This case concerns the violation of the right to property guaranteed by Article 1 of Protocol No. 1 to the European Convention on Human Rights. The Court found that this right was violated due to the actions of the Croatian authorities in relation to the seizure of the applicant’s property.
Namely, Radelić was the director and co-owner of a company that fell into financial difficulties and was unable to meet its obligations, including tax obligations to the state. After the debt could not be recovered from the company, domestic courts, relying on the General Tax Act, established Radelić’s joint and several liability for the tax debt, even though no administrative or criminal proceedings had been conducted against him that would individualize his liability.
The courts, without a detailed analysis of Radelić’s personal responsibility, held him jointly liable, relying on a legal presumption of director liability in cases of irregular corporate operations. They did not examine whether he had specifically contributed to the creation of the tax debt or whether he had the ability to avoid it.
The Court in Strasbourg found that:
- There was a legitimate public interest in tax collection,
- But the state failed to strike a fair balance between that interest and the individual’s rights,
- The applicant was subjected to personal and financial liability without the opportunity to challenge the specific circumstances, which constitutes a disproportionate interference with the right to property.
The Court therefore concluded that there was a violation of Article 1 of Protocol No. 1 and awarded Radelić just satisfaction.
Applicability of the Judgment in the Context of the VAT Law of Bosnia and Herzegovina
Although this specific judgment relates to the circumstances in Croatia, it has significant implications for Bosnia and Herzegovina, especially in relation to Article 63 of the VAT Law, as it emphasizes that directors may only be held liable for a company’s tax debts in accordance with the principles of individual liability, proportionality, and fairness.
Namely, Article 63 of the VAT Law of BiH provides for the possibility of joint and several liability for individuals who enabled or approved the non-payment of VAT. In practice, this means that the Indirect Taxation Authority (ITA) holds the company’s director liable for unpaid taxes and recovers the tax debt from their personal assets.
However, in line with the principles from the Radelić v. Croatia judgment, such liability must comply with the right to property. This implies that:
- There is a lawful basis for the limitation of the right to property,
- The limitation serves the public interest, for example, to ensure tax collection, but
- A fair balance must be maintained between community interests and the protection of individual rights, meaning that the measure must not be excessive or disproportionate.
The Radelić judgment underscores the importance of protecting the right to property and the need for proportionality in state measures. In the context of BiH, this means that the application of Article 63 of the VAT Law—which allows directors to be held liable for a company’s tax obligations—should be carefully considered to ensure compliance with the right to property and the principles of fairness.
Thus, since the Indirect Taxation Authority does not even initiate court proceedings against company directors but instead, as an administrative body, directly obliges them to pay the company’s tax debts without establishing their actual responsibility—whether the director contributed to such a situation at all and to what extent—this judgment could be highly beneficial to courts when deciding in such cases.
Natasa Krejić, Attorney-at-Law
E-mail: natasa@afsajic.com
