Decision of the European Ombudsman on complaint 823/2002/ME against the European Commission

Dear Mr G.,

On 4 May 2002, you made a complaint to the European Ombudsman concerning Regulation 1408/71 and its application in Norway and Sweden.

On 21 May 2002, I forwarded the complaint to the President of the European Commission. The Commission sent its opinion on 9 September 2002. I forwarded it to you with an invitation to make observations, which you sent on 6 October 2002.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

The complainant lodged a complaint with the European Ombudsman in May 2002. The complaint was directed against the European Commission and concerned the application of Council Regulation 1408/71(1) in Norway and Sweden.

The complainant had already addressed the Ombudsman in May 2001 with a complaint about the Commission's failure to reply to two letters asking for information on the unfair application of Regulation 1408/71 in Norway and Sweden (complaint No 744/2001/ME). That complaint was closed in June 2001 since the Commission had replied to the complainant after the Ombudsman's intervention.

The present complaint related to the Commission's responsibility to ensure the functioning of free movement and was thus registered as a new complaint. The complainant, a Norwegian citizen who worked all his life in Norway and moved to Sweden when he retired, put forward the following.

Since the Agreement on the European Economic Area (EEA) came into force in 1994, the complainant has been forced to pay health care taxes in both Sweden ("landstingsskatt") and Norway ("trygdeavgift"). As a comparison, Swedish and Norwegian pensioners living in their home countries only pay one set of taxes, and Swedish pensioners living in Norway do not pay taxes either in Sweden or in Norway. According to the Norwegian Social and Health Ministry, 306 Norwegian pensioners living in Sweden are subject to this double taxation and discrimination compared to other pensioners. Both countries consider that they have the right to charge the complainant for his health care due to the fact that Regulation 1408/71 does not state which country should refrain from charging when one charges via a tax and the other via a fee. According to the complainant, the Commission says that it is aware of the problem but due to the requirement of unanimous decisions in the Council, it has been difficult to make progress.

The complainant considered that it is the Commission's responsibility to make sure that Community legislation does not hinder free movement. However, when free movement is prevented, like in the complainant's case, the Commission cannot only blame the Member States but has a duty, in co-operation with the authorities in Norway and Sweden, to find a solution to the problem.

In summary, the complainant alleged that he is being treated in an unfair and discriminatory way compared to other pensioners. The complainant claimed that it is the Commission's duty, in co-operation with the authorities in Norway and Sweden, to find a solution within the framework of Regulation 1408/71.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission explained that the complainant pays local County tax in Sweden where he lives, which mainly goes to the financing of health care. He also pays Norwegian health care levy on the pension he receives from Norway. In effect, therefore, he has to pay twice for health care. In its reply to the complainant in May 2001, the Commission accepted that the situation is indeed unsatisfactory. There is however little prospect of making progress in the necessary co-ordination of national legislation since both tax and social security provisions require unanimity in the Council.

As regards the Commission's responsibility to bring up the matter with the Norwegian and Swedish authorities, the Commission stated that it is concerned with the existing mismatches between insufficiently co-ordinated tax and social security legislation in the EEA. However, unfortunately, the Commission's powers are too limited to ensure that such co-ordination is brought about.

Technically speaking, the complainant is paying only one levy for health insurance - in Norway. Norway can thus not be reproached with levying such a contribution, which is fully in line with Regulation 1408/71, as it is Norway which has the burden of the sickness benefits granted to the complainant. On the other hand, the County tax collected in Sweden is a tax measure, which serves notably to finance the Swedish sickness insurance scheme, but which cannot be termed a social contribution. In the absence of harmonising measures at EC or EEA level, Sweden cannot be reproached either with making use of its fiscal sovereignty in deciding which expenditure to pay out of these local taxes.

The Commission concluded that, in these circumstances, it cannot be expected to take up the many cases of such mismatches where the legal framework does not permit adequate solutions and where proposals for the modification of this framework have no prospect of adoption.

The complainant's observations

In his observations, the complainant maintained his complaint. He pointed out that he did not blame the Commission for having failed to unify the Member States in taking appropriate measures but for its failure to find other solutions within the existing framework. As the Regulation permits for different options, a fair solution could possibly have been found in co-operation with the countries.

The complainant also stated that before the application of Regulation 1408/71 in Norway, the country of residence had the responsibility for the health care of the retired. He did therefore not have to pay any Norwegian health care levy. However, the Regulation moved the duty to pay for health care back to the country paying the pension, i.e. Norway, who then started charging the health care levy. This would have been understandable if Norway actually had to pay for the complainant's health care in Sweden, but, the complainant pointed out that the Nordic countries had at the same time made an agreement that no repayments should take place between them. This means that Norway is not charged by the complainant's health care.

The complainant was of the view that the way in which Norway applies Regulation 1408/71 is not consistent with the purposes of the Regulation as the effect thereof is that some pensioners pay no taxes or fees and others pay double. The Commission should therefore be obliged to refer the matter to the Court of Justice. The complainant understood that the Commission did consider the complainant's situation to be unfair. He nevertheless found it alarming that some of Europe's most recognised lawyers had still not managed to find a solution after eight years.

THE DECISION

1 The effects and application of Regulation 1408/71

1.1 The complainant is a Norwegian citizen who worked all his life in Norway and moved to Sweden when he retired. He is paying health care taxes in both Sweden ("landstingsskatt") and Norway ("trygdeavgift") as both countries consider to have the right to charge the complainant for his health care due to the fact that Regulation 1408/71(2) does not state which country should refrain from charging when one charges via a tax and the other via a fee. The complainant alleged that he is being treated in an unfair and discriminatory way compared to other pensioners. The complainant claimed that it is the Commission's duty, in co-operation with the authorities in Norway and Sweden, to find a solution within the framework of Regulation 1408/71.

1.2 The Commission admitted that the complainant has to pay twice for health care and stated that the situation was unsatisfactory. There is however little prospect of making progress in the necessary co-ordination of national legislation since both tax and social security provisions require unanimity in the Council. Technically speaking, the complainant is paying only one levy for health insurance (in Norway), as the tax collected in Sweden is a tax measure but not a social contribution. Neither country can be reproached for charging the levy or the tax. The Commission stated that its powers are too limited to ensure that co-ordination is brought about. It stated that it cannot be expected to take up the many cases where the legal framework does not permit adequate solutions and where proposals for the modification of this framework have no prospect of adoption.

1.3 As regards whether the Commission has a duty to find solutions in co-operation with Member States when free movement is not functioning, the Ombudsman notes that it is the Commission's duty, according to Article 226 of the EC-Treaty, to ensure the correct application of Community legislation in the Member States. It must however be noted that Norway is not a Member State of the European Union. In the present case, the Commission has taken the view that both Norway and Sweden have applied Regulation 1408/71 correctly, something that the complainant does not appear to contest. Furthermore, the Commission has the power to take an initiative to change the Regulation. In the present case, the Commission has not taken such an initiative. It considers that amending Regulation 1408/71 has no prospect of adoption due to the fact that tax and social security provisions require unanimity in the Council.

1.4 Thus, it appears that the Commission has not acted in breach of any rule or principle which is binding upon it. There is therefore no maladministration on behalf of the Commission.

2 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the Commission. The Ombudsman therefore closes the case.

The President of the Commission will also be informed of this decision.

FURTHER REMARKS

In the light of the complainant's further comments as put forward in his observations, the Ombudsman informs the complainant of the possibility to lodge a complaint with the EFTA Surveillance Authority as far as Norway is concerned, to the following address:

EFTA Surveillance Authority
Rue de Trèves 74
B-1040 Brussels

The Ombudsman also forwards information to the complainant on this procedure including a complaint form.

Yours sincerely,

 

Jacob SÖDERMAN

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(1) Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community, OJ 1971 L 149/2.

(2) Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community, OJ 1971 L 149/2.