Tax issues halt German energy talks

The major German utilities have suspended talks with the government on the phasing out of nuclear power because of a separate dispute over new taxation plans in the country. Representatives of the main energy utilities said that the “consensus” talks would only resume when the tax issue has been settled.

The German utilities face a heavy tax burden under legislation introduced by former finance minister Oskar Lafontaine. RWE and Viag have both threatened to transfer business operations overseas if the government does not modify the tax reforms.

The planned tax reforms will involve companies paying taxes on their capital reserves. This will hit insurance companies and the utilities, which have large reserves set aside to pay for nuclear plant closures. Taxing these reserves will cost them an estimated DM25bn ($13.7bn). The law, which has been approved by the lower house, will be retrospective to January 1, 1999.

The government expects the talks on nuclear power will resume after Easter. It is seeking agreement with the electricity industry on the phased shutdown of nuclear power plants in Germany and the reprocessing of spent nuclear fuel.