A criminal accusation made by the AFIP was qualified as "close to slander"

On March 8, 2004, the Judge in charge of the No 1 Argentine Criminal Court on Tax Matters of the City of Buenos Aires, Mr. Javier López Bizcayart, resolved to reject the requirement of the tax authorities that criminal investigations should be opened in the case of “Vázquez, Roberto Baldomero - taxpayer: Asociart S.A. Worker’s Compensation Insurance (A.R.T.) s/ simple tax evasion". The case had started when the Federal Administration of Public Revenues (“A.F.I.P.”) made an accusation of simple crime of evasion, pursuant to Section 1 of the Criminal Tax Law No 24,769, after detecting presumed irregularities in the company’s income tax assessment, corresponding to the period of 1998.

The AFIP questioned certain “bad debts” or “uncollectible” deductions made by the taxpayer. According to the AFIP, there were no uncollectibility indexes to enable such deductions, since the taxpayer, dedicated to the insurance activity, had not commenced legal actions in order to collect the premiums owed by certain clients.

The judge pointed out that the AFIP’s expectation was not only non-demandable according to the legal rules of the insurance company’s activity, but also irrational, since the persecution of the credits would become harmful for the economy of the company, because the amounts were so small. Therefore, the judge upheld that the conditions provided for in the Income Tax Law and its regulatory decree to admit the deduction of “bad credits” actually existed.

The AFIP also objected the deduction for commissions payable to the brokers, considered by the company as accrual expenses yielded in the fiscal year when they were billed, since the fiscal criteria was not of “estimated liabilities” but rather because their fulfillment was subject to certain conditions. In fact, the payment of such commissions depended on the payment of the premiums by the insureds, which according to the AFIP, meant that they could not be considered as accrual expenses. Consequently, the judge argued that “to accrue” means to acquire the right over a good, and the moment when the income is earned constitutes "accrual", independently of its collection. The necessary expenses in order to obtain the rent follow the course of the income and, for that reason, are imputed in the moment it occurs, regardless of whether it has been paid or not. All the more reason for the judge to conclude that the commissions were accrued and correctly deducted in the fiscal year by the taxpayer.

After clarifying that the fiscal arguments were groundless, the judge underlined that the dispute involved "interpretation" matters, and that to present the case as “the performance of operations tending to obstruct national tax collection is close to slander". Subsequently, the judge suggested the officials of the entity should consider the issue, particularly because the legal norm provides for an exceptional imperative proceeding (Section 19, Law No 24,769) that forbids public officials from denouncing such cases and if this is not observed the liability of the State may be at stake".

Moreover, the opinion upheld by the judge of the recently created Criminal Court on Tax Matters of the City of Buenos Aires, would seem to be a message directed to the AFIP. In recent times, this body has formulated criminal accusations for supposed crimes of evasion contemplated in the Criminal Tax Law No 24,769 in circumstances whereby the non-existence of "deceits", "artifices" or “maneuvers” seemed clear, but there were only differences of interpretation. In view of the above, criminal accusations should not be formulated because of the absence of the necessary minimum conditions for the existence of the crimes foreseen in the Criminal Tax Law No 24,769. This judgement constitutes a valuable precedent in relation to the formulation of groundless criminal accusations by the AFIP.