The constitution approves a new municipal tax on capital gains and rejects PP’s appeal

The Constitutional Court (TS) by a majority of votes confirmed the Government’s decision to change the system profit tax through a royal decree-law in November 2021. The magistrates rejected the appeal of unconstitutionality submitted by PP representatives, considering that it was justified for the executive to use an emergency method to regulate the said tax.

As reported this Thursday by the Court of Guarantee, the plenary assembly rejected the people’s appeal against the Royal Decree-Law adapting the revised text of the Law regulating local treasuries to the recent jurisprudence established by the Constitutional Court itself in November 2021 regarding the value-added tax of city land, too known as capital gains tax.

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The judges supported the presentation written by the president of the court, Cándido Conde-Pumpido, who was appealed by those from the PP.

It should be remembered that The Capital Gains Tax was repealed by the TK after three rulings in this regard: one in which he concluded that if there is no profit, no tax can be demanded; the second in which he pointed out that even the profit, if it is less than the tax amount, is not constitutional; and the third, issued in 2021, in which it declares the system of calculating capital gains unconstitutional.

After this last sentence was pronounced, the Government issued a Royal Decree-Law establishing a new capital gains tax regulation. The representatives of the PP filed an appeal against the mentioned text, considering that this issue should not have been urgently resolved in the form of a royal decree-law.

In particular, the leaders felt that the entire text was doubly violated: it lacked a budget for an extraordinary and urgent need; and violated the material limitations imposed by the constitution on this type of norm.

The guarantee court ruled on the constitutionality of the mentioned measure because, first, in the approved measures, it appreciates the required connection of the meaning with the state of extraordinary and urgent need, with an explicitly explained problematic economic situation.

He does not see the violation of rights

The Constitutional Court concluded that the contested regulations were intended to fill the regulatory vacuum created by the declaration of unconstitutionality by the judgment from 2021 and, if the regulation in question had not been approved, it would not have been possible to continue collecting taxes by local entities.

Second, the court did not realize that the material limitations established by the Constitution for the use of decree-law in tax matters were violated.

Therefore, he considered that, based on the position of the tax in the Spanish tax system, the disputed regulation — although it changes the tax base of this local tax — did not significantly change the position of those who are obliged to contribute according to their economic capacity in the entire tax system.

For this reason, it was defended that the text did not encroach on the essence of the constitutional obligation to participate in the maintenance of public expenses prescribed by the Constitution.

Judge Enrique Arnaldo and Judge Concepción Espejel voted against, realizing that the second ground of unconstitutionality should have been considered because, in their opinion, Decree-Law 26/2021 does not respect the material limitations that the Decree-Law has regarding taxes, directly affecting the duty to contribute to sustainability public spending.