Definitive Report - Report No 391, October 2019

Case No 3266 (Guatemala) - Complaint date: 20-FEB-17 - Closed

Allegations: The complainant organization alleges that the requirement for trade unions to obtain a tax identification number undermines the principles of free association since it grants the administrative authorities excessive knowledge of and control over the activities and internal administration of trade unions

1. 303. The complaint is contained in a communication from the Indigenous and Rural Workers’ Trade Union Movement of Guatemala (MSICG) dated 20 February 2017.
2. 304. The Government sent its reply in two communications dated 20 December 2017 and 3 May 2019.
3. 305. Guatemala has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), the Right to Organise and Collective Bargaining Convention, 1949 (No. 98), and the Collective Bargaining Convention, 1981 (No. 154).

A. The complainant’s allegations

1. 306. In its communication dated 20 February 2017, the MSICG alleges that the requirement to provide a tax identification number (NIT) to open bank accounts and to deduct taxes on donations to trade unions grants the tax authorities excessive knowledge of and control over the activities and internal administration of trade unions, which undermine the right of trade unions to freely organize their activities and internal matters without interference.
2. 307. The complainant indicates that, for many years, the ILO’s supervisory bodies have called into question the existence of a system of supervision over trade unions in Guatemala, which obliged unions to report on the management of their resources once a year to the General Directorate for Labour. The ILO’s observations had led to the approval of a series of reforms to the Labour Code in 2001 that, while not completely eliminating supervision over trade unions, temporarily alleviated the pressure exerted over them. However, the tax administration soon replaced this supervisory system and began to request trade unions to provide an NIT to process their members’ trade union dues, requiring: (i) the appointment of an accountant to apply for registration on the tax register; (ii) the approval of books and evidence different from those required under the Labour Code; and (iii) the subjection of trade unions to tax controls by the Superintendent for Tax Administration (SAT). This practice was the subject of a complaint to the Committee on Freedom of Association, which made its recommendations under Case No. 2259. The complainant indicates that although the Government has not complied with the recommendations of the case mentioned, it has in practice stopped requiring trade unions to undergo the aforementioned tax controls.
3. 308. However, the complainant alleges that the Government has recently started to require trade unions to provide an NIT to open accounts within the banking system, which has a bearing on the management and handling of trade union funds. The complainant also states that Decree No. 10-2012 and governmental agreement No. 223-2013 impose the legislative obligation to provide an NIT in order to deduct taxes on donations made to trade unions. The complainant states that the SAT requires trade unions to undergo the aforementioned tax controls to be assigned an NIT (article 19 of Decree No. 6-91, of the Tax Code), indicating in that regard that article 30 of the Tax Code obliges “all natural and legal persons, including the State and its decentralized and independent agencies” to provide SAT employees with “information on records, contracts and commercial, professional and other activities with third parties, which is required for the purposes of calculating and generating taxes” and that the powers described therefore allow the tax administration to review the trade union’s assembly decisions, bylaws, executive board agreements and accounts.
4. 309. The complainant states that the regulation preceding Decree No. 10-2012 and Governmental Agreement No. 223-2013 exempt trade unions from taxes and permitted affiliates to deduct ordinary and extraordinary dues from income tax arising from donations and other contributions, clarifying that interested parties had the subjective right to report and pursue those deductions if desired. It also states that, by subjecting trade unions to tax controls, they are simultaneously subjected to the obligations envisaged under the Labour Code as well as tax legislation, in contravention of article 210 of the Labour Code, which establishes that trade unions are not subject to tax obligations. This also undermines the principle of speciality since the Labour Code governs trade unions and their relations with affiliates.
5. 310. Finally, the complainant criticizes the absence of remedy against inspection by the SAT in the light of the powers conferred to that institution by law, and states that the trade unions concerned are unable to demonstrate any resistance to this legislation since there is a system of civil penalties that could allow the raiding of trade union offices and the seizure of all physical and electronic records, files, computing equipment and other documentation related to their activities (articles 69 and 71 of the Tax Code and article 358, D of the Criminal Code).

B. The Government’s reply

1. 311. In its communications dated 20 December 2017 and 3 May 2019, the Government, referring to the requirement for trade unions to submit an NIT, indicates that: (i) in accordance with article 120 of the Tax Code, all contributors and officials are obliged to register with the tax administration before initiating the activities in question; (ii) to date, most trade unions legally established in Guatemala have joined the register of contributors in order to comply with their tax obligations (accreditation of trade union dues) or to receive domestic or foreign donations, goods or services, since such organizations could not receive such donations, goods or services without an NIT; (iii) to date, no trade unions registered on the Unified Tax Register have demonstrated any opposition to registration since they fulfilled the requirements, stating that the process was free, and those that have sought exemption from the different taxes set forth in law have been granted such exemptions through the corresponding resolution; (iv) in this case, the reluctance of the MSICG to register with the SAT is due to the fact that the organization has no legal status even though it has been requested to provide documentation demonstrating its legal establishment and give the name of its legal representative to the Trade Union Register of the Ministry for Labour and Social Welfare; (v) the SAT does not seek to hinder and/or inspect trade union activity as the control and inspection of trade union activity is not within its remit; (vi) the NIT is a tax obligation enshrined in Guatemalan legislation that requires all natural and legal persons to fulfil their obligations before the SAT to ensure transparency in the management of funds; and (vii) pursuant to article 8 of Convention No. 87, trade unions are obliged to respect the law, and the Committee on Freedom of Association had previously declared that questions concerning general tax legislation fall outside its competence unless such legislation is used in practice to interfere in trade union activities.

C. The Committee’s conclusions

1. 312. The Committee notes that, in this complaint, the complainant alleges that the requirement for trade unions to obtain a NIT to open bank accounts and to deduct taxes on donations to trade unions in practice implies that trade unions are subjected to tax controls by the SAT, which undermines the right of trade unions to freely organize their activities and internal matters without interference from the authorities. The Committee also notes that the complainant states that, in Case No. 2259, the Committee on Freedom of Association had already issued recommendations on tax control over trade unions but that the need to obtain an NIT to open bank accounts and deduct taxes on donations to trade unions are new elements that should be examined by the Committee.
2. 313. The Committee notes the complainant’s allegations that: (i) the allocation of an NIT subjects trade unions to tax controls; (ii) decree no. 10-2012 and Governmental Agreement No. 223- 2013 establish the obligation to provide an NIT in order to deduct taxes on donations to trade unions; (iii) article 30 of the Labour Code creates the obligation to provide SAT employees with information on records, contracts, commercial and professional activities with third parties, including the collection of trade union dues, third-party donations and any expenses exceeding 100 quetzales, which are subject to inspection by the administrative authority if they are to be deducted from income tax; (iv) the inspection powers of the SAT extend to the review of the trade union’s assembly decisions, bylaws, executive board agreements and accounts, to the extent that it is possible for this institution to exercise de facto supervision and control over trade unions; (v) article 225 of the Labour Code, in accordance with all legislation prior to decree no. 10-2012 and Governmental Agreement No. 223-2013, establishes income tax exemption for trade unions; (vi) as trade unions are subject to tax controls and the obligations of the Labour Code, they are therefore subject to two forms of control; and (vii) in accordance with the powers conferred to the SAT by law, the trade unions concerned cannot demonstrate any resistance to their inspection activities since there is a system of civil penalties that may permit, among other actions, the raiding of trade union offices and the seizure of records under the Tax Code and the Criminal Code.
3. 314. The Committee observes that the Government, for its part, states that: (i) in the interest of transparency in the management of funds, article 120 of the Tax Code establishes that all contributors and officials are obliged to register with the tax administration; (ii) most trade unions legally established in Guatemala have joined the register of contributors in order to comply with their tax obligations or to receive domestic or foreign donations, goods or services; (iii) to date, no trade unions registered in the Unified Tax Register have demonstrated any opposition to registration since they meet the established requirements and have been granted exemptions from the different taxes as conceded by law; and (iv) the reluctance of the MSICG to register with the SAT is due to the fact that the organization has no legal status, despite that it has been requested to provide documentation demonstrating its legal establishment and naming its legal representative to the Trade Union Register of the Ministry for Labour and Social Welfare.
4. 315. In relation to Case No. 2259 (closed) described by the complainant, the Committee recalls that, in the last follow-up to the case, while taking note of the information communicated by the Government regarding the State’s alleged supervision and interference in the management of trade union funds, the Committee concluded that there had been no interference of the public authorities in the financial affairs of trade unions [see 348th Report, Case No. 2259, November 2007], and therefore the Committee did not pursue the examination of these allegations.
5. 316. The Committee observes that in this case the complainant alleges the existence of two new elements in comparison with the situation examined by the Committee in Case No. 2259, namely: (i) the practical requirement of requesting an NIT to open a bank account; and (ii) the legislative requirement to provide an NIT to obtain exemption for donations made to trade unions under decree no. 10-2012 and Governmental Agreement No. 223-2013. The Committee observes, however, that the allegations presented by the complainant only indicate that, in the context of the situation described, the powers of the tax authority may constitute a potential risk to trade unions and that the complaint contains no concrete allegations that the SAT would exercise any supervision or interfere in the internal affairs of trade unions. Recalling that questions concerning general tax legislation fall outside its competence unless such legislation is used in practice to interfere in trade union activities [see Compilation of decisions of the Committee on Freedom of Association, sixth edition, 2018, para. 28] and given the absence of concrete allegations of interference in trade union activities, the Committee will not pursue its examination of this case.

The Committee’s recommendation

1. 317. In the light of its foregoing conclusions, the Committee invites the Governing Body to decide that this case does not call for further examination.