Are wood chips intended for fuel use only or not? It is a question that went from Grafing to the European Court of Justice. The discussion was initiated by Martin Lechner. He is Managing Director of Grafing-based Ecolohe GmbH. In 2005 he founded the company, which is active in the wood chip business.
In 2008, Lechner was still running his company in Erding and taxed his wood chips at seven percent, the reduced sales tax rate. The shock came after he moved to the Bad Aibling district: the businessman had to pay almost 650,000 euros in back taxes for the past four years. The reason for this was a different categorization as part of the sales tax audit, which was carried out by the Rosenheim financial center. Instead of the reduced tax rate, the full 19 percent should now be applied. An increase of twelve percentage points.
“It is unfair that different tax rates are applied to fuels”
Lechner sued and was right before the Munich Finance Court. The unsuccessful tax authority went into revision and received approval from the Federal Fiscal Court – the different categorization of the wood chips was justified. In its decision, the authority argued that these would not only be used for incineration, but could also be used for other purposes. Therefore, the application of the normal sales tax rate is understandable. A decision that Martin Lechner did not want to accept, and so the case ended up at the European Court of Justice (ECJ).
“It is unfair that different tax rates are applied to fuels,” says Martin Lechner. The problem, he says, is that the tax offices have become autonomous in their administration and there is no general direction. But with the decision of the ECJ, things are different now. In its statement, it pointed out that the same cannot be taxed differently and referred the case back to the Federal Fiscal Court. He now had to revise his opinion and finally agree with Martin Lechner.
It’s a multi-level discussion. On the one hand, there is the unequal tax treatment of wood chips and comparable wood fuels such as pellets. On the other hand, Lechner finds it incomprehensible that energy sources such as nuclear power and gas are classified as environmentally friendly, but not the renewable raw material wood.
A verdict that is important for the entire wood chip industry
Ultimately, according to Grafinger, the increase in prices due to the higher sales tax rate is generally not important for companies because of the input tax deduction. But the buyers of his wood chips are primarily municipalities, private individuals and non-profit organizations – and they are not deductible.
Lechner therefore says that unequal treatment also affects the end consumer. After all, they would have to bear the higher taxation in full. “We’re talking about inflation of twelve percent – that’s not a little.” Therefore, for him, the court decision is one that is important for the entire wood chip industry. Because for them, a major competitive disadvantage has finally been eliminated.