Issue:
Whether the tax reform that introduced a tax on ultra-processed foods and ultra-processed sugary beverages (Law No. 2227 of 2022) violates the principles of equality, freedom of enterprise, and free competition.
Summary:
In Decision C-435-23, the Constitutional Court of Colombia [Corte Constitucional] upheld the constitutionality of Article 54 of Law 2277 of 2022 (tax reform). Said provision imposes taxes on ultra-processed sugary beverages and products. This ruling resulted from two separate lawsuits (D-15137 and D-15129) challenging the provision. One claimed legal procedural defects in the enactment, while the other alleged violations of the principles of equality, economic freedom, and free competition. The Court rejected both arguments and confirmed the constitutionality.
In its analysis, the Court addressed three key issues: (i) the role of taxation in correcting negative externalities, (ii) the principle of equality, and (iii) the implications of taxation for free competition.
Regarding taxation as a mechanism to mitigate negative externalities, the Court acknowledged that such measures serve an extra-fiscal function while maintaining their essential tax characteristics. It emphasized that, once enacted by the legislature (exercising its broad regulatory discretion) such taxes must include all essential elements. The Court cited past cases involving tobacco products and agricultural waste, reaffirming that taxes intended to discourage harmful economic activities and behaviors can be constitutionally valid.
On the principle of equality, the Court applied a mild scrutiny test, requiring that the measure was reasonable and adequate for its intended purpose. It concluded that the tax did not violate equality rights, as it applies uniformly based on an objective criterion (the sugar content per milliliter of beverage). Since individuals in comparable situations receive identical tax treatment, the alleged discrimination was unfounded, and therefore the provision is considered constitutional.
Addressing concerns about economic freedoms, the Court reiterated that these rights are not absolute and may be restricted to safeguard fundamental rights and the public interest. It found the tax limitations constitutionally valid because they met the following criteria: they were established by law, did not infringe the core of economic freedoms, were justified, and aimed at protecting the general welfare. As a result, the Court deemed the restrictions reasonable, proportional, and constitutional.