Spanish Tax System: Contributions, Taxes, and Fees
General Tax Act 58/2003 (LGT)
CC. art. 2 LGT. It is a source of Public Revenue (PR) that consists in economic payments required by Public Administration (PA) when a set of conditions of fact are met for which an act of parliament establishes the obligation (OB) to contribute, whose primary aim is to obtain the resources needed to finance public expenditure. Features:
- CC assesses the economic capacity. The principle (PP) of economic capacity is the true principle of justice in the scope of financial order.
- A CC finds its legal base in the existence of economic capacity.
- CC consists of a source of monetary character, although it may also consist of a delivery of goods that possess non-monetary nature.
- CC is never a sanction of an unlawful act, except when this contribution is an extension by a third of a pecuniary OB.
- The purpose of financing public expenditure cannot be identified with the objective (OB) of sanctions.
- CC and sanctions respond to different principles of justice: economic capacity and reestablishing of the violated order, respectively.
- Ability to pay as a prerequisite; it has a non-confiscatory nature (31.1), not a penalty for an infringement.
- It applies not only to nationals but to whoever has economic dealings with Spain or Spanish territory.
Art. 31. CC consists of a pecuniary benefit claimed by PA. Tax rules introduce a set of rights and obligations whose main content is the payment of a determined sum of money. Payment is referred to the use of a right of credit and its corresponding obligation. Art. 58.1 LGT establishes the main obligation of the CC of the passive subject: the payment. It is an *ex lege* obligation; it is created by the will of the law (act of parliament) and the will of the taxpayer is irrelevant. *Ex lege* obligation, according to Art. 20 LGT, is the main financial obligation: payment of money. It arises independent of the will of an individual, but out of the law.
Tax
CC required without consideration whose taxable event consists in operations, acts, or facts that reveal the existence of an ability to pay on the part of the taxpayer (2.2c). Common element with other CC: ability to pay principle. Differential element: without consideration, without any individual return. It is paid due to an ability to pay without the imposed obligation connected to any administrative activity. Features:
- A payment without compensation, anything in exchange.
- *Ex lege* obligation; not contractual, but rather established by the law.
- Ability to pay of an individual is taken into account.
- Not connected to any administrative activity.
Types:
- Personal: The tax established with reference to a particular person. A tax which cannot be imposed without relating to a determinant person.
- Real: Has an objective character, independent from the personal element of the financial relation. It could be established by the norm without reference to any particular subject.
- Subjective: Subjective element refers to personal circumstances of the passive subject is taken into account at the moment of establishing the amount of the tax liability.
- Objective: Personal circumstances of the taxpayer are ignored when calculating the amount of the tax.
- Periodical: Continuous in time; taxes divided in periods.
- Instant: Tax which is exhausted by its nature in a determined period of time, which does not mean that it has a fleeting duration. Example: payment of IVA (VAT) in acquiring an immovable property.
- Direct: Means of imposing; a legal norm establishes the obligation of payment of a tax by a particular person to another person who doesn’t form part of a circle of the obligated ones in the financial relation. No right for compensation.
- Indirect: Means of imposing; a financial norm gives to a passive subject faculties to obtain from another person repayment of the tax.
- Fiscal: Traditional taxes aimed at financing public expenditure.
- Extrafiscal: Aimed at reaching other objectives, such as creation of job posts or stimulating economic development.
Fee
Art. 2.2 LGT. Financial contribution which is imposed in case of private utilization or special exploitation of public domain, service delivery, or realization of activities in the scope of public law that affect and benefit individually a taxpayer. These activities or services are not requested or voluntarily received by those that are obliged and are not delivered by private entities. Services delivered and activities are considered to be in the public law regime when they are performed according to administrative law concerning public services and by a public authority. According to the current approach, it could be said that those who pay a fee usually obtain something in exchange; the fee is paid for a consideration (a return). Possibility to use in own benefit public lands or the right for receiving a certain public service or activity from the administration. The necessary existence of an administrative activity: authorization to occupy public domain and delivery of services constitutes a definitive character of a fee. If there is no administrative activity, there cannot be a fee, different from the tax. The aspect of effectiveness of the service is considered to be important by the Spanish Court.
Art. 31.1. CE (Spanish Constitution)
Everyone shall contribute to sustain public expenditure according to their economic capacity through a fair tax system based on the principles of equality and progressive taxation which in no case shall be of a confiscatory scope.
2. Public expenditure shall make an equitable allocation of public resources and its programming and execution shall comply with criteria of efficiency and economy.
3. Personal or property contributions for public purposes may only be imposed in accordance with the law.
Duty to Pay Tax
1. Duty to pay tax: 31.1 STC 76/90. The duty to pay taxes is an order that binds both Public Authorities and citizens and has an impact on the nature of the tax rules. For citizens, this constitutional duty implies, beyond a generic submission to the Constitution and the rest of the legal system (Art. 9.1), a position of submission and collaboration with the tax administration in order to contribute to sustain public expenditure whose unquestionable and essential public interest warrants the imposition of legal limits on individual rights. The tax administration and taxpayer are not in the same position as they would be in a private law relationship. Art. 31.1 prevents any such claim since it frames the duty to pay taxes as a constitutional duty, thus allowing the legislative power to take effective measures and empower the administration as needed, in order to request and obtain the exact compliance of tax obligations by taxpayers – powers that turn the administration into a *potentior persona*, in a superiority position. Art. 9.1 reflects the general position of subjection; citizens are subject to the SC and legal system. It is an order aimed at the legislative power that has to specify the content of such duty and establish penalties. PA are bound by it and must create the corresponding obligations on the citizens under terms and limits of SC. No tax obligation derives from the generic duty to pay taxes. Legislative power will decide how to specify the content of that duty and the penalties in case of failure to comply.
2. Duty to pay tax: The principle of ability to pay has to be linked to the principle of justice inside the sphere of public expenditure. It refers to the sustainment of public expenditure according to each individual economic capacity of every taxpayer, implies a mandate that connects citizens to the public powers. The legislator is obliged by principles of ability to pay to create a financial system in which the citizens are able to participate in the sustainment of public expenses in accordance to their economic capacity. Economic capacity prohibits unequal treatment or discrimination. The Constitutional Court established that SC expressly refers to the principle of ability to pay regarding the contribution to public expenditure connected with principles of equality and progressiveness. Legislative has to provide a tax system the principle of ability to pay; therefore, the tax system belongs to legislative who has the mandate to reflect what the SC wants. NO executive power, judges, citizens, just the legislative has the power to create the tax system and public authorities are bound by it. Duties are enforceable by the administration. Tax system decide with the principle of ability to pay how much you have to pay, SC doesn’t give you an answer regarding to your quantity. Administration has to respect this principle. Those specifications belong to the legislative.
Legal Meaning of Duty to Pay Tax
1. Legitimates the tax: The basis of the tax is not simply the supremacy of the state over the citizen, but a duty of solidarity of all citizens to contribute to sustain public expenditure. Citizens have an interest as members of a political community: in the existence and sustainment of the state. The powers of the state in tax matters are a consequence of a *prius*, which is the duty to pay taxes. The need of public expenditure provides the grounds for the duty to pay tax. Constitutional court establish that the duty is based upon a contribution of solidarity of both economic and social whose fulfillment is not disconnected from the right of property. Duty to pay tax is not a mere programmatical declaration but establishment of legal mandate that binds both. P. author. and citizens sts.76/90. Duty to pay tax as a duty of solidarity connects logically and ideologically with the provision that establishes a social and democratic state under rule of law 1.1CE.
2. Limit and legal protection: Constitutional provision establishes the limits of the duty to pay tax and therefore the state cannot constrain a citizen into paying beyond those boundaries or according different criteria from established in the CE. Although constitutional provisions impose duties and restrict freedom and right to property, it is also a legal protection since it limits the supremacy of the state which can only tax situations that reveal the existence of an ability to pay.
3. Programmatical orientation of Public Authorities: Legislative power is entrusted the creation of a fair tax system as a means to make effective the duty to pay tax expressed in SC is functionally connected with public expenditure.
Equality Principle
It’s considered an essential element and has a superior value inside legal system. Regarding to the relation with the rest of the principles, and in particular with the ability to pay principle, equality principle must be applied taking into consideration the existence of other principles, especially the progressiveness principle. The equality cannot be limited to the literal meaning of art. 14 SC. Equality principle is a limit to the power to tax.
3. Constitutional appeal in art. 31.1. *Recurso d ampar*. It allows this appeal and it’s the only one that’s available to citizens; the other two aren’t: question of constitutionality and inconstitutionality appeal. Citizens cannot appeal a provision because the provision infringes art. 31 since it is not covered by the *amparo* appeal (not a fundamental right). Equality is also in art. 14: art. 14 prohibits discrimination; it is a formal equality, and art. 31 contains the limit on discrimination; it is material equality. This principle presents a connection with public expenditure sts 77/85; the equality is included as requirement in the financial or tax legal order as a whole. Important to mention the equality projected in the territory sts 19/98 as const court has declared this principle cannot be understood in a strict sense; it can also be applied to the exercise of the financial power of local entities inside the sphere of their competences to give efficacy to the principle of local autonomy and financial sustainability. The fact that you pay more taxes doesn’t mean you aren’t equal or discriminated because it depends on the expenditure and standard taxpayer in the guideline. In practice, this comparison is questionable as we have exceptions in certain CCAA like Navarre, Basque Country.