The General Assembly Meeting of the Constitutional Court has started. Andalusian Supreme Court of Justice rejected the question of unconstitutionality raised by the Contested-Administrative ChamberCeuta and Melilla amended article 21 of article 1 of the personal income tax law of 2014, and The legislator does not have to take inflation into account. to calculate real estate earnings in personal income tax.
The question raised the question of whether the principle of economic capacity in Article 31.1 of the Constitution is valid. required the law to be taken into account. inflation Determining the amount of capital gains arising from the transfer of real estatethus fully nominal capital gains are not taxed.
In the particular case under consideration, The State Tax Administration had claimed personal income tax on real estate gains arising from the transfer of property acquired in 1995 and sold in 2016.without updating the purchase value according to the evolution of the price index between the two years.
However, it applied the wording of article 35.2 of the Income Tax Law in the 2014s.removed the update coefficients of the acquisition value of properties that were in effect until then. The sentence begins from the fact that what is stated is unconstitutional by omission, and that this can only be understood as produced if the Constitution itself imposes the need to dictate certain rules of constitutional development to the legislator and the legislator fails to do so. For this reason.
The economic capacity doctrine
He then recalls the constitutional doctrine on the principle of economic capacity, in which he declared the system of calculating the tax base on the increase in the value of urban land (municipal capital gains) in 2021 unconstitutional. The principle is not only that all taxes are based on a real budget that demonstrates economic capacity, but also that requests that the tax liability be quantified accordingly. However, this second aspect of the legislator a large margin of freedom to determine the amount of tax, according to the criteria of reasonableness and proportionality. The printing of update coefficients for real estate in 2014 was based on the fact that the only item of personal income tax that takes into account the evolution of prices, without justifying this singular treatment, is property earnings.
This emerged in the Report of the committee of experts for tax system reform prepared in February 2014, a few months before the reform under review. Regarding inflation adjustments, TC, referring to the municipal capital gains tax, denied in a precedent that this should be calculated taking into account inflation in any case.. In this case, he ensured that the nominalist principle was consistent with the constitutional order, and that only in “extreme situations” of “particularly acute” inflation would the legislator need to act to prevent inflationary erosion from adversely affecting the principle of economic capacity.
The Court considers the economic situation before and after the 2014 reform, with an average annual inflation of 2.37% for the period 2004-2014 and 1.80% for the period 2014-2023, far from being characterized as “extreme” or “particularly acute”. Likewise, he stresses that the rule under trial cannot be analyzed alone, but rather in conjunction with the rest of the personal income tax provisions that provide preferential treatment to real estate gains over other incomes as they are taxed at lower rates. more than income, salary or work, and also enjoy certain exemptions when they come from their habitual residence.
Reflecting the wide margin that the legislator must recognize in this area, subsequent personal income tax adjustments Many different options for inflation adjustmentdoes not apply to all, some, or none of capital gains over time. The same conclusion is drawn from the analysis of personal income tax in other regions with autonomy in this regard. While inflation adjustment continues to apply for both real estate and other heritage items in the Basque Country, in Navarra it has not been foreseen for any as it has been in the common region since the aforementioned Law No. 26/2014.
The decision concludes It is not possible to deduce from the economic capacity principle that the legislator always and in any case has the obligation to foresee the updating of the acquisition value of the immovables.by separating real estate gains through a special inflation adjustment that does not apply to any other element of personal income tax or other taxes on capital gains such as municipal capital gains or corporate income tax. This is a legitimate option that can be challenged in terms of political or legal expediency, but does not constitute a state of unconstitutionality by omission.
individual votes
The judiciary has individual opinions of judges Ricardo Enríquez Sancho and Enrique Arnaldo Alcubilla. They think that the reform of the calculation of capital gains in personal income tax, carried out by Law No. 26/2014, makes the mere difference between an asset’s value at acquisition and its value at transfer reveal a delicate economic capacity. to taxation, unknownErosion of the snow by the tyranny of time (inflation) purely monetary to the point where they may not have actually occurred, they may well have done so, but for less than nominally stated.
In this way, they anticipate that with this reform, far from taxing any real economic capacity, citizens will be taxed wholly or partially for non-existent manifestations of wealth, in clear contradiction with both the principle of economic capacity and the tax system. . only those specified in art. 31.1 EC. According to that, taxation only in the common lands is not, once again, much more burdensome than in the historical lands of the Basque autonomous community.however, it falls outside current trends in OECD countries in general and in our environment in particular (eg Germany, France, Italy, Luxembourg or Portugal).