On the right of a court to individualise penalty charges for unlawfully reduced social insurance contributions
The Constitutional Court, by its ruling of 19 May 2022, declared that the provision of paragraph 2 of Article 19 of the Law on State Social Insurance (wording of 29 June 2016) “Where during a verification it is established that social insurance contributions have been unlawfully reduced, the amount of social insurance contributions that is underpaid shall be calculated and a penalty charge equal to 50 per cent of the amount shall be imposed”, insofar as, after establishing the said severe sanction applicable to the violators of law for the unlawfully reduced social insurance contributions, it does not allow the court to individualise that sanction by taking into account the nature of the violation of law and the mitigating and other circumstances, is in conflict with paragraph 1 of Article 109 of the Constitution and the constitutional principle of a state under the rule of law. The Supreme Administrative Court of Lithuania has applied to the Constitutional Court in an administrative case in which the dispute arose regarding the proportionality of penalty charges imposed by means of decisions of the tax administrator (State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania) on a person for the unlawful reduction of social insurance contributions.
The Constitutional Court noted that, after the penalty charge of a flat-rate amount had been established in the impugned provision of paragraph 2 of Article 19 of the Law on State Social Insurance, which, as mentioned above, may also be quite high, i.e. after this severe sanction applicable to violators of law had been consolidated, the court neither under this nor under other laws is allowed to reduce for a person who has committed the violation of law provided for in that provisions (i.e. who unlawfully reduced social insurance contributions) the amount of the penalty charge imposed by law, i.e. the court has no opportunity to individualise the severe sanction established in the Law on State Social Insurance.
The Constitutional Court emphasised that, under the Constitution, the legislature must establish in this or other laws such a legal regulation that would create an opportunity for a court to individualise the strict sanction (established in the impugned provision of paragraph 2 of Article 19 of the Law on State Social Insurance) – 50 per cent of the missing amount of social insurance contributions – for unlawfully reduced social insurance contributions.