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Important Supreme Court ruling
On 15 July 2014 the Supreme Court of Justice delivered a relevant ruling admitting the action filed by Asociación de Bancos de Argentina (ABA) and its associated banks against the Province of Buenos Aires. Taxand Argentina takes a look at this ruling.
Under this ruling the Revenue Department of the province of Buenos Aires (ARBA) is disabled, among other issues, to:
1) freeze or seize funds or assets located outside the province of Buenos Aires jurisdiction without court authorisation
2) require financial institutions to provide information regarding assets seized or freezed outside the province of Buenos Aires
3) enforce sanctions on Banks who do not comply with any of this orders issued by ARBA
For that purpose the Supreme Court of Justice declared the unconstitutionality of parts of the tax code of the Province of Buenos Aires. Therefore the Province of Buenos Aires must accept this judgment and repeal the rules that were declared unconstitutional. Even though the Supreme Court of Justice recognised that the tax-raising power is one of the foundations in which provincial autonomy is based it was established that this power can not be extended outside its jurisdiction nor invade other jurisdictions.
The Supreme Court of Justice upheld -despite the advice provided by the Attorney General's Office- that ABA was entitled to filling this action against the Province of Buenos Aires. This is important as the Supreme Court recognised legal standing for associations or chambers to sue in federal courts about tax matters.
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The doctrine set out in this decision can be applied to other cases where different provinces intend to extend its tax power beyond their own jurisdiction. It might also allow for discussions around extra-jurisdictional bank withholding regimes (on gross income tax) and other issues.