The Court of Justice of the European Union (CJEU) has endorsed this Wednesday the legality of the controversial tax on the value of electricity production (IVPEE), a tax approved by the Government of Mariano Rajoy in one of the worst moments of the economic crisis to combat the tariff deficit. The ruling concludes that the IVPEE fully respects the EU rules. Spain was gambling the return of up to 10,200 million euros paid so far by the electricity companies.
“The directive on the general regime of excise duties It is not opposed to a national regulation that establishes a tax that is levied on the production and incorporation into the electrical system of electrical energy in the national territory and whose taxable base is constituted by the total amount of the taxable person’s income obtained by carrying out these activities, without taking into account the amount of electricity actually produced and incorporated into that system “, says the ruling.
This direct tax of 7% on power generation was introduced at the end of 2012, with Cristóbal Montoro as Minister of Finance and José Manuel Soria as Minister of Industry. The tribute ended up raising the electricity bill, but still allows collecting every year about 1,500 million euros.
It is the same tax that was in the spotlight in 2018 with Teresa Ribera already as Minister of the Ecological Transition because the Government decided to suspend it for a few months to temporarily stop an escalation in the price of electricity.
The PP of Mariano Rajoy legislated this tribute as a direct tax and protected his creation in the need of offset environmental damage, given that with its collection it was intended to finance the break that the expensive subsidies to renewable energies of the Zapatero Government had been making to the system for years.
The tribute gave rise to a legal battle between the electricity sector and the Government. However, neither the Constitutional Court nor the Supreme Court considered the demands of the sector. Yes he did Superior Court of Justice of the Valencian Community when submitting a question for a preliminary ruling to Luxembourg to rule on the matter following an appeal by the company Promociones Oliva Park SL
In its appeal, this company argued that the IVPEE is added to other taxes levied on the same good or service. It also argued that, despite its regulation as a direct tax, its nature and essential elements are those of an indirect tax, whose tax burden is passed on to the final consumer of electricity.
Finally, Promociones Oliva Park denounced that, despite nominally having an environmental purpose, it is essentially a collection tax, with no specific extra-fiscal purpose; what discriminates against the production of electrical energy derived from renewable sources, without differentiating according to the intensity and pollution of the environment; and that distorts the internal market for electricity and undermines free competition.
In the procedure before the CJEU, the Spanish Government replied that the IVPEE is a direct tax levied on the production and incorporation into the electrical system of electrical energy, without impact on the consumer, with a specific environmental purpose, which is not related to the ‘polluter pays’ principle, and that it does not discriminate against renewable producers. Therefore, according to the Spanish Government, the tax does not violate Union law.
Arguments of the TWO
In its ruling this Thursday, the EU Court of Justice dismisses all the arguments of Promociones Oliva Park and agrees with the Spanish Government. First, the CJEU considers that the IVPEE does not violate the directive on excise duties: no constitutes an indirect tax that directly or indirectly affects the consumption of electricity. The taxable event is the net energy production and the tax is not collected directly from consumers, but from the economic operators that produce it and incorporate it into the system.
In addition, the ruling considers that the tax burden of the IVPEE is not passed on to consumers. There is no formal mechanism for the impact of the tax and, furthermore, the tax is calculated based on the condition of electricity producer and regardless of the amount of electricity actually produced and incorporated into the system. There is no direct and inseparable link between this tax and electricity consumption.
The CJEU maintains that This tax does not discriminate against renewable energy producers either. The renewables directive “does not prohibit member states from imposing a tax, such as the IVPEE, on the production of electricity and its incorporation into the system, also when the electricity is produced from renewable energy sources.” “Member States have a margin of appreciation with regard to the measures that they consider adequate to achieve the objectives “of renewables.
Finally, the ruling ensures that the IVPEE does not breach the directive on common rules for the internal electricity market. The Superior Court of Justice of the Valencian Community indicated, in this regard, that the tax favors electricity producers established in the other Member States because it only applies to national producers.
The CJEU also rejects this argument. Taxes do not fall within the scope of the EU rules on subsidies unless they constitute the mode of financing of an aid measure. “In this case, it does not appear that the income from the IVPEE collection constitutes the mode of financing a state aid measure,” the ruling concludes.
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