In February 2023, the subrogating Judge of Federal Court 1 of the Province of Corrientes, Gustavo Fresneda, granted the action filed by the plaintiff and issued a judgment in the case “Kunin, Beatriz Miriam c/AFIP s/ acción meramente declarativa de inconstitucionalidad”, declaring the unconstitutionality of the Coronavirus Wealth Tax (“Aporte Solidario y Extraordinario para Morigerar los Efectos de la Pandemia“) established by Law No. 27. 605 and regulated by Decree No. 42/2021 and AFIP General Resolution No. 4930/2021.
In the ruling, the Judge determined that the Coronavirus Wealth Tax constitutes a contraposition to the fundamental principles set forth in the National Constitution. More precisely, the existence of the Coronavirus Wealth Tax violates the constitutional principles and guarantees of the right to property and the principle of non-confiscation (protected by Articles 4, 14, 17, 17, 33 and 75, paragraph 2 of the National Constitution), the principle of reasonableness (contained in Article 28 of the National Constitution) and the principle of contributive capacity (embodied in Articles 4, 16, 17, 28 and 33 of the National Constitution).
In order to reach this conclusion, the Judge made a historical analysis of the constitutional principle of “non-confiscation”. To this end, he emphasizes that confiscation consists of the absorption of a substantial part of the property and/or income produced by the assets. Regarding Income Tax, in the precedent “Candy” (2009), the Supreme Court of Justice of the Nation determined that for confiscation to occur, there must be an absorption by the State of a substantial portion of the income or capital. There it was determined that, to judge the existence of confiscation, the maximum constitutionally admissible quantum (set by the Court) is 33%.
Therefore, if the application of a tax to a particular case exceeds 33% of the total income produced, it can be affirmed that there is confiscation. In addition, the Court requires conclusive evidence (on behalf of the plaintiff) that evidences the alleged confiscation. That is why, from the precedent “Sol de Mayo S.A.” (2010), the Court considered the accounting expertise as indispensable evidence for unconstitutionality actions to proceed.
In the present case, through the accounting expert opinion, it appears that the Coronavirus Wealth Tax would absorb approximately 88% of the plaintiff’s income in the year 2020. This would cause a clear absorption of the income that was already taxed by the Personal Property Tax and the Income Tax, resulting confiscatory considering the precedents established by the Court. Furthermore, the percentage of the income that would be absorbed by the Solidarity Contribution, added to Personal Property and Income Tax for the fiscal year 2020, would be approximately 145% of the total income of the plaintiff during that fiscal year.
It is extremely important to clarify that double or multiple taxation is not confiscatory. What should be questioned is the effect on the substantial portion of the plaintiff’s income.
Although the claim of unconstitutionality applies to each particular case, this precedent could open a door to new claims against the Coronavirus Wealth Tax. However, it is most likely that this precedent against the Coronavirus Wealth Tax will be appealed by AFIP, and the matter will now be considered by the Federal Court of Appeals of Corrientes.
