Luis Arias: “With this TC ruling, companies could request the return of their paid debts”

Sunat’s former boss Luis Arias Minaya maintains that the decision of the Constitutional Court (TC), that prohibits the charging of interest to delinquent companies, could anticipate the repayment or reduction of the debts that companies such as Telefónica, Scotiabank or Cerro Verde owe to the State. Warns of a potential conflict of interest.

—What tax matters has the TC ignored?

—This ruling basically consists of forgiving interest by allowing it to be collected only during a certain period, which is the legal one, to resolve a claim or appeal. What is even more serious is that interest cannot be charged once the disputed debt reaches the stage of discussion before the Judiciary. Instead of diminishing them, the Constitutional Court encourages practices such as avoidance and evasion, and that trials last indefinitely. The longer the duration, the greater the loss in value of the debt.

Was there case law?

—The TC establishes a general rule when no one has requested it, takes an amparo action for charging interest presented by the Maxco company, which is medium-sized, and declares its request inadmissible, but then raises a retroactive application that disrupts article 33 of the Tax Code, existing for more than 50 years in all the codes of the world.

—Why is a decision pernicious for the State?

—This, which would seem to have good intentions, as its defenders have wielded, regarding being able to get the State to resolve its controversies in time, has a totally opposite and harmful effect on tax collection, because it not only condones interest to large companies retroactively ( which is unacceptable), and with an amount of forgiveness that according to Sunat itself amounts to S/12,000 million, but rather, by generating an imbalance and tilting the field in favor of companies that wish to litigate, it is encouraging these behaviors inadequate taxes increase.

“What kind of effects?”

—In Peru, we have very high evasion rates: the IR is 50%; of the IGV, around 40%. If one reads the annual reports of the MEF, there is a potential to increase collection by reducing evasion. But what this ruling does, which is serious, ends up encouraging non-compliance, because a good part of Sunat’s work responds to inspection work, which ends with a debt collection resolution, which then goes to litigation.

—How to understand this practice of some companies of delaying their trials?

—Companies have the right to do tax planning, it happens all over the world. There are certain circumstances or operations where there is a doubt and they choose not to pay, risking going to court with Sunat. It is valid, although it would be better if it did not happen. And how does the State defend itself? With arguments before different claim instances such as the Judiciary, and interest is running while the process lasts. But, if these are waived, the whole field is tilted in favor of the company that delays the payment and ends up paying less. This is not only negative for collection, but also for competition, because these companies operate in markets where they do not have this type of behavior.

—The ruling comes at a time when Telefónica is getting ready to pay S/3,000 million to Peru.

—Telefónica carries out the necessary financial operations to comply with the payment, but it is certain that it will do so under protest and, immediately after, reinforced by the ruling, it is likely that it will go before ICSID.

—But it is said that this ruling seeks to favor small businesses over Sunat.

—It is unlikely that there will be micro-entrepreneurs who will benefit from the sentence, firstly because Sunat does not focus its inspection action on mypes. Secondly, if there are exceptions, it is difficult for microenterprises to have the financial backs to go to the Tax Court and, even less, in a contentious administrative lawsuit before the Judiciary.

—With this decision, then, could companies like Cerro Verde, Scotiabank or Telefónica, which have already paid or are going to pay historical debts, propose a refund?

—What the TC has done, by forgiving interest retroactively, is to grant a tax amnesty. Having included in the resolution the idea that it also applies to pending cases, then some companies may interpret that they can go to an international court and say ‘my case is still pending even though I have paid’, and therefore request a refund of your money. It is an open possibility in a circumstance where, after several years, lawsuits have been completed with several important companies.

—Would Telefónica benefit more from this decision of the TC?

—Telefónica, which has been in litigation for nearly 20 years, is obviously the company with the highest profit.

—Sunat has asked the TC to annul the sentence, but does he have a chance?

—This failure is so serious that it competes with the double depreciation, which favored many companies —including public services— in the late 1990s. Sunat has filed an appeal for annulment, and I hope that the magistrates, among whom there are very respectable members, reflect; I also hope that those who have conflicts of interest refrain from participating in the decision regarding the request for declaration of nullity presented by the Sunat.

—Do you consider that there is any conflict of interest within the magistrates of the TC?

—This sentence has a rapporteur magistrate, Dr. César Ochoa Cardich. If you review his resume, he has worked in an important study in Lima, which has the main companies in the country as clients. And it’s not that he’s been here for a short time, he’s been working since 2005, I think.

Forado. Luis Arias Minaya explains that money is devalued over time and, in practice, you end up paying less debt in about 10 or 20 years after lawsuits.