Hamburg Finance Court: Constitutionality of Nuclear Fuel Rod Tax Seriously Doubtful

In a preliminary injunction procedure, the 4th Senate of the Finance Court of Hamburg expressed serious doubt as to the legality of the nuclear fuel rod tax that is levied as of 1 January 2011. The court therefore granted preliminary relief to a nuclear power plant operator.

The nuclear fuel rod tax was introduced last year as a consumption tax on newly installed plutonium and uran fuel rods. At the time the government planned to extend the operating times of the 17 German nuclear power plants (Energy Concept 2010). After the nuclear accident in Fukushima the government reversed its nuclear policy. It proposed comprehensives legislative changes, including a nuclear phase-out until 2022 and the immediate shut down of the seven oldest operating nuclear power plants (plus the Krümmel nuclear power plant that was not in operation due to technical problems). The nuclear turnaround laws have meanwhile been promulgated. However, the Nuclear Fuel Rod Tax Act that was aimed at raising EUR 2.3 billion per year between 2011 and 2016 has not been repealed.

In accordance with the Nuclear Fuel Rod Tax Act, the operator after an exchange of nuclear fuel rods in July submitted a tax declaration amounting to EUR 96 million to the competent Main Customs Office of Hanover. The operator also paid the tax wanting to avoid a late payment fine, but at the same time applied for a preliminary injunction with the competent Finance Court of Hamburg, asking the court to revoke the immediate execution of the tax assessment so that the company had to be (preliminarily) refunded.

The court followed the operator’s reasoning and issued a decision revoking the immediate execution of the tax assessment. Due to the nature of the preliminary injunction procedure, the court assessed the facts and its legal consequences only on a summary basis. The court said it had serious doubt with regard to the legality of the nuclear fuel rod tax, arguing it was likely that the German state did not have the competence to raise the tax as the tax was most likely not a consumption tax in the sense the German federation can levy under constitutional law. Furthermore, the court called it doubtful whether the constitutional system of balanced financial competences between the German federation and the federal states allowed the German federation to invent a new tax.

The court granted leave to appeal to the Federal Finance Court (Bundesfinanzhof), as it considered the matter of fundamental importance. Hence, the decision is most probably only a first victory for the operators of nuclear power plants, albeit an important one. E.ON, RWE and EnBW all declared to have taken legal action against the nuclear fuel rod tax. E.ON AG had blamed the amendment of the Atomic Energy Act (AtG) with the early unplanned shutdowns of nuclear power plants in Germany and the nuclear-fuel rod tax for its loss in Q2 2011. The government on the other hand is likely to fight for the nuclear fuel rod tax, as revenue has already been lower than budgeted, due to the immediate shut down of several other nuclear power plants.

Source: Finance Court of Hamburg

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