-owned enterprises, companies owned by local governments and senior officials in the public sector, including municipalities.
The Constitutional Court annulled again the retroactive effect of the 98 per cent tax. The decision was based on the Court’s competence to protect human dignity. The Court argued that the retroactive effect of the tax was an affront to this right, since it attempted to tax gains on which tax had already been lawfully paid. Under the decision, the tax office cannot collect tax under the new 98 per cent tax rules for income earned in 2005-2010 and any tax already collected under this category must be refunded.
Due to the wording of the law, the decision also pertains to payments effected in 2010, even if such payments did not fall within the ' retroactive’category.
Justice László Kiss and Justice Miklós Lévay attached concurring opinions to the decision.
Supplementary information:
Two days after delivering the decision, Parliament approved a new law under which a 98 per cent tax can be levied on severance payments made after 1 January 2010.
-   Bulletin 2010/3 [HUN-2010-3-009].