Taxation Cannot Demand Prepayment Of Penalties and Interest on Audits, Court Rules

At the tax office. File photo
At the tax office. File photo

(QCOSTARICA) A declaration of unconstitutionality has been given to the section of the tax code that allowed the Ministerio de Hacienda (Treasury) to demand payment of penalties and interest allegedly owed on taxes.

In effect, the Court ruling put the brakes on the outlandish idea on the part of lawmakers putting the proverbial cart before the horse, asking taxpayers advance payments in a process (audit) that sometimes involves decades.

The objective of the prepayment of penalties and interest was to eliminate or reduce evasions where people would use to their advantage the inefficiency of the tax department.

“Unanimously and for separate reasons, declared partially with cause the action of unconstitutionality are articles 144 and 192 of the Code of Tax Procedures Standards,” reads the unanimous decision of the court.

Carlos Vargas, director of the Dirección General de Tributación (DGT) – Directorate General of Taxation, said yesterday that they are awaiting notification of the judgment to gauge its scope.

The taxation director confirmed that the ruling means the tax department can only collect on a tax debt once the process is complete.

Mauricio Estrada, president of Agroganadera Pinilla, and Rándall Madriz, lawyer for Comercializadora Konekta, who presented the Constitutional Court challenge said in the argument, “the law violates the right of innocence and defense by not allowing the taxpayer to submit arguments against the penalty set by the Treasury.”

Allan Saborío, CEO of Deloitte, told La Nacion that with the elimination of confiscatory taxation, “taxpayers who have paid (were charged) will have to visit the tax office to get back their payments if there is no firm decision on their case.”