The Constitutional Court has ratified that the legislator does not have to take inflation into account to calculate capital gains. In a sentence, the plenary session explains that the principle of economic capacity -by which the Magna Carta says that everyone will contribute to the maintenance of public expenses in accordance with their economic capacity- does not impose on the legislator the obligation to take inflation into account to Calculate real estate gains in personal income tax.
The sentence explains that it is a legitimate option from which one may disagree from a point of view of political or legislative opportunity, but that it does not imply a case of unconstitutionality by omission.
With this text, which has the particular vote of two magistrates, the TC dismisses the question of unconstitutionality raised by the Superior Court of Justice of Andalusia, Ceuta and Melilla. The question raised the question of whether the principle of economic capacity included in the Constitution requires that the law take inflation into account to determine the amount of capital gains derived from the transfer of real estate, so that purely nominal capital gains are not taxed.
The ruling explains that in relation to inflation adjustments, the TC already dismissed in a precedent, referring to the municipal capital gains tax, that this should be calculated in any case taking inflation into account. In that case, he assured that the nominalist principle is coherent with the constitutional order and that only in “extreme situations” of “particularly acute” inflation would the legislator be required to act to prevent inflationary erosion from negatively affecting the principle of economic capacity.
The Court considers that the economic situation before and after the 2014 reform, with an average inflation of 2.37% per year for the period 2004-2014 and 1.80% per year for the period 2014-2023, is very far from being able to qualify as “extreme” or “especially acute”.
Likewise, it stresses that the rule under trial cannot be analyzed in isolation, but rather in conjunction with the rest of the provisions of personal income tax, which already grant preferential treatment to real estate gains over other income, since they are taxed at lower rates than income salary or business and also enjoy certain exemptions when they come from the habitual residence.
The judgment concludes that from the principle of economic capacity “it is not possible to infer an obligation for the legislator to anticipate, always and in any case, the update of the acquisition value of the real estate, singling out the real estate gains through a specific adjustment to inflation that does not It is applied to no other element of personal income tax, nor to other taxes that are also levied on capital gains, such as municipal capital gains or corporation tax”.
It is, according to the court, “a legitimate option from which one may disagree from a point of view of political or legislative opportunity, but which does not imply a case of unconstitutionality by omission.”
The sentence has the particular votes of the magistrates Ricardo EnrÃquez and Enrique Arnaldo. They consider that the 2014 reform in the calculation of capital gains in personal income tax has caused the mere difference between the value of an asset at the time of acquisition and that of the transfer to reveal an economic capacity susceptible to taxation, “ignoring the erosion that the tyranny of the passage of time (inflation) generates on purely monetary gains”.
For these two magistrates, with this reform, “far from submitting a true economic capacity to a tax, citizens would be taxed for totally or partially non-existent manifestations of wealth, in open contradiction both with the principle of economic capacity and with the fair tax system “.
