Constitutional rejects CESE on wholesale oil and fuel traders

The Constitutional Court (TC) once again rejected a form of the Extraordinary Contribution on the Energy Sector (CESE). Ratton Palace judges rejected the rule on wholesale traders of crude oil and petroleum products. The judges consider that this tribute was transformed into a tax and that the electricity tariff debt was not caused by the oil sector.

Remember that CESE has been in force for 11 years and was created during the time of the troika. In 2023, it generated 125 million euros for the Environmental Fund.

Looking back at the time, the company (whose name is omitted) began by challenging CESE in the Lisbon Tax Court. In March 2022, the challenge was dismissed, but the company appealed to the South Central Administrative Court, invoking the unconstitutionality of several rules. This court considered the appeal unfounded in September 2022, and the company appealed again this time to the Constitutional Court, which now ended up finding the appellant in favor.

In March 2023, the Constitutional Court considered unconstitutional the application of CESE to a company that carries out transportation, distribution or underground storage of natural gas. The judges considered that it violated the principle of equality by requiring CESE from an energy subsector that is not responsible for the electricity tariff deficit, according to ruling no. 101/2023, handed down by the 3rd Section of the TC.

But months later the TC took decisions contrary to the one taken in March 2023. The 1st and 2nd sections of the TC, in different rulings, rejected the claim of other natural gas companies in their processes, considering that there is a great interdependence between subsectors of the energy sector and that the exclusion of natural gas companies from CESE would represent an incompatibility with the principle of equality.

In the most recent ruling, the judges appeal to the March 2023 decision to justify their decision of unconstitutionality: “the changes made by Decree-Law no. 109-A/2018, of December 7, to the regime for allocating funds from the FSSSE, to which CESE’s revenue is allocated, distorted the paracommutative link between a certain category of subjects and the purposes of the tax to such an extent that it was no longer possible, once the new legal framework came into force, to base the encumbrance of its assets on the principle of equivalence. For such subjects, therefore, CESE started to constitute, due to such a change in regime, a true tax, without it finding any support in the principle of contributory capacity.”.

The conclusion reached in the March 2023 agreement is valid for the wholesale sale of oil and fuels. “For concession entities involved in the transportation, distribution or underground storage of natural gas, the changes introduced by Decree-Law no. 109-A/2018, of December 7, dissolved the link with the purposes of the tax, transforming the tribute into a tax, with regard to such entities – applies, for the same reason, to wholesale traders of crude oil and petroleum products. In fact, regarding these, it can be said, in the same way, that “[…] it is no longer possible to assert that […] may be held responsible for the [concretização dos objetivos da CESE, agora fortemente reduzidos]and much less presumed causes or beneficiaries of public benefits that the FSSSE is responsible for providing”. The tariff debt in the electricity sector was not caused by the oil sector, “[…] nor does its reduction benefit all the operators integrated in this sector in an effective or direct way – rather constituting, at most, a presumed benefit based on certain contingencies” (declaration of vote attached to Judgment no. 296/2023, above mentioned, so “[…] There is no reason to rush the companies [comercializadoras de petróleo bruto e de produtos de petróleo] charges associated with the reduction of tariff debt in the electricity sector. Nor is there any reason to assume that the prevention of risks associated with tariff instability in the electricity sector benefits operators in other subsectors in particular.”.