2023-11-07 14:44:31
The Constitutional Court endorses the tax on large fortunes. As planned, the Plenary Session of the court debated in the session on November 7 the possible illegality of the tax that the Government approved at the end of 2022 and about which the Community of Madrid presented an appeal for unconstitutionality. However, finally has rejected the request of the Government of Isabel Díaz Ayuso and has supported the tax that assets of more than 3 million euros must pay included in Law 38/2022, of December 27.
According to the court, “the autonomous government charged the tax with violating the ‘ius in officium’ of the deputies (art. 23.2 of the Spanish Constitution), having been introduced by way of amendment during the processing of a bill that had another object. At the jurisdictional level, it denounced that the new tax violated the financial autonomy of the Community of Madrid and the reserve of organic law on the transfer of taxes, in relation to the wealth tax (IP) (arts. 156.1 and 157.3 CE). In addition, he considered that the principles of economic capacity and non-confiscation (art. 31.1 CE) were also violated since the tax rates of the new tax are very high. Finally, he blamed it for going against the principle of legal certainty (art. 9.3 CE), due to having a degree of retroactivity that affects already existing situations”. However, he adds, “The ruling rejects all challenges.”
Why the Constitutional Court endorses the tax on large fortunes
The Constitutional reviews the reasons why it has decided to endorse this tax, which since its entry into force has been criticized by both jurists and tax advisors and some regional governments.
“Starting with the procedural nature, the constitutional doctrine on the right to amendment applies, according to which the art. 23.2 of the Constitution is only violated when there is an obvious and manifest lack of connection between the content of the amendment and the initiative for which it is presented.. This is not the case of the tax on large fortunes, since the bill that gave rise to Law 38/2022 had as its objective the creation of two taxes (energy and banking) whose purpose was to provide – like the contested tax – of public revenue with which to face the consequences of the energy and price crisis caused by the war in Ukraine. Therefore, the amendment meets the requirement of homogeneity,” the statement explains.
Regarding the alleged violation of financial autonomy, the ruling recalls that “the tax on large fortunes is complementary to the Wealth Tax (IP) – a state-owned tax transferred to the CCAA – so that the amount paid for this is discounted to determine the amount of the new tax, which It does not affect or interfere with any of the regional powers. about the IP. The exempt minimum, the rate, the deductions and the IP bonuses applicable in the Community of Madrid will continue to be, solely and exclusively, those decided by it, without the tax on large fortunes implying any change.
According to the Constitutional Court, the main complaint of the Government of Isabel Díaz Ayuso is that “its residents with assets greater than 3 million euros (the only ones who are subject to the tax on large fortunes) will have to pay the new state tax, with which Madrid loses its fiscal attractiveness to attract said wealth to its territory. For the Court, This objective cannot prevent the State from exercising its competence to establish new taxes.. If in the past the Constitutional Court has already recognized that the State can occupy an autonomous fiscal space to harmonize it, with even more reason it will be able to do so in its own fiscal space, such as this one,” he emphasizes.
Thirdly, the court explains that it also rejects the violation of the principles of non-confiscation and economic capacity of art. 31.1 of the Constitution. In this sense, it points out that “in the face of the argument of the Community of Madrid that the tax rates of the new tax are very high in relation to the current profitability of the markets, the ruling recalls that the tax on large fortunes would only have a confiscatory effect in case of depleting the value of the assets (about which the lawsuit argues nothing), not the income generated by the encumbered assets, which is a different manifestation of the economic capacity. And, as far as this last principle is concerned, The appeal also does not provide data on the alleged disproportionate nature of tax rates. Furthermore, the ruling cites data extracted from AEAT statistics according to which the effective tax rate on large fortunes is below 0.5 percent of the value of the taxed assets, so it is not disproportionate.”
Finally, and with regard to the alleged retroactivity, the ruling emphasizes that “the tax on large fortunes is not applied in relation to a tax period, but only by reference to a specific date (December 31, 2022 and 2023). Therefore, on the date of entry into force there was no situation that had begun to produce effects, so “It is not retroactive and the principle of legal certainty is not violated.”
Private votes
Several members of the Constitutional Plenary have formulated private votes on the sentence. Specifically, the ruling has included 7 votes in favor and 4 against: those of the judges Ricardo Enríquez Sancho, Enrique Arnaldo Alcubilla, Concepción Espejel Jorquera and César Tolosa Tribiño, who consider that the appeal of the Community of Madrid should have been upheld, declaring article 3 of Law 38/2022 unconstitutional and void. December 27.
Among his arguments, he highlights that there is no connection between the temporary solidarity tax of large fortunes that was introduced via amendment to the regulations on taxes on banking and energy companies, which violates the political and financial autonomy of the Autonomous Communities, and that The fact that it came into force on December 29 “has prevented the taxpayers of the tax from organizing their economic relations in sufficient time”, especially taking into account that “the creation of the new tax was not foreseeable”, so ” “abounds in the violation of the constitutional principle of legal certainty”.
A postponed debate
The debate on the legality of the tribute to large fortunes was scheduled for the Plenary Session on October 24. However, the high volume of pending matters forced the date to be postponed until this week.
According to the Constitutional Court, it is the “first deliberation” of this matterwhose presentation fell into the hands of the progressive magistrate María Luisa Balaguer. The proposed sentence that Balaguer defends, and that the Plenary of the Constitutional Court has decided, overturned the appeal presented by the Community of Madrid and endorses the taxconsidering that it does not violate the financial autonomy of the CCAA or the principles of legal certainty and non-confiscatorial nature.
In addition to the Madrid Government, the Junta de Andalucía, the Assembly of Madrid, the Xunta de Galicia and the Government of Murcia have also filed an appeal for unconstitutionality against the tax on large fortunes. “processes that must be resolved by applying the established doctrine in relation to the appeal of the Governing Council of the Community of Madrid”as clarified by the court.
Madrid will approve a law to keep the proceeds
The president of the Community of Madrid, Isabel Díaz Ayuso, has announced that the regional government will urgently process a new law that allows them to collect the tax on large fortunes, so that it remains “in the Madrid coffers.”
According to Ayuso, the regulations will be presented “as soon as possible” so that “this collection remains in the hands of the Madrid taxpayer” and, in this way, “they can return it” to them. And he has insisted that the tribute to great fortunes goes “against the heritage, work and effort of the Madrid taxpayer. Obviously we are not going to stand still.”
More than 620 million in collection
The so-called Solidarity Tax it affects to net assets exceeding 3 million euros, is accrued on December 31 of each year and the declaration is submitted between July 1 and 31. This is a state tax that is, in principle, temporary in nature, as it has been designed for the years 2023 and 2024.
To avoid double taxation, taxpayers They only pay taxes on the part of their assets that have not been taxed by their autonomous community in the Wealth Tax. In this way, in the solidarity tax of large fortunes a deduction is applied to the amount paid in the Wealth Tax, deducting from the payment of this new tax the amount paid by the Wealth Tax.
According to Treasury data, this tax figure It has already raised 623 million euros. In total, 12,010 large estates, which represent 0.1% of taxpayers in Spain, have paid this tax, complementary to the Heritage tax, an average fee of 52,000 euros
Most of the revenue comes from the Madrid’s community (10,302 taxpayers who have contributed 555 million euros), followed by Andalusia (865 filers who have paid 29.7 million) and Galicia (91 taxpayers with a fee to pay of 9.8 million).
These three communities account for more than 95% of the taxpayers and the collection, and are precisely the ones that have filed an appeal for unconstitutionality, along with Murcia.
An unnecessary and unconstitutional tax, according to experts
He Institute of Economic Studies (IEE) presented a report at the beginning of the year together with several professors of Tax Law and Public Finance in which the reasons for considering that the tax appears to be unconstitutional are outlined. For example, it has begun to be applied retroactively, it gives different treatment to national and foreign assets, and because it limits regional powers in tax matters. Furthermore, they fear that this tax will be extended over time, hindering collection and new investments by large estates. “Relocation is assured,” according to the CEOE think tank.
In that line, the Spanish Association of Tax Advisors (AEDAF) He has also criticized the way in which the Government carried out this fiscal change. Specifically, he has emphasized his “reprehensible” parliamentary proceduresince it was included as an amendment in the bill to introduce new temporary taxes on energy companies and banks, and its intended harmonizing effect with the Wealth Tax has been blurred in a certainly significant way, despite being “a reaction of the State to a lawful decision of the autonomous communities, such as subsidizing the Wealth Tax”.
Furthermore, he has insisted that the approval of measures with such “poor technical quality” It contributes to the multiplication of litigation, in addition to the pressure on the taxpayer, the advisors and the judicial system. They have also described it as a “abuse” and a “possible fraud of parliamentary law that generates legal uncertainty,” which “makes us turn on all the alarms and all the alerts because there are many violations.”
Another reason that could overthrow the tax is that, according to advisors and many other experts, it prevents the free movement of capital, a guarantee of the Treaty of the European Union, since it establishes a different treatment for resident and non-resident taxpayers. The latter, for example, do not enjoy the exempt minimum of 700,000 euros.
From the Spanish Association of Tax Advisors (AEDAF) They also saw signs of unconstitutionality, although they encouraged taxpayers to declare the tax and subsequently appeal it, in the hope that the TC would strike down the tax and those affected could claim the amounts paid.
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