By: Andrés López
The idea of a new fiscal or legal tax system is not an ideal of the constitutions or an ephemeral idea, but an essential obligation, which should not be in hands of the bureaucracy or political candidates.
Creating a new tax system must always start from the tax principles that inspire it, and the main idea is not to stop being coercive but to stop being “authoritarian and highly discretionary”; in this sense, we have to date in Guatemala’s constitutional principles that regulate the tax activity and also fiscal activity of the “tax authority”, which must always be attached to the norm (principle of reserve of Law) and move away from the fickle interpretations in which many times it falls in the exercise of the fiscal activity of the entities with taxing power. Remember that the legal nature of the tax is nothing more than its foundation and that justifies its subjection to the taxing power of the State, legally, all taxes, as an institution of public law, constitute a unilateral obligation coercively imposed by the State by virtue of its power of empire, but never an authoritarian submission.
Note that in order to achieve a fair and equitable system, the “intuito persona” aptitudes of the taxpayer must be taken into account, whether is a moral or natural person, according to the provisions of Article 243 of the Political Constitution of the Republic of Guatemala, which reads as follows: the tax system must be fair and equitable so that the tax laws can be structured according to the principle of capacity to pay; and in this sense the legislator, in spite of his “indubio pro legislatoris”, must fix the parameters that make effective this principle that limits the power of the State as a creditor of the tax, using progressive rates, purify the taxable bases of each type of tax excluding the necessary expenses to be able to receive the income and without falling into fines or the same confiscatory taxes, thus avoiding “killing the goose that lays the golden eggs”.
So, we have a tax system that must be governed by at least two of the tax principles that are considered basic: legality and capacity to pay. Currently, the Guatemalan system is based on a tax system whose maximum purpose is to collect taxes under an annual goal set by the superintendence of the tax agency, under the pretext of supporting the needs of the State, which we know does not occur in all cases when the tax is collected, because how much need of the State can be to support the payment of bureaucrats appointed by hand or the stratospheric telephone expenses of an official on duty? to give an example. Regardless of the destination and quality of public spending, it is accepted that every tax system must be fair and equitable, and the principle of legality allows us to give these nuances to the taxes, and when analyzing these in their different forms and that constitute the tax structure of a country, it must be done in a unitary form.
In our country, the fiscal policy has been poorly conducted throughout many governmental periods, one and another government has tried to implement tax packages that reactivate the economy, but unfortunately they fail to control public spending, and much less if a tax evasion culture has been created in citizens and Guatemalan companies, due to the lack of trust and the perception that tax equity and justice is nonexistent, or at least unequal, and does not encourage the taxpayer to adopt a system that is favorable and simple, and here are the statistics that indicate that about 17% of “formal” taxpayers are those who are effectively controlled (read formally registered with the Tax Administration), leaving the remaining 83% of the economically active population in the universe of the informal economy, and this is one of the most influential factors that impact the fact that the collection bases are not more favorable for tax collection, since the controls and pressure on formal taxpayers increase, regardless of their ability to pay, when the opposite effect could be produced and thus broaden the base with the consequent effects of redistribution of the burden, and facilitate controls and, in brief, simplify the country’s tax collection system, I think that this is where the efforts of an integral tax reform should be focused, to simplify the determination and liquidation of the tax, broaden the base and reduce the tax rates, with the other elements that accompany this new tax system.
The tax or fiscal legal system may be supported by a natural person, a group of persons or a territorial collectivity and the income available to such person, group or collectivity, but for the reasons stated above, such system must be based on a tax or fiscal legal system inspired by basic constitutional principles, which are: Principle of Legality or Reservation, which is no more than that the taxing power must be fully exercised by means of legal rules. There can be no taxation without a prior law establishing it, hence the Latin aphorism “nullum tributum sine lege”. And also, the Principle of Contributive Capacity or capacity to pay: which is the material limit as to the content of the tax regulation, guaranteeing “justice and reasonableness”. All taxation must be established according to the economic capacity of individuals or legal entities, otherwise it would lead to arbitrariness or irrationality. Without leaving out others that are closely related such as the principles of Generality, Equality, Proportionality, Non-Confiscation, Non Solvet et Repet, Convenience or Comfort, Economy, No double (internal) taxation, etc.
In my opinion and considering the above considerations, it can be concluded that some basic changes to form a fair and legal tax system according to the current needs of the country, including the payment of the taxpayers obliged to the same may be:
- To feed an inclusive tax system where the creation of the bases of collection corresponds solely to the Congress of the Republic through the issuance of specific tax laws, leaving out the analogical interpretation, where no taxpayers may be instituted, nor obligations, exemptions, exonerations, discounts, deductions or other benefits, nor tax infractions or penalties nor any of the other bases of collection established in Article 239 of the CPRG may be created, modified or eliminated.
- Include in the laws that create taxes, the procedures by which the tax shall be levied and collected, leaving out the regulations that develop the laws since they lack legal force in the tax field and thus expanding the sense of the principle of legality.
- All tax laws must expressly include within the articles the prohibition of interpretation, other than grammatical or literal, by the active subject through its tax collection entities, with the sole purpose of not using in practice the discretionary criteria of what effectively constitutes generating facts, taxpayers, deductions and the corresponding infractions and their penalties.
- Eliminate exemptions that are openly improper, and that do not have constitutional rank, in accordance with the principle of generality, equality, capacity to pay, and tax justice.
- Proceed to eliminate, as mandated by Article 243 of the CPRG, all those taxes that to date constitute double internal taxation, leaving out those that are clearly unconstitutional for such reason.
- Broaden the tax base, since it turns out that the lower percentage that is controlled by the Tax Administration, bears the highest tax burden and as a consequent effect, inequality is created, which violates constitutional guarantees and the principle of generality.
- Finally, it is important to emphasize that the powers of tax inspection and control of the current system, which are increased with a certain periodicity, are not the solution to increase tax collection; on the contrary, they asphyxiate capital and cause capital flight and, in the national case, conversion to the informal market. Therefore, a proposal is required that, simplifying the determination of taxes and respecting the capacity to pay and tax equity through tax laws that integrate the system, allows for increasing tax collection and the quality of expenditure.