Top Salvador Court Rules ‘War Tax’ Unconstitutional

The Salvadoran Supreme Court nullified the “war tax” Thursday, declaring that the levy imposed to finance the campaign against leftist rebels is unconstitutional.

Chief Justice Francisco Jose Guerrero told a news conference all five justices agreed that President Jose Napoleon Duarte’s government has no authority to collect such taxes.

Guerrero said Salvadoran law requires taxes to be used only for financing ordinary budget expenditures and that extraordinary expenditures, such as wars or emergencies, must be paid for with loans or donations.

The tax on capital holdings was approved Oct. 3 in the 60-member National Assembly by all 33 members from Duarte’s Christian Democratic Party. Conservative opposition legislators either voted against it or abstained.

Anyone with holdings of more than $20,000--such as bank accounts, homes and personal possessions--was liable for a one-time tax ranging from $100 to $5,000. Duarte hoped it would raise $24 million this year to fight the war.

The law, called the Tax Bill for the Defense of National Sovereignty, was followed by an austerity package that included higher interest rates and income taxes, a currency devaluation and higher prices for gasoline.