Lawyers to challenge backdated tax on solar in Greece10. December 2012 | Applications & Installations, Global PV markets, Industry & Suppliers | By: Max Hall
A group of international renewable energy investors are questioning the legality of the imposition of retroactive taxes on renewable electricity generation plants in Greece with a view to lodging a formal complaint with the EU.
The disgruntled investors have engaged Athens-based legal firm Metaxas and Associates to examine whether the legislation, rushed through the embattled Greek parliament on November 7, breaches EU state aid law.
The legal firm's founding partner Antonis Metaxas told pv magazine that an initial assessment of the controversial law – which imposes taxes on revenue, rather than profits, of up to 30 percent on all solar installations since July 1, 2012 – indicated the legislation also breaches the spirit of a recent EU communication, as well as possibly violating two articles of the Greek constitution.
"I can only comment on our initial assessment of the law," stated Metaxas, adding, "I imagine we will have a final text prepared in January 2013, but our initial examination indicates this tax infringes the philosophy of a quasi-binding EU communication against the retroactive modification of the framework under which renewable providers produce energy.
"It would also appear that this legislation could be considered a selective tax, that is, a tax adopted to solve a particular deficit problem. Selective taxes are prohibited by EU law, but can be implemented if the EU is notified of them and gives its approval."
Those circumstances do not apply to the hugely unpopular legislation, referred to as Memorandum III, which was put before the Greek parliament on November 5 and passed two days later.
Memorandum III made international headlines because of its swingeing austerity cuts to public salaries, pensions and the Greek health service and was put before the newly-formed coalition government as a yes or no decision on the understanding the next multi-billion dollar EU bailout for the Greek economy was contingent upon its approval.
Metaxas explained that many unpopular measures were bundled into the act for that purpose, including the renewables legislation, which penalizes solar much more heavily than other forms of renewable energy.
FIT regime too generous
The rationale behind the renewable aspect of the bill was that the backdated taxation – referred to as a 'solidarity payment' – was to address the €370 million deficit of the Market Operator caused by the now-defunct FIT regime, which was the most generous in Europe.
Metaxas contends studies of the Market Operator's deficit reveal it is not solely down to FITs subsidies, but also the method the operator used for calculating an artificially low wholesale price of electricity for all generators.
"There is also the possibility that the Greek constitution has been violated by this legislation," added Metaxas, who refused to reveal the identities of the clients who had engaged his firm. "The right to property is infringed because investors in renewable energy could not have known that they would be taxed on revenue rather than profit. Whether one accepts the government's argument about the role played by subsidies in the deficit or not, investors can argue that this is a problem related to poor planning by the government rather than something they should be held responsible for.
"On a separate issue, the law of proportionality requires the state prove that this was the only possible remedy to the problem and also requires that they justify their figures. Who decided this 30% figure and what were they basing that number on?"
With no constitutional court in Greece, those questions could be decided by a judge in any court in the country.
The Metaxas firm has been very active on solar issues having previously concluded that Greece's premium FIT scheme was not incompatible with EU state aid law; helped the adoption of an EU domestic content requirement on Greek installations; and attempted to annul a decision by the Greek government to halt new photovoltaic installations.
The law firm has also spoken in favor of the EU anti-dumping and countervailing duty investigation being conducted by the EU into Chinese solar module manufacturers.
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