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Constitutional doubts of the Supreme Court regarding the Value Tax on the Production of Electrical Energy

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Enrique Vázquez analyses the constitutional doubts of the Supreme Court regarding the Value Tax on the Production of Electrical Energy

The Supreme Court, in an decision of 10th January 2018, has once again raised a question of unconstitutionality concerning the Value Tax on the Production of Electrical Energy, a tax introduced into our legal system by Law 15/2012.

The High Court reiterates the doubts it has already raised before the Constitutional Court in a decision dated 14th June 2016, which were not dispelled as the matter was not allowed, since there were also doubts as to its incompatibility with the legal system of the European Union, and it had to refer a question to the Court of Justice of the European Union (ECJ) for a preliminary ruling prior to going to the Constitutional Court.

Now, given the recent pronouncements of the ECJ, the Supreme Court has come to the conviction that, regarding the Value Tax on Electric Power Production (hereinafter Ivpee), Law 15/2012 does not present problems of adjustment with the legal system of the European Union, although its constitutionality doubts continue, which has led to the reopening of the question of unconstitutionality through the decision of 10th January 2018.

It should be remembered that the Ivpee is a direct tax levied on the production and incorporation of electrical energy into the electricity system, with respect to electrical energy production facilities, both of a general and special nature. The taxable base of the Tax is formed by the total amount that corresponds to be received by the taxpayer for the production and incorporation into the electric power system, measured in busbar cost, for each facility in the tax period, being the fixed tax rate of 7%. The Ivpee entered into force on 1st January 2013.

The High Court questions the extra-fiscal purpose of the Ivpee, since its collecting nature is clear but not its environmental purpose, since, by analysing the structure of the tax, this alleged environmental nature is not appreciated. Thus, according to the Court, the tax is levied in the same way on those who use these networks intensively as on those who use them to a lesser extent; for environmental protection tax exemptions or benefits where the contribution to the environmental impact is not significant would have been advised; the tax base does not contain any variables with environmental impact; it is not easy to establish a link between investments in transportation and distribution networks and the environmental impact that the tax justifies.

After analysing the controversial tax, the Chamber concluded that it had serious doubts about the environmental purpose of the Ivpee and shared with the claimants that the real objective of the tax was to reduce the tariff deficit. However, even though the tax is not intended to protect the environment, this does not make it unconstitutional, if the tax respects the principles of Article 31.1 of the Constitution, specifically the principle of economic capacity, and this is where the doubt arises in the High Court, since the Ivpee could be taxing an economic activity already subject to taxation by the Tax on Economic Activities.

Consequently, the Supreme Court once again raises the question of the unconstitutionality of certain articles of the law governing the Ivpee with the Constitutional Court because of its opposition to the principle of economic capacity in accordance with article 31.1 of the Constitution.

It is therefore up to the Constitutional Court to determine whether the Ivpee goes contrary to the Constitution.


For further information, please contact:

Enrique Vázquez Alcover

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