By three decisions handed down over the last year, the Strasbourg Court has declared 12 complaints, all named "Christian Religious Organization of Jehovah's Witnesses against Armenia", inadmissible. The cases concerned imposition of value-added tax (VAT) on imported literature - on 67 shipments received between 2007 and 2015, to be exact. In short, the organization claimed that, first, the shipments should be tax-free pursuant to article 12 of the Freedom of Conscience Act ("Monetary and other gifts received by religious organisations, as well as income received from citizens shall not be subject to taxation"); secondly, the customs authorities arbitrarily determined the customs value of the imports based on, for example, the prices the Bible Society of Armenia (affiliated with the dominant Armenian Apostolic Church) sold imported religious literature.
Up until March 2007, there were constant problems receiving regular shipments of religious literature, which should be tax-free but which Customs arbitrarily reassessed at unpredictable higher values and then imposed a value-added tax of 20 percent. As the amounts involved were very small, the charges were paid reluctantly. Then, on March 29, 2007, Customs officials reevaluated periodicals at an enormously higher rate, from US$0.05 to US$1.00 per journal, despite having been provided all necessary documentation under Article 87 of the Customs Code, proving the actual value of these periodicals and that they were tax-free donations. This increased the value-added tax for this shipment from US$4,580 to US$65,150.
This unjustified adjustment created considerable hardship for the Religious Organization of Jehovah’s Witnesses in Armenia, as its activity is financed solely by voluntary donations. While trying to carry out the customs clearance of this shipment from Georgia, another shipment of more than seven tons of literature was received from Germany. Customs flagged all subsequent shipments in their computer system, preventing them from being cleared. Therefore, all shipments of Bible literature, even copies of the Holy Bible in Armenian, were prevented from being imported, in spite of strenuous efforts to reason with officials. This works a hardship on Jehovah’s Witnesses in Armenia, who did not receive any of their religious literature for over one year. In April 2008, the Customs officials finally released a shipment of literature, but only after they were warned that this egregious violation would be reported to European officials and were reminded of the real possibility of litigation. Shipments are now being released, but payments are being made under protest, and the issue of the imposition of VAT and the dilatory refusal to release the shipment of literature is being litigated.
The General Counsel of jehovah's Witnesses, 2009
In April 2007, the customs authorities drastically increased the “customs value” of imported religious periodicals published by Jehovah’s Witnesses, The Watchtower and Awake!, to 15 times the actual cost of producing that literature. To receive literature shipments, Jehovah’s Witnesses have been forced to pay excessive VAT on that donated religious literature. Litigation was initiated over this matter in April 2008, and since then Jehovah’s Witnesses have filed over 35 lawsuits in order to import their literature at reasonable declared values. As a result of the litigation, the “customs value” of the donated literature imposed by the customs authorities was eventually reduced but still remains more than two and a half times the actual costs of producing the literature.
Because of the exorbitant “customs value” arbitrarily imposed on the religious literature, the Witnesses were forced to reduce the amount of literature imported into Armenia by more than one-half, which has had a significant impact on their freedom of religion.
The European Association of Jehovah's Christian Witnesses (EAJW), 2011
Not only is the excessive taxation imposed on the religious literature of Jehovah’s Witnesses arbitrary and unfair, it is also discriminatory. The Christian Religious Organization of Jehovah’s Witnesses in the Republic of Armenia has repeatedly requested that the State Revenue Committee of Armenia provide evidence that the Armenia Apostolic Church—the State Church in Armenia—is also required to pay VAT on its donated property. The State Revenue Committee has ignored those requests, thus strongly supporting the credible inference that the VAT imposed on the religious literature of Jehovah’s Witnesses is discriminatory and is targeted to impose an excessive financial burden on the manifestation of their religious beliefs in Armenia.
EAJW, 2014
In a report the Jehovah’s Witnesses issued during the year, despite a legal provision that any donations to religious groups are tax free, the government required the Witnesses to pay “tens of thousands of euros” (tens of thousands of dollars) in value added tax (VAT) on imports of religious literature they had received as a donation and distributed free of charge within the country. According to the report, the Jehovah’s Witnesses filed eight applications between 2010 and June 2015 with the European Court of Human Rights (ECHR), seeking a VAT exemption, after they had exhausted legal remedies within the country. The report added that the government had lowered the VAT rate in July but that the Jehovah’s Witnesses were still obliged to pay the tax at the new rate. Private businesses and secular NGOs have reported similar difficulties, but they did not have the legal avenues available to religious groups. Other religious minority groups have also reported being required to pay VAT on donations that were imported from abroad; however, they have opted not to pursue legal action.
The US Department of State, 2016
In July 2015, the Armenian customs authorities substantially lowered the customs value that it arbitrarily imposes on the donated religious literature of Jehovah’s Witnesses for the purpose of calculating VAT. While this is a welcome development, it does not resolve the underlying problem, and the Witnesses are still unlawfully required to pay VAT.
EAJW, 2018
Between 2007 and 2015 the applicant organisation has received more than sixty shipments of religious literature. The State Revenue Service (“the SRS”) has required it to pay value added tax (“VAT”) for customs clearance, while the amount of VAT due has been calculated based on custom values determined by the SRS and not those declared by the applicant organisation. As a result, the applicant organisation has sometimes been required to pay more than twice the amount it had declared. ... Between 2008 and 2016 the applicant organisation has been involved in more than fifty sets of judicial proceedings, seeking to dispute the authorities’ decision to impose VAT on its imports of religious material and the manner of calculating the tax due. None of those proceedings had a positive outcome for the applicant organisation
ECtHR, 2020
By two decisions dated December 17, 2019, the European Court dismissed 11 complaints that concerned 66 shipments. As to the very first shipment, a complaint was declared inadmissible due to non-compliance with the six-month time-limit; as to the further 55 shipments - for failure to provide "any summary of facts pertaining to the proceedings in question, an analysis of Convention complaints, if any, in relation to the individual circumstances of those proceedings" (only copies of the relevant domestic decisions were submitted) (application no. 25103/10). Ten complaints were dismissed for failure to appeal decisions of the first instance Administrative Court before other domestic courts; the organization claimed "that this was not an effective remedy in view of the fact that all its previous appeals in identical cases had been rejected" - the argument that is possibly correct but it's difficult to assess whether it was properly substantiated because of lack of access to case files (applcation no. 15124/15 and 9 others).
More recently, on September 29, 2020, the Court ruled on another complaint. The decision deals, among others, with interpretation of the above-mentioned article 12 of the Freedom of Conscience Act. The domestic courts held that it applies only to "gifts" (art. 594 of the Civil Code) whereas "the shipment in question had constituted a 'donation'" (art. 605 of the Civil Code): "It is clear from the above-mentioned provisions [of the Civil Code] that the notions of ‘gift’ and ‘donation’ are unequivocally different from each other and they regulate different legal relations of a different nature" (the judgment of the Administrative Court). The European Court avoided reviewing that and other conclusions on their merits, generously deferring to the national authorities in the light of absence of a disproportionate burden:
In the Court’s view, in the present case it has not been demonstrated that the impugned measures ... have had such an effect on the applicant organisation as to fundamentally undermine its ability to develop its religious activity. It has been required to pay 20% and 30% VAT on the customs value of its shipments of periodicals and CDs, and DVDs respectively, whereas the books and Bibles have not been subjected to taxation. In addition, the measures in question have not had any impact on the applicant organisation’s places of worship. ... The Court notes, however, that [the applicant organization] did not submit that it could not afford to pay the customs clearance tax imposed on its imports or that it had found itself in such financial hardship that it had been prevented from guaranteeing its adherents’ freedom to exercise their religious beliefs. Rather, the applicant organisation submitted that it could have used its funds to develop its religious activities, had it not been forced to pay a tax it should have been exempt from paying. Nor did the applicant organisation complain that as a result of the measures in question, it had been unable to import a sufficient quantity of periodicals, CDs and DVDs, having regard to the total number of its adherents (§§ 35, 36).
The Court sees no reason to question the domestic courts’ interpretation and application of either section 12 of the Freedom of Conscience and Religious Organisations Act or section 2 of the VAT Act, considering that it is primarily for the national authorities, notably the courts, to interpret and apply domestic law. Furthermore, in so far as the tax sphere is concerned, the Court’s well-established position is that States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test. ... The Court considers that in a complex sphere such as the imposition of VAT, the respondent State should be afforded a particularly wide margin of appreciation (§§ 50, 51).
The Court observes at the outset that the applicant organisation was required to pay 20% and 30% VAT on the customs value of its shipments of periodicals and CDs, and DVDs respectively. In the Court’s view, those rates, from the quantitative standpoint, could not be considered exorbitant. Furthermore, there is nothing to indicate, nor has it been suggested by the applicant organisation, that the levying of such a sum in VAT fundamentally undermined the applicant organisation’s financial situation – one of the factors to which the Court has given weight when gauging whether a fair balance has been struck in a given case (§ 53) (citations omitted).
The problem with this approach is that the domestic courts' interpertation of the article 12 is obviously erroneous. The Civil Code defines donation as a kind of gift, as scholars (like Sukhanov, Vitryanskiy, Braginskiy) who drafted the CIS Model Civil Code - after which the Armenian Civil Code was modeled - affirm, and both its articles 594 and 605 are located in chapter 34 named "Gift". Describing the concepts of "gift" and "donation" as "unequivocally different" makes no more sense than saying the same about the concepts of, say, "human" and "citizen" (or "tree" and "oak"). Moreover, it would be weird and illogical if the law disincentivized religious organizations from accepting donations, defined as public benefit gifts, in favour of non-restricted gifts.
More generally, these cases illustrate the European Court's approach to avoid deciding on complex or controversial cases by excessively deferring to domestic authorities and treating complaints with excessive formalism, especially if there is no gross violation of human rights. Add to this its failure to deal with important and urgent cases promptly or at least in reasonable time. As a result, domestic authorities are allowed to discriminate against and mistreat their citizens under the guise of legitimate application and enforcement of laws. The shameful treatment of post-coup complaints from Turkey, NGOs' complaints from Russia or of the Austrian Muhammad case are sad examples. The Court's approach is understandable, given its limited resources, exorbitant caseload and constant challenges to its authority from national governments, but it's still wrong and problematic.
For sure, while these tax cases are also proper examples of that problem, they aren't the best ones. I understand what legitimate reasons could exist for the irregularities - like the failure to appeal certain Administrative Court decisions, which would be a waste of time and money - made by the JW legal team. But they should have expected the Court's reluctance to dig deep into complex national laws and through mountains of documents. And while their resources are limited, they are still better equipped to protect their rights and interests than many other Armenian churches, non-profits and companies, not to say about citizens, so I think they should have tried to comply with procedural requirements to the maximum extent possible.