BARSOM AND VARLI v. SWEDEN
Inadmissible
Corneliu Bîrsan;David Thór Björgvinsson;Egbert Myjer;Elisabet Fura;Ineta Ziemele;Isabelle Berro-Lefèvre
The applicants, Mr Afram Barsom and Mr Levent Varli, are Swedish nationals, who were born in 1962 and 1974 respectively and live in Södertälje. They were represented before the Court by Mr R. Armholt, a lawyer practising in Stockholm. s, may be summarised as follows. Mr Barsom owns 31.25% and Mr Varli owns 43.75% of the active shares of a limited company, Restaurang Välfunnet Holding AB, which in turn owns a restaurant, Restaurang Välfunnet. Both applicants are involved in the daily running of the restaurant which is open for lunch, dinner and, during weekends, a discotheque. During 2004 the Tax Authority (Skatteverket) in Stockholm carried out a tax audit of the restaurant covering the period from June 2001 to July 2002. It found that the bookkeeping of the restaurant was severely deficient and that it had not kept the necessary evidence of the business’s expenses and sales. Based on certain calculations and statistics, the Tax Authority estimated that the restaurant had omitted to account for and declare all its sales in its bookkeeping and tax returns. Consequently, it found it necessary to make a discretionary assessment of the restaurant’s unrecorded sales, which it calculated at SEK 2,700,000 (approximately EUR 292,300) and to adjust its tax returns accordingly. On 8 December 2004, on the basis of the results from the tax audit, the Tax Authority decided to increase the applicants’ income from business for the tax assessment years 2002 and 2003 and to impose tax surcharges on them amounting, in total, for Mr Barsom to SEK 106,084 (approximately EUR 11,460) and for Mr Varli to SEK 144,512 (approximately EUR 15,610). As the applicants, together with a third person, were the main owners of the company which owned the restaurant, and as they were in charge of its daily running, the Tax Authority found that most of the unrecorded sales from the restaurant were to be considered as taxable income, in the form of salary, for the applicants and the third person. Moreover, since the applicants had failed to provide correct and complete information concerning their income, the Tax Authority considered it justified to impose tax surcharges on them and found no grounds on which to remit the surcharges. In January 2005 the applicants and the company appealed against the decisions to the County Administrative Court (länsrätten) of the County of Stockholm, disputing the Tax Authority’s findings and claiming that there were no grounds for changing their tax returns or imposing tax surcharges on them. In both their appeals and their supplementary submissions, the applicants stated that they wished to rely on the same grounds as the company had in its appeal and supplementary submissions to the court. The applicants and the company were represented by the same lawyer. On 14 March 2005 the Tax Authority made the obligatory reassessment of its decisions of 8 December 2004 but decided not to change them. Following this, it forwarded the appeals to the County Administrative Court. On 31 August 2005 the applicants requested the County Administrative Court to grant them legal aid to engage a lawyer to represent them. They referred to Article 6 § 3(c) of the Convention, claiming that since their cases concerned tax surcharges they had a right to free legal aid. The applicants stated that they lacked the means to pay for a lawyer since they had been obliged to pay the additional taxes and tax surcharges, as they had not been granted respite from the payment. Furthermore, they alleged that, as immigrants in Sweden, they did not have a complete command of Swedish or knowledge of the Swedish legal system and that their cases were complicated and involved significant amounts of money for them. On 8 September 2005 the County Administrative Court rejected the applicants’ request. It first noted that, according to the Legal Aid Act (Rättshjälpslagen, 1996:1619), the possibilities for a businessman to be granted legal aid in tax matters were very limited and it could only be granted if there were special reasons. It further observed that Article 6 § 3(c) of the Convention laid down that a person was entitled to free legal assistance only if he could not afford it himself and the interests of justice so required. It also noted that the domestic case-law indicated that there was no absolute right to legal aid in cases involving tax surcharges but that regard must be had to the amount at stake (the tax surcharges) and the complexity and nature of the case. Turning to the particular circumstances of the applicants’ cases, the court considered that the material invoked by the parties was relatively voluminous but that the legal questions at issue and, in relation to these, the ancillary questions concerning tax surcharges were not of such a character as to warrant a grant of legal aid, under either Swedish law or the Convention. The applicants appealed against the decisions to the Administrative Court of Appeal (kammarrätten) in Stockholm, repeating their claims and adding that, having regard to their financial situation, the tax surcharges amounted to substantial amounts for them. They added that they needed professional help to show that the Tax Authority’s audit report and decisions were flawed. On 18 October 2005 the Administrative Court of Appeal upheld the lower court’s decisions in full. The applicants lodged a further appeal to the Supreme Administrative Court (Regeringsrätten), which, on 5 April 2006, refused them leave to appeal. The tax proceedings are still pending before the national courts. The relevant rules concerning legal aid in Sweden are to be found in the Legal Aid Act (Rättshjälpslagen, 1996:1619 – hereinafter “the Act”). Section 7, paragraph 1, of the Act provides that legal aid may be granted if the person applying for it is in need of legal assistance and cannot obtain it by other means. Moreover, pursuant to section 8 of the Act, legal aid may only be granted if it is reasonable for the State to contribute to the costs, having regard to the nature and importance of the matter, the value of the contentious issue and other relevant circumstances. In any event, in matters concerning taxes and various fees for taxes, legal aid may be granted only when there are special reasons (section 11, paragraph 1, point 3). Furthermore, section 13, paragraph 1, of the Act stipulates that legal aid may not be granted to a person who is, or has been, a businessman where the contentious issue has arisen in connection with the business, unless there are special reasons relating to the nature and limited scope of the business, his or her financial and personal situation and other relevant circumstances. The Act defines a businessman as a natural person who runs a business of an economic nature that can be described as professional, or who has a deciding influence over a legal entity which runs such a business (section 13, paragraph 2). From the case-law of the national courts, it appears that when a case involves tax surcharges, Article 6 § 3(c) of the Convention is applicable, but that consideration must be given to the amount of the imposed tax surcharges as well as to the nature and character of the case. Moreover, only if there is a risk of particularly serious consequences or if complicated legal questions arise should free legal assistance be granted on the basis of the Convention in cases involving tax surcharges (Regeringsrättens Årsbok 2003 ref 56). Section 8 of the Administrative Court Procedure Act (Förvaltningsprocesslagen 1971:291) requires the administrative courts to ensure that the circumstances of each case are clarified to the extent that its character demands. Where necessary, the courts must give directions for the case-file to be supplemented with the requisite information.