Constitutional Court upholds solar tax

The Czech Constitutional Court has upheld the government’s tax on solar power, introduced retroactively last year in an effort to cool the solar boom in the country. Photovoltaic firms complain the tax damages their business while foreign investors into the business are threatening to initiate international arbitrations against the country. But the court said their interests cannot be superimposed over those of Czech citizens.

The Czech Republic introduced the 26-percent solar tax in January 2011 to put a brake on the rapid development of the photovoltaic industry. Generous state incentives along with falling prices of solar panels and other equipment made the investors’ profits soar – at the expense of the end customers who eventually covered the costs of the support. The tax on the buying price of power applies to solar plants with a capacity higher than 30 kW that were connected to the grid until December 31, 2010.

The tax came under fire from solar plant owners who complained it would damage their investments and in effect ruin those who took out loans to build their plants. A group of senators then filed a petition to the Constitutional Court, asking for the tax to be cancelled as it infringed the investors’ property rights. But the court upheld the tax, arguing it was approved in breach of the constitution. Justice Ivana Janů oversaw the case at the court.

Ivana Janů

“Nobody has a right guaranteeing the law cannot change. Law is a set of rules regulating the life of a society, and balancing the interests of the whole and those of the individual. I believe that in this case, those affected have no particular reason to complain.”

But owners of solar plants complain a change of the rules in the middle of the game will seriously affect their businesses. Zuzana Musilová is the head of the Czech Photovoltaic Association.

“Some of the investors have already taken out long-term credit on the basis of the promised incentives guaranteed by the previous government. After the diminution of these incentives, they will not be able to pay for the credit.”

However, the court said the investors were indeed aware that the prices of solar collectors were falling and could therefore expect a change in the state policy of support for solar power. The impact on their investments has not changed and their returnability remains 15 years while the impact on the profits is not relevant. Justice Ivana Janů again.

Photo: Barbora Kmentová

“We wanted to make sure that none of the entrepreneurs suffer any serious losses, particularly those who took out credit because those who did not have been making nice profits since the very start. We wanted to avoid a direct impact on their investments.”

Foreign solar firms are already preparing to launch international arbitration against the state for failing to protect their investments in the country while local companies will have to sue the state individually in the Czech Republic.