A Case Initiated regarding the Regulation on Applying the Subsidized Energy Tax
On 9 May 2014 the 1st Panel of the Constitutional Court initiated a case “On Compliance of Para 1 of Section 3 and Para 1 of Section 4 of the Subsidized Energy Tax Law with Article 1 and Article 105 of the Satversme of the Republic of Latvia”.
The Contested Norms
Para 1 of Section 3 of the Subsidized Energy Tax Law provides: “Tax shall be applicable to revenue gained from: 1) the electricity sold in the framework of mandatory electricity procurement.” Whereas Para 1 of Section 4 of the Subsidized Energy Tax Law provides: “Tax-payers are the producers of electricity, who have the right to: 1) sell electricity in the framework of mandatory procurement.”
The contested norms entered into force on 1 January of the current year.
The Norms of Higher Legal Force
Article 1 of the Satversme: “Latvia is an independent democratic republic.”
Article 105 of the Satversme: “Everyone has the right to own property. Property shall not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law. Expropriation of property for public purposes shall be allowed only in exceptional cases in the basis of a specific law and in return for fair compensation.
The Facts
The constitutional complaint was submitted by Ltd. “AD Biogāzes stacija”, Ltd. “BIO Auri”, Ltd. “Daile Agro”, Ltd. “BIOPAB” and Ltd. “Agro Iecava”. The applicants sell electricity produced at biogas or co-generation power plants.
The applicants note that in accordance with the contested norms they have the obligation, as of 1 January this year, to pay the subsidized energy tax. It is noted in the complaint that the State has broad discretion in the field of taxation; however, it should be exercised in a fair and proportional way. The said tax is alleged to be excessive; it impacts the applicants’ solvency and possibility to gain return of investments. Thus, the applicants’ future business activities are under threat.
It is also noted in the complaint that the contested norms are incompatible with the principle of legal certainty. Previous regulatory enactments had envisaged the term and the price of mandatory procurement; thus, the applicants relied upon the constancy of this regulation.
Legal Proceedings
The Constitutional Court has asked the Saeima and to provide a reply on the facts of the case and legal substantiation by 9 July 2014.
The term for preparing the case is 9 October 2014. The Court shall decide upon the procedure and the date for hearing the case after the case has been prepared.
Linked case: 2014-12-01