TAX NEWS - JUNE 2010

German Tax: German Govt Plans Tax On Nuclear Energy, Air Travel

The German government Monday announced plans to impose taxes on nuclear power plant operators and air travel in a bid to rein in public budget deficits.

The government said the levy on nuclear energy will be the price reactor operators will have to pay in return for longer operating lives of the power plants.

Germany is in the process of gradually phasing out all of its remaining 17 nuclear reactors by around 2022, but the government has said it plans to extend the operating lives to help achieve its ambitious climate protection targets.

The government also said the duty on reactors will help relieve the federal budget in financing the decommissioning of nuclear facilities and remediate the interim nuclear waste storage Asse that was partially flooded, threatening to contaminate ground water.

It also said that nuclear reactors aren't affected by carbon dioxide emission trade, contrary to other energy sources such as fossil fuels. As a result, utilities that operate nuclear reactors have posted considerable windfall profits, which further justify the levy, the government said.

The duty on nuclear reactor operators will contribute EUR2.3 billion in tax income per year to the package of austerity measures, with an overall volume of EUR81.6 billion between 2011 and 2014.

Germany's nuclear power plants are operated by utilities E.ON AG, RWE AG, EnBW Energie Baden-Wuerttemberg AG and Vattenfall Europe AG.

The government didn't elaborate if it intends to impose the levy via a tax on fuel elements for nuclear power plants as had been speculated in press reports over the past few days.

The economics and environment ministries weren't immediately available to clarify.

In a separate statement, the economics ministry said that the austerity measures also foresee cutting subsidies on coal mining by more than 10%.

The government also said it intends to introduce a tax on air passengers, which is expected to contribute EUR1 billion per year to the package of austerity measures.

Until the airline sector is included in the trade of CO2 emission allowances in 2012, the government will impose a levy on all passengers on flights that are taking off from domestic airports, the government said. Thereafter, the air travel duty could be imposed via the CO2 emissions trading mechanism, it added.