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More Legal Doubts Over Germany's Nuclear Tax

by Ulrika Lomas, Tax-News.com, Brussels

13 October 2011


Following hot on the heels of a similar court ruling in Hamburg, a tax court in Munich recently raised considerable doubts as to the constitutionality of the German government’s nuclear fuel tax law.

The court’s ruling followed close examination of an emergency application submitted by German energy concern RWE, in which the nuclear operator objected to and opposed payment of the government’s nuclear fuel levy (der Brennelementesteuer).

In its appeal, RWE rejected the tax assessment after the company had exchanged nuclear fuel elements at its Gundremmingen reactor in Bavaria. The bill amounted to around EUR74m (USD101m).

In its decision, the court expressed serious doubts as to whether or not the nuclear tax is, as the German finance ministry insists, a consumption tax, and therefore within the legislative remit of the federal government.

Following its examination in mid-September of a similar appeal submitted by German energy rival Eon, in which the company demanded repayment of around EUR100m, the tax court in Hamburg expressed the same considerable doubts as to whether or not the nuclear fuel tax law is in accordance with the country’s constitution.

It very clearly stated at the time that the tax is not a consumption tax and questioned whether or not the federal legislature is allowed to “invent” a completely new tax.

Outraged by the coalition government’s resolve to maintain its controversial nuclear fuel tax, despite reneging on an earlier commitment to extend the working lifetimes of nuclear power stations in Germany by on average 12 years, and announcing plans instead to pursue an accelerated move away from nuclear power to renewable energy by 2022, German energy concerns RWE and Eon elected back in June to take legal action to avoid payment of the levy.

Provided for in the coalition’s future package (Zukunftspaket), approved by the German Bundesrat, or upper house of parliament, in November last year, and in force in Germany since January 1, the government’s nuclear fuel tax was originally expected to generate in the region of EUR2.3bn (USD3.26bn) in additional revenues for the government annually, and to yield EUR14bn by 2016.

In view of the decision to close eight of the country’s nuclear power plants in the wake of the Fukushima disaster in Japan, the tax is now expected to yield significantly lower revenues of up to EUR1.3bn annually until 2016 from the nine remaining plants, equating to around EUR150m a year per reactor.

Under current provisions, the nuclear fuel tax is imposed when a reactor is fitted with a fuel element. The amount of tax due by operators is determined by the weight of nuclear fuel in the element.

The current tax rate of EUR145 per gram of nuclear fuel was agreed with energy providers during the course of negotiations held last autumn.

Given the underlying importance of the legal case, both tax courts now aim to submit the complaint to Germany’s federal fiscal court.

TAGS: court | tax | fiscal policy | energy | law | budget | Germany

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