The principle of non-confiscation supposes the prohibition of establishing an exorbitant tax burden that entails an almost total deprivation of the wealth of the tax subject.
That is, this principle means that a tax that implies the appropriation of all the assets and income of the subject cannot be applied.
It is a principle of tax law which regulates the taxes imposed on taxpayers.
The contribution to the maintenance of public spending through levies cannot consist of depriving the taxpayer of all their income and properties.
In this sense, this principle seeks to protect the right to private property. The taxpayer’s wealth cannot be depleted.
Seen in another way, non-confiscation is the limit to the progressivity of tax burdens. Likewise, this principle is associated with the principle of economic capacity. Why? Because the tribute must be based on economic capacity so that it never has confiscatory scope.
But what does economic capacity consist of?
Economic capacity refers to the wealth of the taxpayer. Once this wealth is obtained from the taxpayer, a limit may be established that cannot be levied with taxes, since otherwise it would have a confiscatory nature.
This capacity can be obtained from indicators such as the consumption of goods, the ownership of an asset, the obtaining of income or the circulation of wealth.
Currently, there is no exact limit for the tax system that indicates that the tax burden is having a confiscatory nature, although it is generally understood that taxing more than 60% could be considered confiscatory. Similarly, it is clear that taxing 100% would be confiscatory.
This principle must not only be studied for the entire tax system of a country, but must be applied to each of the taxes. If this limit did not exist, the State could indirectly appropriate the assets of taxpayers through tax burdens. This is precisely what the non-confiscatory principle wants to avoid.
Functions of the principle of non-confiscation
It is possible to notice two functions of this principle:
- This principle protects the wealth of people, taxpayers, who despite their obligation to contribute to defray public expenses will not lose their income or property to achieve this support of public expenses.
- It works as a limit to progressive tax systems, since it is always necessary to maintain a vital minimum so that taxpayers can develop their lives.