29 mayo 2019

Supreme Court Ruling: the Tip of the Iceberg for Transparency Across the Board

The Supreme Court has found non-salary payments in the Army that are unlawful for the Public Administration in re Sosa, Carla Elizabeth et al v Department of Defense ARMY on military officers and civilians in the Armed and Security Forces. (CAF 46478/2013/RH1).

Published in El Cronista on May 28, 2019
The National Court of Appeals in administrative contentious federal matters (Panel II) confirmed the Lower Court decision and sustained the complaint filed by several active-duty officers in the Argentine Army against the National State (Department of Defense). It declared that the allowances for “hierarchical position” and “equipment management”, which were established by Executive Order 1305/12 as amended, should be subject to tax deductions and also included in the calculation basis for other items, and ordered payment of the amounts arising out of the relevant calculation plus interests.

The Lower Court found that in most military ranks, all or almost all officers collected one or both allowances, and emphasized that those who did not collect these payments were beneficiaries of a fixed amount under the terms of Section 5 of Executive Order 1305/12, contrary to the particular nature that the law intended to assign to the pay rises granted.

The Court ruled that these allowances met the requirements to be subject to tax deductions in accordance with case law (Judgments 321:619; 323:1048 and 1061), and stated that the general and permanent pay rises under Executive Order 1305/12, as amended, not only were subject to tax deductions but also should be included in the calculation basis of other items, as provided by Section 55 of Act No. 19101.

The judgment on appeal is within the exclusive jurisdiction of the Executive, including the authority to establish the salary policy for Administration staff.

In other words, there are two kinds of benefits both in the public and in the private sector. The so-called “salary” benefits include those items that make up employees’ pay in exchange for services or work done.

Each item serves a particular purpose, and its nature does not depend on the will of social stakeholders or those who decide to grant or increase employees’ pay.

As a matter of fact, the public policy doctrine has been created to have norms to manage the will of people at organizations according to their idiosyncrasy and within the framework of their rules, generally differentiating between those that are applicable in the private sector and those for the public sector, and in particular those that are applied in the general administration, Armed Forces and Security Forces.

To some extent, the structural reforms required by the State have to do with transparence at its administration, and this judgment clearly shows that for a number of reasons, non-registered employment and wrongful registration such as unlawful non-salary benefits are calling for regularization, and constitute one of the reasons why social security entities lack enough funds or run deficit.

Forty percent of the national economy off the books is coupled with technical mechanisms for tax and social security evasion through many different anomalous models from the State at its central administration and, more importantly, in the Armed Forces and Security Services at the national, provincial or local level.

This Supreme Court ruling is just a small portion, the “tip of the iceberg” of the need to have transparence across the board, and in particular along the capricious corridors of state agencies.

By Julian A. de Diego
Director of the postgraduate course on Human Resources at the School of Business at UCA.

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