- The New Constitution draft establishes several principles and rights regarding taxation matters.
- Some of these principles and rights, such as equality before the law, non-confiscatory taxes, taxes set by law, and no pre-determination of the collected taxes, are recognized in the Constitution currently in force.
- Other principles and rights, such as the “tax system” and the taxation goals, are a novelty compared to the current constitutional regulation.
Main taxation principles and rights set forth in the New Constitution Draft
1. Tax system
We have the right to a “tax system” based on equality, progressivity, solidarity, and material justice principles.
Among its goals, the tax system will have to reduce inequalities and poverty.
2. Non-confiscatory system
The tax system must not, in any case, be confiscatory in scope.
3. Taxes must be set by law
Taxes of any kind or nature can only be created, modified, or repealed by law. The same applies to benefits regarding taxes, the determination of their progression, exemptions, and proportionality, notwithstanding the exceptions established by the New Constitution Draft.
These laws are of necessary presidential concurrence and can originate from a presidential initiative or a parliamentary motion. They cannot originate in popular initiatives of law.
4. Taxation goals
The New Constitution Draft indicates that taxes may aim at goals other than collection. However, they must always take into consideration certain limits such as necessity, reasonableness, and transparency.
Regarding this principle, the draft states that the law may establish taxes on activities that affect the environment and on the use of “natural commons” (bienes comunes naturales), national public property, or State property.
5. No pre-determination of collected taxes
Taxes, whatever their nature, must be collected by the State’s Treasury or the territorial entities’ treasuries, as appropriate, under the New Constitution Draft.
Exceptionally, the law may create taxes on activities or goods identified with a territory that directly benefit such territory’s territorial entity.
Comparison with the Constitution currently in force
1. Tax system
The New Constitution Draft includes the concept of a “tax system” based on the pillar principles of equality, progressivity, solidarity, and material justice. Additionally, it stipulates that the tax system will have, among its goals, the reduction of inequalities and poverty.
The Constitution currently in force does not consider a concept of a tax system. It only mentions the principle of equality regarding the distribution of taxes and other public charges and does not express a specific goal for taxes.
2. Non-confiscatory system
The New Constitution Draft expressly states that the tax system must not, in any case, be confiscatory in scope.
The Constitution currently in force provides that the law may not establish manifestly disproportionate or unfair taxes (tributos manifiestamente desproporcionados o injustos). It has been interpreted that the non-confiscatory principle arises from such mention.
3. Taxes must be set by law
The New Constitution Draft expressly establishes that the creation, modification, and repeal of taxes of any kind or nature, as of the benefits applicable to them, the determination of their progression, exemptions, and proportionality are matters only of the law, notwithstanding the exceptions established by the draft. Such laws are subject to presidential concurrence and may originate from a presidential message or a parliamentary motion.
The Constitution currently in force establishes that people have the right to the equal distribution of taxes in the form established by law, which has been interpreted as a legal reservation of tax matters. These laws are of the exclusive initiative of the President of the Republic (Article 65).
4. Taxation goals
The New Constitution Draft expressly states that taxes may aim at goals other than collection, provided that certain limits such as necessity, reasonableness, and transparency are respected.
The Constitution currently in force does not establish a specific goal for taxation.
5. No pre-determination of collected taxes
The New Constitution Draft establishes the no pre-determination of collected taxes as a general principle of taxation. Exceptionally, it allows the possibility of assigning the collection of a determined tax to a specific territorial entity, provided there is a clear identification between the levied activity or goods and the respective territories.
The Constitution currently in force also recognizes the no pre-determination of collected taxes as a general principle. Exceptionally, it permits the destination of collected taxes to national defense purposes or a region or territory clearly identified with the activity or goods subject to a specific tax.
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