FUNDACIÓN ELÉUTERA´S POLICY ACHIEVEMENTS IN THE NEW HONDURAN TAX CODE The following is a list of policy recommendations presented by Fundación Eléutera in its policy papers, letters and op-eds published on January, March and June, which have been signed into law by Congress in the new Honduran Tax Code. 1. Legality Principle. From now on, all punishable offenses and sanctions that can be imposed to tax payers, must be regulated by the law. Before the current of Tax Code was approved, tax payers were punished for noncompliance with administrative regulations issued by the Tax Administration or with the executive orders issued by the President. The duty to present tax returns, as well as deadlines in general, must also be regulated by law. 2. Protection Against Sanctions. Taxpayers can now suspend the application of sanctions until the administrative procedure has been exhausted. During the period from 2014 to 2016, the Tax Administration closed 1,462 businesses for alleged breaches of administrative regulations such as the billing regime; the same administration blocked the RTN (National Tax Registration) of 28,359 taxpayers, depriving them of performing commercial transactions in the formal sector of the economy, due to alleged debts with the Tax Administration. The sanctioning process followed by the tax authorities did not respect the minimum guarantees enshrined in article 8 of the American Convention on Human Rights; violating, among others, due process rights such as presumption of innocence, the right to defense, the right to a prior hearing, and the right to be heard in court. 3. Court order required. In order to protect the rights of the taxpayer, the Tax Code prescribes that the agents of the tax administration will need prior judicial authorization when: 1. They require the use of public force to enter commercial establishments; and, 2. To seize documents and assets. Before, the Tax Administration carried out tax raids accompanied by agents of the Armed Forces who entered business premises with high caliber assault rifles. 4. Legal Certainty. In compliance with the principle of non-retroactivity of the law, the Tax Code now protects tax payers from erratic tax reforms; establishing the following rules: a. If the tax is payed yearly, any modifications affecting it will come into force the first day of the next fiscal period. b. If the tax is payed monthly, the modifications will come into force three months after its publication.
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This measure aims to provide legal certainty in the application of the tax laws, in order to create a safe investment environment. 5. Limits to Shareholder Liability. The first tax code draft wanted to make stockholders liable for the tax debts of the companies were they owned stock. The final Tax Code establishes limits to shareholder liability, protecting them from the tax debts of the companies were they own stock. 6. Modernization of the Tax Domicile. The new Tax Code mandates the creation of a virtual booth through which tax payers can send documents and notifications to the Tax Administration. The Tax Domicile will be the one declared by the Tax Payer. Before, if a taxpayer changed domicile, their notification would not be accepted if they did not accompany it with several other documents which were not required by law; exposing them to administrative sanctions for “not notifying” their domicile change. 7. Accounting Outsourcing. The new Tax Code allows taxpayers to outsource the management of their accounting books. Previously, the accounting books had to be permanently in the domicile of the taxpayer, and if they were not presented immediately during the auditing process, the taxpayer was fined; this situation forced companies to have an in-house accounting staff, which obviously increased their expenses. 8. Non Accumulation of Interests Over Tax Debts during Administrative Proceedings. Once a tax payer protests a tax debt determined by the Administration, there will be no accumulation of interests until the administrative proceedings have ended. On the first Tax Code draft, interests would accumulate over the taxpayers’ debt during the whole duration of administrative proceedings, which could take up to two years long. 9. Tax Debt Collection Must Be Executed Through the Judicial Court System. The first Tax Code draft pushed forward by the Tax Administration, allowed them to collect tax debts through administrative orders; they could freeze bank accounts and appropriate goods belonging to the alleged tax debtor. Under the new Tax Code, all tax debt collection procedures must be executed through the civil courts of the judiciary, just like a regular debt would be collected among equals. 10. Reasonable Deadlines. The first Tax Code draft established deadlines of six months for the Tax Administration to answer a petition or issue a resolution on a
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protest presented by the tax payer. The approved Tax Code establishes more reasonable deadlines for the Tax Administration to abide by. 11. Repeal of article 20 of the Expenditure and Revenue Efficiency Act. Through the enforcement of this article, the Tax Administration suspended the tax payers’ Tax ID (RTN) without any due process. Without your Tax ID, you cannot perform commercial transactions in the formal sector of the economy. 12. Repeal of article 35 of the Financial Equilibrium Act. Through the enforcement of this article, the Tax Administration closed down businesses temporarily without any due process, for alleged lack of compliance with executive regulations. 13. Repeal of article 104 of the Administrative Litigation Jurisdiction Law. Through the enforcement of this article, tax payers were barred from accessing the court system and enjoying procedural rights, if previously they did not pay the full amount of the tax debt the Tax Administration had adjudicated to them. 14. Comprehensive Tax Reform. The new Tax Code prescribes the creation of the following laws: 1. Single or Flat Tax Law; 2. Income tax law; 3. Sales tax law, and; 4. A compilation of all of the tax related laws, in order to avoid conflicts among them and secure legal certainty of applicable law.
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