Municipal taxes and their analysis

Mildred María Almengor Roca,  May 9, 2024

Alegalis - In Guatemala, fees are not considered a tax. They are defined as fees applied to certain goods, services or activities, either by the central government, municipalities or other governmental entities. These fees may vary according to the type of activity or good to which they are applied and are intended to raise revenue to finance specific public services or programs.

In the Guatemalan context, fees tend to be interpreted as arbitrios because they are often applied in a discretionary manner and may be perceived as additional taxes on certain activities or goods. Unlike taxes, which are levied on income, property or transactions, arbitrios tend to be more directly associated with the provision of services or the regulation of specific activities.

And it is at this point where the controversy arises as to whether the Municipal Corporations violate the principle of legality in tax matters regulated in Article 239 of the Political Constitution of the Republic of Guatemala, which establishes Principle of Legality. It corresponds exclusively to the Congress of the Republic to decree ordinary and extraordinary taxes, excise taxes and special contributions, according to the needs of the State and in accordance with tax equity and justice, as well as to determine the basis for collection, especially the following: a) The generating event of the tax relationship; b) exemptions; c) The taxpayer and joint and several liability; d) The tax base and the tax rate; e) Deductions, discounts, reductions and surcharges; and f) Tax infractions and penalties. Provisions, hierarchically inferior to the law, that contradict or distort the legal rules regulating the tax collection bases are ipso jure null and void. The regulatory provisions may not modify such bases and shall be limited to regulating the administrative collection of the tax and establishing the procedures to facilitate its collection", since according to the provisions, it is an exclusive power of the Legislative Branch to create taxes, excise taxes and special contributions.

Municipalities may charge fees for services such as garbage collection, street maintenance, public lighting, among others. These fees usually vary according to the location and the amount of services provided; however, it should be noted that these fees are created at the discretion of the municipal corporations and do not always have the characteristics of fees, but generally comply with the particularities and purposes of excise taxes.

Municipal taxes in Guatemala have been criticized for several reasons, among which it is worth highlighting:

1. Lack of transparency: In many cases, citizens do not have a clear understanding of how municipal fees are determined and what exactly the funds collected are used for. This can generate distrust and skepticism among taxpayers.
2. Lack of equity: they are often not applied in an equitable manner, which means that some taxpayers may end up paying more than they should according to their economic capacity, while others may pay less than they should, in accordance with their taxable capacity.
3. Poor quality of municipal services: Despite the municipal fees paid by citizens, in many places there persists a deficiency in the quality of municipal services, such as garbage collection, street maintenance, drinking water supply, among others. This leads to the perception that taxpayers are not receiving adequate value for the money they pay.
4. Lack of accountability: The management of funds collected through municipal fees often lacks proper accountability and oversight, which can facilitate the misuse or corruption of these resources.

Therefore, it is important to emphasize that the interpretation of administrative fees as a disguise of arbitrios may depend to a great extent on the perception of the citizens on the fairness and efficiency in their application, as well as on the transparency in the management of the revenues generated by these fees, and even on several occasions, the Constitutional Court through its resolutions, It has been argued, as previously indicated, that only the Congress of the Republic has the power to create taxes, thus evidencing the violation by the Municipal Corporations of one of the fundamental principles in tax matters, such as the principle of legality.

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