MEF: Ruling of the Constitutional Court benefits large evading companies

The sentence of Constitutional Court (TC) that retroactively prohibits the application of default interest once the legal deadlines for resolving tax disputes have expired has been crossed out last week from all fronts, as it became a precedent for tax authorities to companies Peruvian debtors start a race to litigate and freeze debts.

To understand the figure, It should be clear that the application of interest, throughout the world, seeks to prevent a debt from devaluing over time. The value of S/100 today is not the same as it was a decade or two ago. Secondly, the annualized Moratorium Interest Rate (TIM-MN) with which the Sunat operates is, historically, lower than the Active Rate in National Currency (TAMN), the amount traded in the market when bank loans are granted. Therefore, the interest charged by the entity is below the market value.

Sources from the sector have explained that, in practice, it would be more beneficial for large companies today to take the money that was used to pay their taxes and use it as investment capital. investment, to later extend the trial against Sunat as much as possible and end up paying the debt, devalued, in many years. The other option would be to get a bank loan, but there the interest is higher and there is no sentence of the TC that limits the late payment. “Find yourself with the State”, summary.

The Sunat has come forward and warns that this ruling creates a precedent for large companies to stop paying more than S / 12,000 million. Prosecutor Renzo Díaz ratified for La República that he has violated “in a very serious, repeated and manifest way the fundamental right to due process”, for which he requested that the decision of the tribunes be declared null and void.

from all fronts

On the side of the Ministry of Economy and Finance (MEF), Minister Alex Contreras has requested a clarification of the ruling —which, originally, stems from the case of the Maxco company, but without even benefiting it—, so that it can be reconsider the decision.

For the MEF, the TC would be exceeding its powers and transgressing the principle of functional correction, since a large part of the default interest on debts in tax disputes would be eliminated in all instances: Sunat, Tax Court and Power of attorney.

He Fiscal Council (CF), An autonomous entity that strengthens the transparency and institutional framework of public finances, joined the MEF and Sunat last week and warned that the measure may generate “perverse” incentives that negatively affect the country’s future tax culture and collection.

For the CF, it is not clear what are the deadlines applied to the judges of the Judiciary to resolve these controversies, because, in practice, there are no such deadlines, and that the prohibition on the collection of default interest causes the debt to retains its nominal value, which inevitably implies a loss of value over time.

Tax litigation is concentrated

The MEF explained that of the total tax debt as of November 2020 —which amounts to S/118,000 million—, only 27.11% (S/32,000 million) is in litigation, which belongs to 0.45% of the total of RUC with outstanding debt. “In other words, the tax litigation is highly concentrated,” adds the entity.

In addition, of those 3,783 RUC that are in litigation, 956 belong to large taxpayers who are disputing a Tax debt that exceeds S/27,000 million. That is to say, “of the tax debt that is disputed, the largest proportion is concentrated in the largest,” summarizes the MEF.

reactions

Renzo Días González, attorney of the Sunat

“Our interest rate on debt is the lowest in relation to all institutions similar to Sunat in the world. It is the lowest that exists. It is even lower than the rate that banks have today.

Alex Contreras, Minister of Economy and Finance

“Will this sentence of the TC benefit many small taxpayers? No, only 0.5% of debtors are in litigation, and 85% of that disputed debt is from large taxpayers.”