In this case a complaint was filed requesting that Legislative Decrees Nos. 762, 763 and 764, approved at the Plenary Session of the Legislative Assembly on 30-VIII-2014, which ended on 31-VII-2014, be declared unconstitutional on procedural grounds, for the alleged violation of art. 135 inc. 1 of the Constitution of the Republic.
The fundamental reason for the declaration of unconstitutionality is that there was no real possibility for parliamentary deliberation and discussion.
Decision of the Supreme Court
The court declared certain legislative decrees relating to the income tax law and the tax on financial transactions to be unconstitutional with effect as of December 2018.
Among the tax measures affected by the decision were
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- Alignment of El Salvador’s transfer pricing rules with the OECD guidelines;
- Ability of the El Salvador tax authorities to exchange information with other tax jurisdictions;
In its reasoning the court refers to procedural flaw in the legislative process, because the decrees were not deliberated or debated by the parliament, which is in violation of article 135(1) of the El Salvador constitution. The Financial Transactions Tax Law was declared unconstitutional as well, since it was enacted through Legislative Decree No. 764.
Excerpts
“Given the circumstances verified, it should be noted that the parliamentary discussion phase presupposes that the deputies have had the bills to be approved within their reach with sufficient time to allow them to adequately know their content, otherwise it would imply an obstacle to the potential discussion that must precede the approval of a law, as required by art. 135 Cn. There cannot be a proper debate on that which has not been made known in depth, nor can a proper decision be taken on topics whose convenience or inconvenience has not been weighed up or considered. Therefore, not giving reasonable time for the study of the referred bills, despite the fact that the deputies themselves pointed out the impossibility of carrying out an acceptable analysis due to the lack of time, implied an obstacle for the particular deliberation of the deputies. Therefore, although the text of the contested decrees was read in the legislative plenary, such a reading does not replace the prior analysis that should have taken place and which, given the complexity of the content of such decrees, could not reasonably be carried out in the time allowed for it. Consequently, although the intervention of several deputies was permitted – 12 of them were denied – by preventing them from having access to the bills with the time that would reasonably allow them to study them, they were also prevented from discussing them, in violation of the provisions of art. 135 inc. 1º Cn. Thus, it is concluded that, given that the deputies did not have the necessary advance notice of the contested decrees for their knowledge and study, there was also no real possibility of their deliberation and parliamentary discussion during which they had the opportunity to express their opinions on the decrees passed, and thus the process of law formation was violated.
3. Having established the aforementioned constitutional violation with respect to all of the challenged decrees, it is unnecessary to examine the constitutionality of the exemption from the procedure, which is why this chamber – as indicated at the beginning of this section – will omit to rule on the matter.
“.
“RULES:
1. Declare the unconstitutionality, in a general and mandatory manner, of Legislative Decrees Nos. 762, 763, 764, approved in the Plenary Session of the Legislative Assembly of 30- VII-2014, which ended on 31-VII-2014, published in the Official Gazette number 142, Volume 404, of 31-VII-2014, by which the Legislative Assembly reformed the Income Tax Law and the Tax Code, and approved the Financial Operations Tax Law, respectively. The fundamental reason for the declaration of unconstitutionality lies in the fact that there was no real possibility for parliamentary deliberation and discussion, which contravenes the content of art. 135 inc. 1º Cn.
However, in order to avoid a possible situation of insolvency in the budget in execution which, in turn, could affect the achievement of public policies and the protection of fundamental rights of a social nature, which could result from the invalidation of the taxes contemplated in the decrees declared unconstitutional, the effects of the present decision are deferred until the thirty-first of December of the current year, during which time the challenged legislative decrees may continue to be applied. Once this period has expired, the legislative decrees declared unconstitutional shall be expelled from the legal order and their application shall no longer be possible.”
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