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The Supreme Court has ruled that the Federal Tax Agency (AFIP) in not entitled to seize tax payers' goods or bank accounts without a previous court's order. The first notifications were issued last night, but the measure is to be officially announced today. This is not the only setback affecting tax collection. The Supreme Court has also ruled the unconstitutionality of the minimum expected profit tax in case taxpayers can demonstrate having negative balance.
The above-mentioned restraint imposed to the Federal Tax Agency takes place after a lawsuit filed by company Intercop (Salta province) against AFIP in 2008. The department led by Ricardo Echegaray stipulated tax foreclosure auctions on the company's properties amounting ARG$ 100,000 on unpaid income, value-added taxes. Due to an amendment included in the law of tax procedures, the Federal Tax Agency was entitled to seize properties. Also, AFIP was only required to follow additional legal proceedings in case a search warrant was needed. The trial court ruled the modification was unconstitutional, but Salta's Federal Court overturned the ruling.
This decision becomes a hard blow to one of the main measures implemented by the Federal Tax Agency when it comes to fight tax evasion. Even though the impact on the tax collection is relatively low, embargoes are efficient means of coercion to be exerted on tax evaders, according AFIP's officials.
Meanwhile, the measure related to the minimum expected profit tax will have a major impact on tax incomes. As of today, companies paid 1 percent over their assets, even if they failed to meet their profits, according to Act 25,063. This allows the Treasury to receive a minimum amount of money, especially on recession time.
The Supreme Court's ruling is to be based on the reasons already used by the Federal Court for Contentious-Administrative proceedings in occasion of pronouncing judgement in favour of the verdict's unconstitutionality in the Hotel Hermitage case. The postulate explaining that the company gains in value because of the mere existence of assets is rejected. The fact that only the company's assets are considered when calculating taxes -instead of the company's liabilities - has also been rejected.
Seven years ago, former General Attorney Nicolás Becerra issued a ruling on this subject defending the application of this tax claiming it was suitable to be applied on 'non earning assets.'
