Practical effects on the possible unconstitutionality of the tax on the Electricity Generation Value

By David Capitán

Introduction to Negotiation VI The Relationship and Communication

By Alejandro Casas

Practical effects on the possible unconstitutionality of the tax on the Electricity Generation Value

David Capitán

The Spanish Supreme Court (Second Section, Administrative Chamber) has raised on January 14th, 2016 a question of unconstitutionality on, among others, the tax on the electricity generation value (hereinafter IVPEE). The Supreme Court raised such question of unconstitutionality based on doubts about the environmental purpose of several taxes as they could have been taxing the same taxable base or the same wealth already taxed by the economic activities tax, breaching article 31.1 of the Spanish Constitution.

1. The IVPEE

We point out the main features of the IVPEE:

a) The Law 15/2012, of December 27, on Tax measures for the energy sustainability, Title I, created the tax on the electricity generation value, as a direct tax of real nature which taxes the activities of production and incorporation of electricity to the electric power system, through each of the facilities indicated in article 4 of the Law.

b) The taxable event of the IVPEE is constituted by the production and the incorporation of electricity to the electric power system, including the mainland electric system and the island and non-mainland territories, in facilities of production of electricity in ordinary regime as well as in the installations of electricity production under special regime.

Taxpayers of the IVPEE are natural or legal persons and the entities referred to in article 35.4 of the Law 58/2003 (…)

c) Taxpayers of the IVPEE are natural or legal persons and the entities referred to in article 35.4 of the Law 58/2003, of December 17, General Taxation Law, that carry out activities subject to the tax, i.e. which produce and incorporate electricity to the electric power system.

d) The taxable base of the IVPEE is constituted by the total amount which should be received by the taxpayer for the production and incorporation of electricity to the electric power system, for each installation, during the tax period.

e) The tax rate is 7%.

f) The tax period matches with the calendar year. The tax is accrued on the last day of the tax period which is December 31st of each year.

g) The taxpayers are obliged to self-assess the tax and pay the corresponding amount in November once the tax has been accrued, by completing and filing the form 583 "Tax on the value of the production of electricity. Self-assessment and Installment Payments. In addition, the regulation establishes that, between the 1st and 20th of May, September, November and February of the following year, the obliged taxpayers shall make the corresponding payment of each respective instalment, corresponding to the period of three, six, nine or twelve months of each calendar year, in accordance with the rules and forms established by the Treasury Department and Public Administration. Exceptionally, when the value of the production of the electricity of a taxpayer, including all its facilities, has not exceeded € 500.000 in the previous calendar year, the taxpayer shall be obliged to make exclusively the instalment payment corresponding to the first nine months of the current tax period, which shall take place between the November 1st and the November 20th.

2. Question of Unconstitutionality

As mentioned at the beginning of this article, the Supreme Court, Second Section, Administrative Chamber has raised the question of unconstitutionality based on doubts about the environmental purpose of several taxes, including the IVPEE, as they could have been taxing the same taxable base or the same wealth already taxed by the economic activities tax, breaching Article 31.1 of the Spanish Constitution.

In the event that the provisions of the analysed taxes were to be declared unconstitutional, the declaration of unconstitutionality would have erga omnes effects, which means that it shall be fully binding upon all taxpayers of the analysed taxes.

Regarding the unconstitutionality flaw, this is a defect of nullity and so declares Article 39.1 of Constitutional Court Organization Act, which means that the effects of the declaration of unconstitutionality are ex tunc and not ex nunc, that is, referred to the time when the Law was passed (with retroactive effect), obtaining a retroactive invalidity.

Notwithstanding, the Case Law considers that the undoubtedly firmness of a self-assessment shall be understood if a taxpayer has formally consented it by not having contested it at its relevant time. Therefore the sums unduly paid could be recovered only in respect of those self-assessments which have not become firm. This means that those taxpayers who have not challenged a tax payment will be deprived from the right of refund it as a result of its unconstitutionality, if four years have elapsed since the submission of each self-assessments, when the Constitutional Court issues its decision.

3. Practical Effects

Therefore, the correction of self-assessments requesting the refund of the sums unduly paid shall be made before the limitation period (both annual self-assessments and instalment payments) which is 4 years as sets forth by article 66 General Taxation Law.

Pending the decision of the Constitutional Court, taxpayers shall continue performing their assessment and payment of the tax and, in parallel, taxpayers shall submit the request for refund of unduly payments before the Tax Agency to avoid the prescription of the right to refund.

It is essential to bear in mind that the first payment submitted in May 2013, corresponding to the first quarter of the year 2013, prescribes on May 2017. The rejection of the action claiming for the refund of undue payments allows to bring actions via appeals and to argue firstly before the different economic and administrative bodies, and subsequently before a court, regarding the undue payment of the tax.

Introduction to Negotiation (VI): The Relationship and Communication

Alejandro Casas

Until this article, we have been analyzing five out of the seven elements of the Theory of Negotiation of Harvard which we could consider internal within the negotiation process and on which a good agreement is based, i.e., the elements that we could place over the bargaining table and which materially intervene in the contents of the agreement, to a greater or lesser extent: (i) alternatives to the negotiated agreement, (ii) interests, (iii) options, (iv) objective criteria of legitimacy and (v) commitment.

The last two elements, communication and relationship, are closely together and usually act jointly.

They both have an external nature from the point of view that they are elements –and instruments- intervening in each of the moments through which a negotiation goes through, but which, in turn do not materialize in any part of the agreement. They can however have a decisive influence on the negotiation success.

On the one hand, the relationship could be defined as the behaviour of the parties involved in the negotiation used to manage their differences as they arise.

On the other hand, communication could be defined as the instrument through which the parties exchange information, thus communication being the channel through which the negotiation is developed.

The union of both elements is reflected in the relationship component, since if the relationship between the parties is good, communication flows spontaneously. Communication is fundamental to optimise the negotiator process: if communication is effective, waste of time in explanations, justifications or bad interpretations is avoided, thus dealing better with the problem to be solved.

If the relationship between the parties is good, communication flows spontaneously, so that the negotiation is usually more effective

From the relationship approach, in practice, in the majority of occasions when a negotiation must be initiated, the speaker of the other party is not well known or, the same being known, we cannot assert that a solid relation exists.

We usually think that the bargainer shall choose between the relation with the other party and the problem to be solved, and therefore the two concepts of hard bargainer and soft bargainer arise.

These concepts could be summarised:

a) Hard bargainers: they uphold their position unwavering, generally maintaining extreme positions from the very beginning without compromising and even threatening in the first adversity. Hard bargainers are only worried about the problem being solved favourably.

b) Soft bargainers: they make concessions, starting from moderate approaches, offering solutions to all adversities. They are extremely worried about the relationship.

The Harvard Negotiation Project theory commits to a combination of both roles, since they can both be appropriate depending on the specific case, because:

• It is okay to talk, but it may be also okay to withdraw

• The relationship is important, but the substance of the problem is also important

• You may gain power by being reasonable, but also being anchored

• It is okay to be flexible, but it is also okay to be firm

• Offers are good, but in certain occasions it is also appropriate to reveal the limits.

As regards the foregoing, the principal recommendation would be to separate the problem from people, by being hard with the problem and soft with people, since the personal relationship is usually confused with the problem, when the most advisable thing to do would be to separate them.

For such purpose and to any possible extent, it is advisable to try to strengthen the relationship with the other party since in no event should the relationship have any influence on the waiver of our own interests. The aspects to be assessed would be:

• Rationality, even if the other party acts emotionally.

• Understanding, trying to understand the other party although he/she may misinterpret us.

• Reliability, by being reliable although they have tried to deceived us.

• Influence, without trying to coerce or giving in before coercions. The legitimacy criteria play an important role to try to persuade.

• Acceptance, although our own opinions or ideas are rejected, we should be interested in the other party’s concerns. We will certainly have the opportunity to set them out again.

It is not about playing a naive role, since being nice or polite is not the solution, but the conclusion of an agreement that satisfies the interests of the parties within the limits of each one.

However, the analysis of these factors may be a tool that allows us to accomplish our interests through negotiation. Extreme positions may be dangerous, since they usually provoke an identical reaction from the other party, thus causing an unnecessary increase of tension, polarizing the positions and blocking the negotiation.

Therefore and within coherence, the bargainer should always take care of the relationship aspects, since the truth is that beneficial agreements are usually obtained by negotiating on serious problems.

Finally, communication also plays a determining role as regards all commented above. As we have advanced, an effective communication will make the negotiator process quite easier. For this, it would be important to have the following guidelines into account:

• Bilateralism. The key for an efficient communication is bilateralism: carefully listening and ensuring that the other party is listening and understanding what we are saying.

• Active listening. Listening is a fundamental tool to obtain information, since through this tool the negotiator obtains data on the interests, options raised and possible points of agreement. In parallel, the negotiator shows interest for the points of view of the other party, thus encouraging the relationship.

• Empathy. Understanding or appreciating the points of view of the other party does not imply to agree with them. For this reason, the negotiator should put himself/herself in the place of the other party.

• Comprehension. It is also advisable to be concentrated on what the other party may be understanding and not on what we think we are saying.

Misunderstandings are frequent in negotiations, also degrading the relationships. Therefore, the analysis of these factors should help us to achieve an effective communication, thus improving the negotiator process.

As a conclusion, we can assert that good agreements are usually obtained through good communication and help to improve relationships between the parties.