Public Revenue and Taxation in Spain: Principles and Liabilities

Posted on Sep 9, 2024 in Law & Jurisprudence

Types of Liability

Only an act can provide that liability is joint and several. This type of liability puts the person liable in a worse position.

1. Secondary Liability

Payment can only be requested when the main debtor is declared insolvent (176 LGT: decisión acto administrativo declaring the insolvency of the main debtors and the persons under joint and several liability). Then, the decision declaring liability (acto declarative de responsabilidad) is notified to the person under secondary liability. After that, the period for voluntary payment is opened.

2. Joint and Several Liability

Payment can be requested in terms equal to those of the main debtor (175 LGT). The decision declaring liability has to be adopted and notified before or after the voluntary period of the main debtor. If it is notified before, payment can be requested at the expiry of the voluntary period. If notified afterward, the notification will open a voluntary payment period for the person liable. In both cases, before the decision adoption which declares liability, the person liable has the right to be heard (plazo de audiencia).

This decision, which declares liability, must inform about:

  • Means and terms for payment
  • Appeals
  • The facts from which liability arises

Debt of the Person Under Liability

In general, the whole amount of the debt is required from the main debtor in the voluntary payment period. This includes:

  • Tax due as a result of the main tax obligation of the debt
  • Interest for late payment

Arguments against: The person under liability didn’t cause the late payment; they were not requested to pay earlier. Surcharges on late tax declaration without previous administrative request (Art. 27, Penalties 179).

Public Revenue

Public revenue is a sum of money received by a public entity with the purpose to finance public expenditure. It is a sum of money, meaning that the payment can be made with goods that qualify as national heritage, or personal services (military services and transport services). It is received by a public entity; the public nature of the receiver is relevant, but not the legal regime, which could be public or private. Its purpose is to finance public expenditure. It is instrumental to collect money (taxes) for other purposes. Their main purpose is not to collect money but to serve other purposes.

Classification

  • Public law/Private law (5.2: all sources except revenue from public assets are of a public nature)
  • Compulsory contributions, monopolies from public assets, from public debt
  • Ordinary and extraordinary (if they are periodical or not)
  • In the budget or out of the budget (principle of budgetary unity)

Compulsory Contributions

(Art. 2) It is a source of public revenue that consists of economic payments required by a Public Administration (PA) when a set of conditions of fact are met for which an act of parliament established the obligation to contribute, and whose primary aim is to obtain the resources needed to finance public expenditure.

Main Characteristics

  • Ability to pay as a prerequisite
  • It cannot be confiscatory and it is not a penalty for an infringement
  • It applies not only to nationals but also to those who have economic dealings with Spain or Spanish territory

Taxes

Compulsory contributions required without consideration whose taxable event consists of operations, acts, or facts that reveal the existence of an ability to pay on the part of the taxpayer (2.2).

Common Element with Other Compulsory Contributions

  • Ability to pay principle

Differential Element

  • Without consideration, without any individual return

Fees

Basis of the fee: Administrative activity and the principle of benefit. The fee is paid for consideration (a return). It is a private utilization or special exploitation of the public domain.

Public Prices

In 1989, a new legal category was created: public prices, made up of some of the cases where payment of a fee was previously required. The main aim was to avoid the legality principle and its inconvenience. The current concept of public price is a payment received by a public entity when the service or activity is voluntarily requested or received and is rendered by the private sector.

Difference Between Fees and Public Prices

A fee is a compulsory contribution with all its implications (ex lege obligation, public law nature, and an economic obligation of a public nature, Art. 31.3 SC). Public prices are not compulsory contributions nor economic obligations of a public nature, since they are created from the will of the payer. There is no need to regulate them in an act of parliament.

Duty to Pay Taxes

(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 relationship. For citizens, this constitutional duty implies a submission to the Supreme Court (SC) and the rest of the legal system (9.1), a position of submission and collaboration with the tax administration in order to contribute to sustain public expenditure. Also, the tax administration and the taxpayer are not in the same position as they would be in a private law relationship.

(31.1) Paying taxes is a constitutional duty. If this duty is not complied with, the SC allows 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. The administration is a potentior persona that is put in a position of superiority.

Legal Meaning of the Duty to Pay 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. The need for public expenditure provides the grounds for the duty to pay tax.

The Constitutional Court affirmed that the duty to pay tax is not a mere programmatic declaration, but the establishment of a legal mandate that binds both the public authorities and the citizens as subjects of a constitutional duty. This duty is based on a contribution of solidarity, both economic and social. The constitutional provision sets the limits of the duty to pay tax, and therefore the state cannot constrain a citizen into paying beyond those boundaries.

From the material perspective (STC 82/97), Art. 31.1 establishes not just the principles of the tax system, which are at once a limit and legal protection of the citizens in front of public authorities, but also the rights and duties of the citizens regarding the taxes established by the state’s tax powers.

Art. 31.1: All shall contribute to sustain public expenditure according to their ability to pay through a fair tax system inspired by the principles of equality and progressiveness that in no case will be confiscatory. Public expenditure will make an equitable allocation. Only an act of parliament can establish personal or economic obligations of a public nature.

Ability to Pay Principle

It is not only a principle of tax justice, it is the logical ground for taxation. It has to be present also in non-fiscal taxes, apparent or nonexistent income or wealth. Ability to pay has to be present in the taxable event. It sets a maximum for taxation. It is a requirement that has to be met not only by the tax system as a whole but by each and every tax in particular.

Equality Principle

It limits the power to tax. It allows for constitutional appeal (31.1, recurso de amparo). It has a connection with public expenditure. Equality is projected in the territory. The ability to pay is the reference to determine when two situations are equal for tax purposes. The ability to pay principle is just one, among others, of the principles in tax matters. The equality principle requires that equal sets of facts receive equal consequences in law.

Progressiveness

(31.3) Progressiveness is a character of the tax system as a whole. It requires that taxation be proportionally higher as wealth is higher. It gives character to the equality principle. It is not formal equality but material equality.

Non-Confiscation Principle

It derives from the constitutional recognition of the property right and from the internal logic of the ability to pay principle. Also, if an ability to pay is not real, the tax should be regarded as confiscatory. It is a criminal law concept. It is established as a limit for the results of the tax system.

Legality Principle

(31.1) Only an act of parliament can establish personal or economic obligations of a public nature.

Purposes of the Legality Principle

  1. Guarantee private property (but property is not an unlimited right, it performs a social function)
  2. Guarantee the “no taxation without representation” principle
  3. It can be an instrument for equality since acts of parliament have a wider reach

The legality principle, as established by STC 185/95, has other functions, but its ultimate goal is to ensure that a public entity compulsorily imposes an economic obligation of a public nature on the citizens.