The Supreme Court declares it has jurisdiction to treat issues regarding Municipal Contributions

The case is a declarative action of certainty (acción declarativa de certeza), where the federal court has to decide about the constitutionality of the so-called “contribution on commercial, industrial and services activity” imposed by the city of Río Cuarto, Province of Córdoba. The tax payer argues that it is unconstitutional, because it overlaps with a provincial tax (turnover tax) and violates the Federal Co-Participation Tax Law (Ley de Coparticipación Federal de Impuestos) and the Argentine Constitution.

The Federal Court of Appeals of the Province of Córdoba confirmed the resolution of the first instance court, and declared it did not have jurisdiction to pronounce a sentence on the substance of the case. It considered that provincial courts have jurisdiction when the interpretation and the validity of local (municipal and provincial) regulations are challenged. It also stated that a federal regulation is not immediately violated nor does a federal issue prevail. In the case under analysis, it understood that the main issue only involved an analysis of the tax law of the municipality of Río Cuarto, and did not recognize the presence of a federal issue.

The Argentine Supreme Court of Justice, in its majority, stated that the federal justice has jurisdiction to analyze this case. The Supreme Court based its decision on the new constitutional rank given to the Federal Co-Participation Tax Law as from the amendment of the Argentine Constitution in 1994. It considered that the tax system established by the Argentine Constitution could be affected if a province violated its commitment not to legislate on specific matters assumed by the Nation. It also pointed out that such violation could be materialized in a clash between a provincial and a municipal law. Thus, the Supreme Court resolved federal courts have jurisdictions when there is an overlap between a municipal contribution and a provincial tax that violates dispositions of the Federal Co-Participation Tax Law.

It should be pointed out that even if the Supreme Court did not rule on the substance of the case, in particular, about the constitutionality of the contribution collected by the city of Río Cuarto, the importance of the same lies in the possibility of filing before the federal justice legal actions challenging the constitutionality of certain contributions collected by municipalities, the main advantage being the possibility of avoiding the requirement to pay the tax being challenged in order to file the claim (“solve et repete”).

It should be highlighted that this ruling of our Supreme Court was adopted at a time when tax pressure exercised by municipalities is an extremely delicate issue, and political solutions are demanded.