The Constitutional Court, having considered the case “On determining the issue of compliance with the Constitution of Article 16, Part 1 of Law No. HO-285-N ‘On Making Amendments to the Tax Code of the Republic of Armenia’ based on the application of at least one-fifth of the total number of National Assembly deputies,” has decided to terminate it.
According to Iravaban.net, the Constitutional Court’s procedural decision was published on June 10.
At least one-fifth of the total number of National Assembly deputies (representatives: Chairman of the Chamber of Advocates of the Republic of Armenia, lawyer Simon Babayan, lawyer Aram Vardevanyan, National Assembly deputy Artsvik Minasyan) had appealed to the Constitutional Court on January 22 regarding the compliance of the aforementioned articles with Article 73 of the Constitution.
The applicants argued that all this is directly connected with the guarantees of independence and self-governance of legal practice provided by the Constitution.
In their assessment: “(…) With the adoption of the Law, not only are the aforementioned guarantees directly endangered, but it has also resulted in the state, ignoring the legal protection nature of legal practice, equating it to such fields as, among others, casino activities, foreign currency buying and selling activities, implementation of games for profit, organization of lotteries, and others.
“The mentioned fields of activity are not only incompatible in any way, but also per se endanger the prerequisites for the unhindered implementation of legal protection activities, which is considered a priority of the rule of law state policy,” the application states.
The applicant also noted that when the state reviews its tax policy regarding legal services, it cannot fail to take into account the direct impact of legal services on people’s rights to receive legal assistance and effective judicial protection in the Republic of Armenia.
They addressed the provision of legal assistance on pro bono grounds, emphasizing that under conditions of increased tax burden and the provision of value-added tax regime, the legislative regulations adopted regarding the provision of legal assistance by lawyers on a voluntary, free basis will practically cease to function, such assistance will not be provided to persons in need of it, considering that such assistance is also subject to taxation.
The respondent recorded that the main purpose of the legislative change is to ensure the possibility for economic entities to operate under conditions of clear tax accounting and mild administration.
Regarding the issue of considering the application of the combined burden of value-added tax and profit tax as an increase in tax burden, the respondent emphasizes: “(…) the severity of that burden increase is not at a level that would make meaningless the essence of a person’s constitutional rights, including the right to receive legal assistance, it is not at a level that would outweigh the most important purpose of preventing negative circumstances arising from possible risks in the service provision sector, shadow activities, dishonest or tax-evading or tax-underpaying economic operators.”
The Constitutional Court found that the mentioned subjects, proceeding from their high constitutional-legal status, should show a higher level of diligence and, in each specific case when challenging the constitutionality of this or that legal act or its provision(s), properly substantiate the causal relationship between the challenged provision and the possible violation of the value/right protected by the Constitution.
According to the Constitutional Court, regarding the taxation system conditions for legal services provided after January 1, 2025, for contracts concluded by legal service providers before January 1, 2025, the issue related to the moment of service provision should be resolved by the law enforcer (tax authority/courts).
Taking into account the above, the Constitutional Court found that regarding the second question raised by the applicant, the applicant did not show due diligence in substantiating the alleged unconstitutionality of the challenged provision, which, in itself, excludes the raised question from having the content of a constitutional-legal dispute.
Based on the above and taking as grounds the requirements of Article 60, Part 1, Point 1, and Article 29, Part 1, Point 1 of the Constitutional Law “On the Constitutional Court,” the Constitutional Court
DECIDED:
To terminate the proceedings of the case “On determining the issue of compliance with the Constitution of Article 254, Part 3, Point 3 of the Tax Code of the Republic of Armenia and Article 16, Part 1 of Law No. HO-285-N ‘On Making Amendments to the Tax Code of the Republic of Armenia’ adopted on 12.06.2024 regarding the revision of the taxation regime for legal service providers, based on the application of at least one-fifth of the total number of National Assembly deputies.”
