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Solidarity tax by the COVID 19

¿Reckless government measure that affects the inalienable rights of individuals?

On April 15 the Government issued Decree Law 568 of 2020, which created the Solidarity Tax by Covid-19. This, in accordance with the Declaration of the State of Economic, Social and Ecological Emergency of 17 March 2020, in which the President, together with all his ministers, has the power to issue decrees with the force of law, exclusively aimed at averting the crisis and preventing the spread of its effects.

Under this declaration, the Covid-19 Solidarity Tax was created to generate new sources to support the vulnerable middle class and independent workers, who have been seriously affected by the adverse consequences of the pandemic. This tax implies that, from May 1 to July 31 of 2020, public servants who earn a salary equal to or greater than ten million pesos (10,000,000), contribute a percentage between 15% and up to 20% to the Emergency Mitigation Fund - FOME, created by Legislative Decree 444 of 2020.

It should be noted that the concept of salary includes any basic monthly allowance received by the public servant, including representation expenses, bonuses, allowances and/or any other benefit received by him as direct compensation for his services.

Likewise, pensioners who receive a pension allowance equal to or higher than ten million pesos (10,000,000), will also have a percentage similar of public servants deducted, for the purposes of FOME. On this particular point, a few qualifications must be made.

Decree 568 is not specific in defining whether the allowance the pensioner receives is due to public or private time contributions and, in that sense, the discount will be made to all those who receive a "mega pension", regardless of whether the person has been a public servant or not.

Regarding the destination of the resources and in relation to the motivational part of the norm, it should be noted that it intends to regulate the generation of new sources of resources "to support the vulnerable middle class and independent workers", taking into account the magnitude of the crisis generated by Covid-19 and the insufficient economic resources available for this purpose, however it seems to seek funding from public resources from private individuals (as in the case of pensioners who have always contributed as private sector workers), burdening them with a responsibility that in principle is not theirs, and which could affect their acquired rights.

The Decree indicates that the cause of this tax is instantaneous, that is to say that it is caused at the moment in which the salary or pensionable allowance is cancelled or credited and will be carried out on a monthly basis until July 2020. The entity in charge of collecting this money is the DIAN, which will also be in charge of transferring the resources to FOME.

As it is, the people who are obliged to contribute to this tax are:

  • Public servants.
  • Natural persons linked by a contract for the provision of professional services and public management.
  • Pensioners.

However, with regard to the percentage of the tax, the Decree has provided for a rate of between 15% and 20%, which is reduced with the first $1,800,000, as follows:

Range of salary/pension allowance in pesosGross rateFormula to settle the tax
Higher or equal toLess than
$10.000.000$12.500.00015%(salary/pension allowance - $1.800.000) x 15%
$12.500.000$15.000.00016%(salary/pension allowance - $1.800.000) x 16%
$15.000.000$20.000.00017%(salary/pension allowance - $1.800.000) x 17%
$20.000.000 20%(salary/pension allowance - $1.800.000) x 20%

 

Beyond the intentions of the National Government, the Decree raises many doubts within the framework of its application. This is evident when analyzing whether the measure adopted for the creation of the solidarity tax complies with the principles of equity and equality, especially with regard to the application of this tax to pension allowances of individuals who have always worked in the private sector.

The creation of the solidarity tax has generated so many doubts and opposition that at this moment the particular application of the norm is in judicial dispute, which has already generated rulings in favor of the plaintiffs through a tutelary action, ordering the judges in their sentences the non-application of the tax in different cities of the country.

What seems to be evident is that the regulations adopted are clearly detrimental to the social rights of state workers and private pensioners, who are being burdened with a clearly regressive measure - which in principle seems to be unconstitutional - especially when it comes, in the case of pensioners, to acquired rights which, when affected, would violate the constitutional principles of social security, and whose justification is neither proportionate nor reasonable.

The Constitutional Court will be responsible for analyzing the study of the constitutionality of Decree 568 of 2020, to determine whether or not its provisions are in line with the Constitution. In this regard, it is pertinent to indicate that multiple petitions have been submitted to the Court by magistrates, judges, and workers from different areas of the public sector, arguing the unconstitutionality of the measure adopted by the Government.

For the time being, the application of the solidarity tax created by Decree 568 of 2020, generates multiple questions such as:

¿Is the measure reasonable and constitutional with respect pensioners who have never in their lives had a contractual relationship with the National Government?

¿What happens in cases of two incomes per salary or pension allowance that do not exceed $10,000,000 per unit, but the sum of which does exceed this amount?

And the biggest question is the one that the Court will have to resolve when analyzing the proportionality and the constitutionally legitimate purpose of the regressive measure adopted by the solidarity tax on social rights:

¿Is the application of Decree 568 of 2020 an appropriate and necessary measure in accordance with the constitutional principles and acquired rights of both pensioners and public sector workers?

While the constitutionality or not of the questioned Decree 568 of 2020 that created this solidarity tax is being resolved, at CMS Rodriguez-Azuero we are offering personalized advice, for those clients who are affected by this measure, which in our concept affects inalienable rights, especially the fundamental rights of pensioners.

Authors

Portrait ofAdriana Escobar
Adriana Escobar
Partner
Bogotá
Portrait ofValentina Ojeda
Valentina Ojeda
Senior Associate
Bogotá
Juan Carlos González