Argentina approves wind tax
An Argentinean municipality in Patagonia approved an unusual tax measure to collect on wind power generation. Taxes In Zapatillas
At first, the municipal area has been extended. So the wind farms are now within the territory. And now the municipality wants to charge with taxes to the park owners and anyone else who provides services to those parks where energy is generated through renewable sources such as wind.
Municipal tax powers and the federal partnership law
A few months ago, the municipality had decided to extend its taxing authority over the wind farms in the area adjacent to its urban area, as published in the newspaper La Nación. In other words, they extended the jurisdiction where they can collect taxes.
The wind farms had been installed on land near Puerto Madryn outside its territorial limits, where the municipality provides services and can charge taxes. But what taxes can a municipality charge? Or not charge?
The framework regulation states (ley de coparticipación) that:
«no taxes, fees, contributions or other charges, whatever their nature or denomination, shall be levied on the taxable materials subject to national taxes distributed or on the raw materials used in the manufacture of products subject to the taxes referred to in this law, this obligation does not extend to the rates of remuneration for services actually provided».
That is to say, as a requirement, there must first be services provided by the municipality. They may not overlap with national taxes. For this, firstly, the premises have to be within the municipal radius, not in the middle of the countryside… or well, municipal countryside.
Then, first, the provincial legislature approved doubling the extension of the municipal ejido, from the limit to more than 33,000 hectares. To have a reference of the size, the City of Buenos Aires has 20,000 hectares, which is more than 140 blocks by 140 blocks, that is, 14 kilometres.
What the constitution of Chubut says about the municipality
Section 225 of the Constitution of Chubut establishes that the municipalities are independent from any other power in the exercise of their functions and enjoy political, administrative and financial autonomy in accordance with the requirements of this Constitution.
«The category and territorial delimitation of the municipalities, development commissions and rural communes are determined by law, which requires for its approval the vote of two thirds of the total members of the Legislature and takes into account especially the area where municipal services are totally or partially provided and the immediate population growth».
As you can imagine, reader, the area where the wind farms are located is not very urban, but rather, as we commonly put it, in the middle of nowhere.
The ordinance implementing the wind tax
By Ordinance 11349, the municipality extended the responsibility for the payment of two fees for services rendered to the owners of the wind farms.
Thus, it will begin to collect the Fee for Qualification, Inspection, Safety and Hygiene and Environmental Control established in Article 173 of the Tax Code to pay:
«municipal services, registration, qualification, inspection, control, health, safety and hygiene and environmental control, which tend to the general welfare of the population (…) even when the exercise of commercial, industrial, professional or service activity does not require a qualified establishment.”
The second tax charged by the municipality will be for the Construction of Private Works and Works carried out by national and provincial companies, which are obliged to pay this tax to wind farms whose works «are in progress or to be carried out on the date the regulation comes into force, 24 April 2020».
According to company estimates, these new taxes represent around 4.5% of the turnover of clean energy projects. It is possible that they will be passed on to the price of electricity, this figure is not yet known, it depends on several factors.
Basis for calculating municipal taxes: wind
The first rate was calculated according to the square meters of the property, like any other company but now its calculation base has changed, reported the newspaper La Nación, or «taxable base».
But now, wind farms, instead of paying by surface area, «will now do so depending on production. The wind tax has been established,» the newspaper says.
In other words, the tax base will become the energy bills produced by the wind farms. According to the court’s jurisprudence, the total equivalence between the cost of the service provided by the municipality and the tax is not necessary (because there are indirect costs) but as it is not a tax, these must be reasonable.
Position of the companies
Provincial Laws XVI No. 100 and XV No. 101 approved the expansion of the municipal ejido of Rawson and Puerto Madryn, and the consequent intention of both municipalities to apply new taxes to wind power generation projects that are reached by the new delimitation under their respective tax codes, they said.
They understand that this modification seriously alters the economic equation of the projects, it is a violation of rights acquired under applicable law and conspires against the sustainability of the system with detrimental effects on the economy in general.
Furthermore, they probably argue that the clean energy law exempts «access to and use of renewable energy sources» from «any kind of specific tax, canon or royalty» (Article 17 of Law 27191).
This is because the Province of Chubut adhered to national law 27191 and granted fiscal stability to projects throughout the province by means of provincial law XVII No. 95.
They claim that the taxes would be inappropriate due to the lack of effective provision of the service and the disproportionate amount withheld for this purpose, since the respective municipalities have not demonstrated that they have carried out inspections to preserve the environment, health and hygiene, nor have they justified the high amount claimed for these taxes, which they say are disproportionate.
As stated by the Supreme Court, «the collection of a fee must always correspond to the concrete, effective and individualized provision of a service related to something no less individualized (good or act) of the taxpayer», they conclude.
With the collaboration of Jenny Moule