The Plenary Session of the Constitutional Court, in a ruling for which Judge María Luisa Balaguer Callejón was the speaker, has dismissed the unconstitutionality appeal presented by the Governing Council of the Community of Madrid against the temporary solidarity tax on large fortunes created by Law 38/2022, of December 27 (art. 3), otherwise known as the wealth tax, or a taxation put onto the highest earners forcing them to contribute more.
The appellant autonomous government accused the tax of violating the ius in officium of the deputies (art. 23.2 CE), having been introduced by way of amendment during the processing of a bill that had another object. At the jurisdictional level, it denounced that the new tax violated the financial autonomy of the Community of Madrid and the reserve of organic law on the transfer of taxes, in relation to the wealth tax (IP) (arts. 156.1 and 157.3 CE). Furthermore, they considered that the principles of economic capacity and non-confiscatory nature (art. 31.1 CE) were also violated since the tax rates of the new tax are very high. Finally, they blamed it for going against the principle of legal certainty (art. 9.3 CE), for having a degree of retroactivity that affects already existing situations.
The ruling rejects all challenges, for the following reasons:
Starting with the procedural nature, the constitutional doctrine on the right of amendment applies, according to which art. 23.2 CE is only violated when there is an obvious and manifest lack of connection between the content of the amendment and the initiative with respect to which it is presented. This is not the case of the tax on large fortunes, since the bill that gave rise to Law 38/2022 was intended to create two taxes (energy and banking) whose purpose was to provide – like the contested tax – public revenue with which to face the consequences of the energy and price crisis caused by the war in Ukraine. Therefore, the amendment meets the homogeneity requirement.
Regarding the alleged violation of financial autonomy, the ruling recalls that the tax on large fortunes is complementary to the IP – a state-owned tax transferred to the CCAA – so that the amount paid for this is discounted to determine the amount of the new tax, which does not affect or interfere with any of the autonomous powers over the IP. The exempt minimum, the rate, the deductions and the IP bonuses applicable in the Community of Madrid will continue to be, solely and exclusively, those decided by it, without the tax on large fortunes implying any change.
The ruling emphasises that the appeal does not indicate any regional jurisdiction that has been affected by the contested tax. The real complaint of the Community of Madrid is that those of its residents with assets greater than 3 million euro (the only ones who are subject to the tax on large fortunes) will have to pay the new state tax, with which Madrid loses its fiscal attractiveness to attract said wealth to its territory. For the Court, this objective cannot prevent the State from exercising its jurisdiction to establish new taxes. If in the past the Constitutional Court has already recognised that the State can occupy an autonomous fiscal space to harmonise it, with even more reason it can do so in its own fiscal space, such as this one.
The violation of the principles of non-confiscatoriality and economic capacity of art. 31.1 CE is rejected based on consolidated constitutional doctrine. Faced with the argument of the Community of Madrid that the tax rates of the new tax are very high in relation to the current profitability of the markets, the ruling recalls that the tax on large fortunes would only have a confiscatory effect if the value of the assets (about which the lawsuit argues nothing), not the income generated by the encumbered assets, which is a different manifestation of economic capacity. And, as regards this last principle, the appeal also does not provide data on the alleged disproportionate nature of the tax rates. What’s more, the ruling cites data extracted from AEAT statistics according to which the effective tax rate on large fortunes is below 0.5 percent of the value of the taxed assets, so it is not disproportionate.
Finally, regarding the alleged retroactivity, the ruling emphasises that the tax on large fortunes is not applied in relation to a tax period, but only by reference to a specific date (December 31, 2022 and 2023). Therefore, on the date of entry into force there was no situation that had begun to produce effects, so it is not retroactive and the principle of legal certainty is not violated.
Finally, it should be noted that the Government of the Junta de Andalucía, the Assembly of Madrid, the Xunta de Galicia and the Government of the Autonomous Community of the Region of Murcia have also filed an appeal for unconstitutionality against the tax on large fortunes; processes that must be resolved by applying the established doctrine in relation to the appeal of the Governing Council of the Community of Madrid.
The wealth tax, brought in by the socialist government, affects only a small number of people, but has brought in millions in revenue to help the majority, a matter which the PP of Madrid took exception to.
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