Provinces Have Two Years to Impose and Collect Tax Fines

On March 7, 2023, the Supreme Court (SC) issued its opinion on the case “Alpha Shipping S.A. c/ Provincia de T.D.F. A. e I.A.S. s/ contencioso administrativo – medida cautelar”. Here, Justices Maqueda, Lorenzetti, and Rosenkratz held that the statute of limitations in article 65 paragraph 4 of the Criminal Code (CC) applies to provincial tax agencies for imposing and collecting tax fines in accordance with article 75 paragraph 12 of the Argentine Constitution. Therefore, the term of two years since the infringement date cannot be exceeded. 

 

1. Facts

 

During the last quarter of 2009, the Tax Authority of the Province of Tierra del Fuego assessed the deficiency of Alpha Shipping overturn tax returns for the terms 5 to 12 of 2004 and 1 to 12 of 2005 and imposed a fine.

After the final administrative decision was issued, the judicial controversy focused on the statute of limitations applicable to impose and collect said fine.

 

2. The decision of Tierra del Fuego’s Supreme Court

 

The judicial review examined two topics the Supreme Court of Tierra del Fuego (SCTF) had to decide: which is the statute of limitations and since when may the term be counted to impose and collect the fine issued by the provincial tax authority. The taxpayer argued that the SC’s opinion in the case ‘Filcrosa’ applied to this case.

In that leading case, the CS had ruled that local legislatures could not pass a statute of limitations for taxes different from the one established by the Argentine Civil Code that was in force until July 31, 2015. The reason lies on the National Congress’s sole authority to pass codes on Civil, Commercial, and Criminal matters, among others, as established in article 75 paragraph 12 of the Argentine Constitution.

It was the taxpayer’s opinion that ‘Filcrosa’ should apply as well to statutes of limitations for tax fines, due to the criminal nature of these. Therefore,  articles 63 and 65 paragraph 4 of the CC should apply. From this perspective, the term to impose and collect tax fines would be two years as of the date of the infringement.

On the contrary, the provincial tax authority argued that it was articles 81 and 82 of the Tierra del Fuego Tax Code that applied to this case, and therefore the statute of limitations was five years starting the first day of the following year of the infringement.

 

In accordance with the provincial Tax Authority’s position, the TFSC ruled that the provincial Tax Code was the applicable law. The decision had two main arguments.

On the one hand, the TFSC explained that tax fines come after the infringement of provincial tax regulations entirely regulated by the provincial Tax Code, so it was logical to apply its statute of limitations to the case, and start counting the term as established in that Code.

On the other hand, the TFSC considered it incoherent that there was a two-year term to impose and collect tax fines when there was a five-year period to verify and assess tax returns. As the TFSC explained, no tax fine can be applied if there is no previous verification and tax assessment of the taxpayers’ compliance with the law.

The taxpayer appealed such decision before the TFSC, to be later decided by the SC, but it was denied. The taxpayer then asked the SC to grant a Writ of Certiorari.

 

3. Supreme Court’s decision

 

The majority’s opinion was that tax fines are of a ‘criminal sort’ and that Criminal Law principles apply to them. The SC considered that they are not compensations, but rather intimidating and exemplifying penalties. Therefore, provincial laws are applicable to these tax fines, although not exclusively.

 

Regarding the term of the statute of limitations, the SC highlighted that its rulings have invariably stated that a statute of limitations is a legal, general and common concept, the establishment of which falls under the scope of the National Congress, as vested in by article 75 paragraph 12 of the Argentine Constitution.

Consequently, the SC took the taxpayer’s argument that only the Congress can establish the term and calculation of the statute of limitations for tax fines, so articles 63 and 65 paragraph 4 of the PC are applicable to the case. Therefore, the decision of the TFSC was overturned.

 

 

4. Chief Justice Rosatti’s dissent

 

In his dissenting opinion, Chief Justice Rosatti explained that, in a Federal State, each province is vested in a tax power that permits establishing its own statute of limitations applicable to tax fines. Therefore, the Chief Justice considered that the Tax Code rules on the statute of limitations were applicable to this case.

 

5. Conclusions

 

The SC’s decision upholds the ‘Filcrosa’ ruling and other similar cases. This decision is particularly interesting since –until this case– the CC’s statute of limitations had never been applied to provincial tax infringements.

 

This reasoning applies when infringements were committed before the new Civil and Commercial Code entered into force in August 2015. The new code has an article that states that local legislatures can establish a different statute of limitations term for collecting taxes. Therefore, this case leaves the following questions open: (i) how will the longer term to assess and collect taxes be harmonized with the shorter term to apply and collect tax fines (ii) what will the SC decide regarding the Civil and Commercial Code regarding the provinces’ power to establish their own statute of limitations for tax collection, since this article could be rendered unconstitutional in the light of article 75 paragraph 12, as the National Congress self-limited one of its constitutionally-given powers and passed it on to provinces.