EDP refuses to pay special energy tax – €338 million remains uncollected

EDP’s directors have decided not to pay the extraordinary energy tax that was imposed as an austerity measure by the Passos Coelho coalition government in 2014.

At stake is the €69 million due for 2017 from the electricity company. EDP joins Galp and REN, which also have refused to pay up, preferring to go to court to challenge the legality of the tax.

The special tax should have raised €655 million to the end of 2017 but only €317 million had been received, leaving €338 million in outstanding taxes to collect.

These figures, provided by the Finance Ministry, show that REN (Redes Energéticas Nacionais) was the only energy company to pay the tax.

EDP, led by António Mexia, who earned over €2 million in 2016, stated that “EDP has decided to exercise its right” not to pay the tax due while a clourt decides whether it should have to, or not.

The electricity company already had decided to contest the special tax payment in January 2017 after paying the tax for the first three years. EDP justified this change in attitude by saying the tax should have been temporary, as put forward by the previous Government.

The decision to stop paying the tax heightens the current conflict between the government and the formerly State owned energy supplier. Current spats include EDP having to charge poorer customers less for their electricity, the so-called ‘social tariff.’ The company says the government should support the poor, not EDP. There also is an argument over guaranteed subsidies for certain power stations.

The Ministry of Finance said to parliament that the Tax Authority, “will continue to develop all the measures that will lead to the quickest reimbursement of the amounts owed.”

The Office of the Secretary of State for Fiscal Affairs says that as EDP has gone to court, under the current laws, the company can not yet be pursued for the tax debt even though the tax authority has rejected complaints filed by recalcitrant companies.

The Ministry of Finance said that the tax boycott is only from energy companies as equivalent special taxes levied on banks and the pharmaceutical sector are being paid without question.

Of the energy companies, only Galp has lodged an equivalent amount in escrow. It potentially owes €240 million to the State.

Any individual taxpayer challenging the State over the fairness or otherwise of a tax demand would be forced to pay the sum demanded and later, much later, argue the case in court. This would incurr unrecoverable legal costs on which VAT is payable.

These large energy compaines, with the notable exception of Galp, have sat on their cash and commissioned top lawyers to argue the legal minuitae while other individual and corporate taxpayers pay up to keep the country going.