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Constitutional framework to issue decrees in the area of excise duty legislation

by Dr. Dirk Jansen

The national law on excise duties is based upon eight different acts which make alcohol and alcoholic beverages, energy products, electricity, tobacco and coffee subject to taxation. These acts lay down the general rules for chargeability, amount, exemption and the person liable for the excise duty taxation and also enact rules for a tax suspension system. Each act is accompanied by one or more decrees that are issued by the Federal Ministry of Finance with the intention to specify the regulations in further detail. This national legislation for excise duties is (like any other tax that is important for the establishment of an internal market within the European Union), often subject to short-term changes due to the strong influence of the European Legislation and constantly changing economic processes.

If a short-term change or adoption of European Law becomes necessary, the Federal Ministry of Finance has, in general, the choice of either going to parliament and changing the act in question or adopting the change by issuing an amended decree. Due to the duration and the complexity of the legislation procedure the Ministry tends to solve as many changes or adoptions as possible by amending the decree. However, the German constitutional framework contain numerous rules which regulates the relationship between the specific act and its accompanying decree. The main reason for these rules is the fact that a parliamentary act has much more democratic legitimacy than a ministerial decree. If a decree fails to comply with this constitutional framework it might be declared invalid by the Federal Constitutional Court.

One example of such a short-term amendment was the state aid problem of the § 55 Energy Tax Law (Energiesteuergesetz) that allowed a certain tax exemption for the producing industry. This tax exemption lacked a CO² related dependency and was therefore not in compliance with European law. Due to this fact it became necessary to connect the tax exemption with a national CO² reduction plan. Therefore, the government partly amended the Energy Taxation Act. This amendment made it possible to decide on the compliance with the CO² reduction plan by means of a decree. If the producing industry fails to comply with the CO² reduction plan the decree will have to deny the further use of this tax exemption. This might be questionable, because the higher democratic legitimacy of a parliamentary act will be derogated by a decree with far less legitimacy.

The aim of this research is to look at recent amendments under similar circumstances, to analyse their compliance with the constitutional framework and to draw conclusions for future amendments. Therefore, the first step is to analyse the constitutional framework, focussing on its impact on the special requirements for excise duty legislation. It will then be possible to focus on recent changes and the excise duty legislation as a whole. Finally, the amendments and their constitutional problems can be divided into different groups thereby making it possible to draw conclusions for further parliamentary acts or decrees.

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