Extraordinary Contribution is partially unconstitutional

Judgment 101/2023 of the Constitutional Court (TC) ruled unconstitutional for violation of our Fundamental Law, especially the principle of equality, article 2(d) of the extraordinary contribution on the energy sector (from now on CESE), insofar as it applies this contribution to the concessionaires of the activities of transportation, distribution and underground storage of natural gas.

From financial emergency to lack of connection between ends and benefits

In the present decision, the Constitutional Court decided to uphold the appeal, deeming it unconstitutional, for violation of article 13 of the Constitution, article 2(d) of the legal regime of the CESE, insofar as it determines that the tax is levied on the value of the assets referred to in paragraph 1 of article 3 of the same regime, which the concessionaires of the activities of transmission, distribution and underground storage of natural gas own. The tax is levied on the value of the assets referred to in Article 3(1) of that regime, owned by legal entities that are part of the national energy sector, with tax domicile or head office, effective management or permanent establishment in Portuguese territory, which, on 1 January 2018, are concessionaires of natural gas transmission, distribution or underground storage activities (under the terms defined in Decree-Law 140/2006 of 26 July, as amended).

Briefly, the applicant considered that the current validity of the CESE is unconstitutional for two reasons:

1. First, since 2018, the exceptional circumstances of financial emergency and external intervention by the Troika, which were at the origin of the scheme, have ceased to exist;
2. Second, there is no connection between the aims and benefits of the measure for their sector of activity.

Fundamentally, the EESC, having been planned as an extraordinary measure to be in force for a transitional and limited period, cannot remain in detail once the specific intervention scenario that gave rise to it has been overcome.

Second, he questions the application of the financial contribution to his case, as there is no connection between the purposes and benefits of the measure and his sector of activity.

The TC, in line with its other decisions, considers that the extraordinary nature of the measure and the cyclical change are not in themselves sufficient for the action to be necessarily declared unconstitutional.

However, the TC agrees with the second argument of the appellant, considering that the incidence on companies that are concessionaires of natural gas transmission, distribution or underground storage activities de-characterizes the tax to the point of excluding it, as far as these subjects are concerned, from the universe of financial contributions.

The TC also agrees that the fact that all operators are part of the energy sector is not a sufficient condition to substantiate the existence of liability of the natural gas sub-sector group for charges related to an issue in the electric power sub-sector. The TC considers that, after 2018, the legislator has reduced the objectives pursued by the EESC to such an extent that it is no longer possible to state that concessionaires of natural gas transmission, distribution or underground storage activities can be considered responsible for their implementation, let alone presumed causes or beneficiaries of the public services that the FSSSE is responsible for providing.

The conclusion: violation of the principle of equality

Thus, this investigation has led the TC to conclude that the rule that is the object of this appeal violates the principle of equality, enshrined in Article 13 of the Constitution since it is discriminatory to overtax an economic group without due justification/connection to the financial contribution.

There is no justification for “making the companies that are concessionaires of natural gas transmission, distribution or underground storage activities bear the costs associated with reducing the tariff debt of the electricity sector”.

Consequently, this understanding of the Constitutional Court is an opportunity for entities of the same sector even question its scope of future applicability.