Supreme Court Says Most Benign Criminal Law Applies Retroactively when Filing Criminal Tax Charges

On October 28, 2021, the Argentine Supreme Court handed down its judgment in the case of “Vidal, Matías Fernando Cristóbal et al. on violation of Law No. 24,769” which revolved around the retroactive application of amounts triggering criminal charges under the new Criminal Tax Regime (the “CTR,” after its acronym in Spanish) approved by Title IX of Law No. 27,430 (published in the Official Gazette on December 29, 2017).

Through this recent ruling, the Supreme Court granted the plaintiff’s extraordinary appeal and revoked the majority decision of Division III of the Federal Court of Cassation, which had held that the amounts established in the new CTR do not apply retroactively pursuant to the Continental Law principle of “retroactivity of the most benign criminal law.”

When establishing different criminal charges, the CTR sets minimum “quantitative amounts” for criminal behaviors to be subject to criminal reproach (for example, for the crime of “simple tax evasion,” the minimum is ARS $ 1,500,000 for each tax and for each fiscal year). The question addressed by the Court is whether those amounts apply by virtue of the principle of “retroactivity of the most benign criminal law” even to exclude from reproach criminal behaviors that were prior to the CTR’s entry into force and that were regulated by a previous law that established lower “quantitative amounts.”

This controversy has generated hundreds of claims by those who understood that the CTR applied retroactively and were awaiting a final decision by the Supreme Court.

Although the Supreme Court had already ruled for the application of this principle in similar cases, under previous reforms, the Court of Cassation’s appealed position was that those precedents should be set aside because the increase of the “quantitative amounts” under the CTR stemmed from an economic policy aimed at adjusting to inflation and not from the social ponderation of the respective behaviors in question. The Court of Cassation reached this conclusion from the message sent to the National Congress by the Executive Branch with the first proposal of Law No. 27,430.

However, once again, the Supreme Court upheld the application of the principle under analysis, finding, among other things, that:

• The “most benign criminal law” principle stems from the constitution and is enshrined in international human rights treaties (Pact of San José de Costa Rica and International Covenant on Civil and Political Rights); therefore, it is universally applicable and admits limited exceptions.
• Beyond the message sent to the National Congress by the Executive Branch, there is no legislative evidence that Law No. 27,430 has linked the amendment of the “quantitative amounts” to reinstatement due to inflation; thus, this purpose cannot be verified.
• The lawmaker’s rationale was not reflected in the letter of the law and there are questions as to whether that rationale was indeed the reinstatement of these amounts (for example, because lawmakers further increased the amounts proposed by the Executive in different proportions with respect to each criminal charge).
• The fact that Law No. 27,430 created the Tax Value Unit (the “UVT,” after its acronym in Spanish), as a mechanism that can enable, for example, updating the monetary parameters of the CTR to mitigiate the effects of inflation, reveals that, without this incorporation, the system was insufficient to face this reality. In other words, there is a mechanism for reinstating these amounts (not in force yet), thus the latter cannot be a reinstatement on their own.

Consequently, the Supreme Court overturned the Court of Cassation in the case under analysis and in all the decisions handed down in the remaining cases in which it applied the same solution which will be subject to this precedent.

The Supreme Court’s decision will have significant impact on ongoing cases in which the application of the “retroactivity of the most benign criminal law” principle has been invoked. In this sense, the Office of the Attorney General issued resolution No. 87/2021 and the Federal Tax Authority issued General Instruction No. 2/2021 by which they ordered the adoption of the Supreme Court’s standard in this case.

Apart from that, the application of the new standard will not prevent the Federal Tax Authority from fining taxpayers for tax evasion (section 46 of the Tax Procedural Law), with fines between 200% and 1000% of the unpaid tax (between 200% and 600% under the reform introduced by Law No. 27,430), in proceedings that require the submission of defenses.

Finally, within the broader framework of the controversy and regarding the role played by the Court of Cassation, the Supreme Court addressed other relevant issues on the nature of the cassation appeal filed before the Court of Cassation and the extraordinary federal appeal, the need to standardize criteria through decisions handed down with the courts sitting en blanc and the purpose of these decisions, the obligation of the lower courts to follow Supreme Court precedents, the effects of dismissals of extraordinary appeals grounded on insufficient or irrelevant federal basis for appeal (Section 280 of the Argentine Code of Civil and Commercial Procedure), the interpretation of parliamentary debates and other sources of law, and many other matters.