‘Solidarity tax’ on banks “unconstitutional” rules court

Portugal’s Constitutional Court has ruled that an extraordinary ‘solidarity tax’ on the country’s banking sector in 2020 at the height of the pandemic was “unconstitutional”.

According to Jornal de Negócios, the measure, created by a law that came into force in July, 2020, but which retroactively covered the entire year, violated the Constitution of the Republic because the law was “irredeemably retroactive” and this was against the principle that “no-one may be forced to pay taxes of a retroactive nature”.
Moreover, the ruling, dated February 27, also concluded that the solidarity payment or ASSB was actually a tax and not just an additional payment on the Contribution on the Banking Sector (CSB), and so the ruling now opens the door to other appeals of a similar type which are awaiting a decision.
The ASSB was created in 2020 alongside a package of Covid measures called the Economic and Social Stabilisation Plan (PEES) with an annual revenue (initially estimated at €33 million but rising to €38 million by 2023) earmarked for the Social Security Financial Stabilisation Fund whose aim was to reinforce social security financing as a way of compensating the exemption of VAT applicable to the banking sector on financial services.
It came into force in July 2020 with the Supplementary Budget approved that year to cover the PEES, and similar to the CSB – which had existed since the last financial crisis of 2011, and which apparently had assumed the role of main tax — also was charged on banking sector liabilities and the notional value of financial instruments derived off balance.