The Swedish State is planning to increase the real-estate tax for hydropower as of 2013. The tax is based on the production volumes and according to preliminary information, it will increase the share of tax from the market price of electricity produced with hydropower to 25-30 per cent. The estimated effect of the increase on Fortum's costs is approximately EUR 40 million annually.
The tax is selective as it only targets one CO2-free production form. Therefore it is an indirect state subsidy to production based on fossil fuels and in clear conflict with the Swedish government's climate and energy goals.
"Energy taxation should promote the EU's and member states' climate and energy goals and taxation should consistently follow existing legislation. In Finland, the planned windfall tax is a similar selective tax that targets CO2-free hydro and nuclear power," says Reijo Salo, Head of Tax at Fortum.
"Energy taxation should conform with the Energy Taxation Directive according to which electricity is to be taxed at consumption not at production. Furthermore, energy taxation should be transparent so that consumers can see how energy is taxed. In Sweden this is not the case," he continues.
Fortum has filed a complaint with the European Commission in order to find out whether the increased real-estate tax on hydropower can be based on production volumes, as it is now, considering the EU regulations on excise duty. The complaint also asks the Commission to take a stand on whether taxes targeting only specific production forms are to be considered as indirect state subsidies to other production forms. According to notification to Fortum, the European Commission has decided to investigate the matter and has asked for further information from the Swedish authorities.
Fortum pays more taxes in Sweden than in any other country it operates in. Furthermore, the company has invested significantly into developing hydropower in the country in the recent years.
Reijo Salo, Head of Tax, Fortum, +358 50 452 4443
Esa Hyvärinen, Vice President, Corporate Relations, +358 40 826 2646
Background information to news desks:
The real-estate tax is planned to be increased from SEK 4 billion to SEK 6 billion annually. The taxation on electricity produced with hydropower is expected to be at the level of EUR 10 per megawatt-hour (SEK 0.09 per kilowatt-hour) and is thus 25-30 per cent of the current electricity market price (system price on 26 June 2013 in Nord Pool Spot was EUR 30.69 per MWh).
Fortum has complained to the European Commission that the Swedish hydropower real-estate tax may be in conflict with the directive on general arrangements for excise duty 2008/118/EC as well as with the EU regulation on state aid.
In 2012 Fortum paid taxes in Sweden in the amount of EUR 347 million (2011: 410), of which EUR 93 million was income tax (2011: 154), EUR 140 million production taxes and EUR 114 million (2011: 332) other taxes. Further information on Fortum's taxes in our 2012 Sustainability Report: http://vuosiraportointi2012.fortum.com/en/2012/sustainability-report-2012/our-business-2/generating-value-to-stakeholders/taxation/
Fortum's purpose is to create energy that improves life for present and future generations. We provide sustainable solutions that fulfill the needs for low emissions, resource efficiency and energy security, and deliver excellent value to our shareholders. Our activities cover the generation, distribution and sales of electricity and heat as well as related expert services.
Fortum's operations focus on the Nordic countries, Russia, Poland and the Baltics. In the future, the integrating European and fast-growing Asian energy markets provide additional growth opportunities. In 2012, Fortum’s sales totalled EUR 6.2 billion and comparable operating profit was EUR 1.7 billion. We employ approximately 10,400 people. Fortum’s shares are quoted on NASDAQ OMX Helsinki.