On October 1, the National Supreme Court of Justice upheld the judgment of Chamber 2 of the Social Security Court of Appeals in “Calderale Leonardo Gualberto v. ANSES s/ Reajustes varios” without addressing the merits of the issue, through the mechanism provided for in article 280 of the National Civil and Commercial Procedural Code. In this way, the highest court declared unconstitutional art. 79(c) of Income Tax Law 20,628, which taxes as fourth-category income that arising from retirement pensions, survivor pensions, retirement benefits or subsidies of any kind insofar as they originate from personal work and to the extent they were subject to payment of the tax, as well as that of directors of cooperative companies.
It should be noted that the fact that the decision was made through the procedure established by article 280 of the National Civil and Commercial Procedural Code, that is, without the Court developing an analysis of the issue, should not necessarily detract from the importance of the ruling; the Court has used article 280 as a positive certiorari, accepting cases in which the failure to meet formal requirements is evident, without analyzing them, as a way of overcoming unmet admissibility requirements in view of the significance of such cases. In the well-known Ekmekdjian v. Sofovich decision, Justices Petracchi and Moliné O’Connor held that “it should be specified that Art. 280 (…) must not be understood as a means that only allows the dismissal of appeals that do not meet its standards. If, as has been established, it constitutes a selection tool aimed at giving the Court a procedural framework that enables a complete and focused development of its institutional role, it must also be acknowledged that this provision also makes it possible to consider admissible appeals that clearly involve issues of significance, notwithstanding the failure to meet certain formal requirements, so that the formalities of the proceedings do not become an element frustrating the efficiency with which that role must be performed.”[1]
The Court had already ruled that taxing pensions with income tax was unconstitutional in the case of a former legislator from Entre Ríos in March of this year, but it had framed the case in terms of the plaintiff’s vulnerable situation, as she suffered from an illness.[2] By contrast, in the upheld ruling, Chamber 2 of the Social Security Court of Appeals based its decision on the fact that the integrity of pension benefits is a fundamental matter of legal protection, enshrined in art. 14 bis of the National Constitution, and as such must be protected regardless of the pensioner’s vulnerability. In this regard, it highlighted the following doctrine of the Supreme Court: “…particularly careful consideration so that, in practice, the ‘comprehensive’ and ‘non-waivable’ nature of social security benefits is not affected, since their purpose is to cover the risks of ‘subsistence’ and ‘old age’, moments in life when assistance becomes most necessary. Their holders are citizens and inhabitants who, upon concluding their working life, make their livelihood dependent, in principle absolutely, on the effective receipt of the benefits to which they are entitled under constitutional mandate”[3].
The appellate judges considered it contradictory to recognize, on the one hand, that pension benefits are protected by the constitutional guarantee of integrity, proportionality and substitution, and, on the other, to classify them as income, enrichment, yield or profit taxed by the very State that is primarily responsible for ensuring the validity and effectiveness of those constitutional principles. They held that “it is unreasonable and devoid of all legal logic to assimilate or equate social security benefits with yields, income, enrichment, etc. obtained as a result of some for-profit business, commercial or income-producing activity, which the law describes in great detail in its provisions. A person with the status of pensioner, if during his or her time as an active worker his or her salary exceeded the non-taxable minimum provided for by current law, should have paid this tax in the category provided for in art. 79 of Law 20,628, which classifies as income: ‘personal work performed in an employment relationship.’ It could be inferred from this that the income tax contribution levied on pensioners would be collected by the State twice with respect to the same person, which could constitute double taxation and at the same time unjust enrichment for the State”. They also referred to the position of the Federal Court of Appeals of Paraná: “…the retirement benefit is not income in terms of the tax law, but a social debt that is fulfilled by refunding contributions made to the pension system. Consequently, since retirement is considered a refund or social debt, applying the tax on contributions made during active life and repeating taxation on the same contributions when returning them in the form of a pension benefit violates various constitutional guarantees by affecting the comprehensive nature of the benefit and the right to property as a result of double taxation and the confiscatory nature of the reduction (…) Its reduction through taxation is contrary to the constitutional principles of integrity of pension benefits”.[4]
In this regard, it should be recalled that double taxation is not unconstitutional in itself; the concurrent exercise of taxing powers allows the same taxable event to be taxed by different levels of government, provided they act within the limits of their powers. It will be unconstitutional when such double taxation is confiscatory, in violation of the right to property guaranteed by arts. 17 and 14 of the Constitution, applicable to all taxes. In the case at hand, the double taxation argument is debatable, since the case does not involve two jurisdictions taxing the same activity, but rather the same level of government taxing two different but related circumstances. The real point is that receiving a pension should not be considered a taxable event for income tax purposes, since a pension does not represent income; and requiring a pensioner who is inactive, without carrying out any profit-making work or commercial activity, to pay a tax of this nature directly conflicts with the constitutional guarantee of the integrity of pension benefits.
Regarding the integrity of pensions, the Supreme Court has held that “the need to maintain a fair and reasonable proportion between retirement benefits and the situation of active workers is a consequence of the comprehensive nature that the Supreme Law recognizes for all social security benefits and of the close connection between the benefits guaranteed to workers and those of a pension nature, which are financed primarily with the contributions made during service. The rights to fair remuneration and to a minimum, living and adjustable wage aimed at guaranteeing food and housing, education, healthcare and, ultimately, a dignified life, find their counterpart in the adjustable retirement and survivor pensions that must be guaranteed to workers when they retire. Any situation that prevents the effective enjoyment of social security benefits, as created by the legislature following the constitutional mandate, whether by reducing or eliminating them, would render the constitutional clause meaningless and empty the principles it enshrines of content.”[5]
It would be desirable for the Supreme Court to expressly state its position on this matter in the future, analyzing the issue in depth and establishing a clear criterion. In any case, the ruling represents a step forward in the defense of pensioners’ rights and should be taken as a precedent.
