Vehicle circulation tax in Guatemala: Is it unconstitutional?

By: Mario Estuardo Archila

The short answer is, YES.

However, this simple answer would not solve anything since it needs to be supported by something. Basically, this tax has two constitutional violations:

  1. It is not a tax according to payment capacity.
  2. It contains delegations that “clash” with the principle of tax legality.

Regarding the capacity to pay, this principle is one of the main material limits that tax legislation must comply with. For a tax to be fair and equitable, it must be structured in accordance with this principle. The capacity to pay, in two plates, is a subjective aptitude to face the tax debt. Therein lies the violation, since the taxable base, that is, from which the value to which the rate (2%) is applied is taken, is an indication of the ability to pay: the ownership of a vehicle and the value of said vehicle. Said base is a historical reference since it is possible to know with certainty that the subject had economic capacity when he acquired the vehicle, but we do not have that certainty afterwards.

Therefore, scholars as well as the Constitutional Court itself have said that no tax can be established on patrimony, assets or income, without allowing its depuration so that the effective and real payment capacity of the subject is established and not taxed on a fictitious basis.

Regarding the second point, the violation lies in the fact that the principle of legality was universally established to avoid the arbitrary action of the executive bodies in taxation, mainly in the establishment of its amounts and its collection. It is for this reason that our Constitution indicates that it corresponds exclusively to the Congress of the Republic to establish taxes and their collection bases, among them, the taxable base. In the case of the Vehicle Circulation Tax, which is really a tax on the ownership of vehicles, the taxable base is established by the SAT by means of a list. Therefore, it is an act of power that determines how much a car costs. The value of the car is the “taxable base” and, therefore, it cannot be a “delegated” act, since it corresponds with “exclusivity” to the Congress to establish the taxable base, to avoid, precisely, that the executive body does it.

Well, having said this, I will tell you that the unconstitutionality raised by a few “divers”, dullards, law students, is centered, precisely, on the second point.