A case has been initiated before the Constitutional Court on provisions regulating the taxation of winnings from lotteries and gambling
A case has been initiated before the Constitutional Court on the application of the Administrative Regional Court “On Compliance of Section 8(3)(204) and Section 9(1)(5) of Law On Personal Income Tax with the first three sentences of Article 105 of the Constitution of the Republic of Latvia”.
Section 8(3)(204) of the Personal Income Tax Law provides that winnings from lotteries and gambling shall be included among the income of a natural person on which tax is payable, unless otherwise provided in Section 9(1)(5) of this Law. Section 9(1)(5) of this Law provides that the annual taxable income shall not include and shall not be taxed lottery and gambling winnings if the amount of the winnings (their value) (their total amount) during the taxation year does not exceed EUR 3,000.
The applicant examines an appellation of the administrative case initiated at the person’s application on cancellation of the decision made by the State Revenue Service. The State Revenue Service found that the plaintiff had not included income from lottery and gambling winnings in their taxable income for 2019 and 2020. Thus, by the decision of the State Revenue Service changes were made to the plaintiff’s income declarations and determined the personal income tax payable. It follows from the application that there is a dispute in the administrative case as to how the taxable amount in respect of winnings is to be determined. The applicant submits that, when examining the administrative case in question, it is required to apply the contested provisions, which together provide that winnings from lotteries and gambling, the total amount of which (their total sum) during the taxation year exceeds EUR 3,000, are subject to tax. However, the concept of winning is understood to mean the total amount paid to a player by the gambling or lottery organiser in the event of a win, irrespective of the player’s contributions to the game. Thus, under the contested provisions, situations may also arise in which the tax payable is greater than the winning minus the costs of participation in the game.
According to the applicant, the means chosen by the legislator are not suitable for achieving the legitimate aim of the restriction of the fundamental right contained in the contested provisions, since the departure from the objective net principle is not justified, and in this way the income is in fact taxed twice – the tax has already been paid on the money paid in when the relevant income was earned. Therefore, the contested provisions do not comply with the first three sentences of Article 105 of the Constitution.
The Constitutional Court invited the institution that has issued the contested law – the Saeima – to submit to the Constitutional Court a reply with the explanation of the actual circumstances of the case and the legal basis by 13 September 2023.
The deadline for preparation of the case is 13 December 2023. The Court shall decide on the procedure and date for hearing the case after the case is prepared.
Linked case: 2023-33-01