Tax on green farm born from envy

Cometh the green revolution, cometh the tax demand. Danish authorities want Orsted to pay more tax on profits earned from two UK wind farms. The extraterritorial cash grab raises tricky questions about the jurisdictions that should apply to renewables now that they are generating serious income.

The Danish Tax Agency is claiming DKr6.6bn ($1bn) on two thickets of windmills. It is an odd move. The wind farms are owned by UK subsidiaries of Orsted, a glamour business pioneer of wind energy. Denmark has a double taxation treaty with the UK that should cover them.

If its tax collectors succeed in their raid on Orsted, it could have negative consequences. Orsted and other Danish renewables groups might reconsider the viability of their business model; foreign countries would be less likely to approve schemes from Danish groups. Tax collectors everywhere would hope for a windfall when multinational renewables groups headquarter locally.

The claim against Orsted is for projects off the coast of Yorkshire and Cumbria for tax years 2015 and 2016. Only an early part of these projects, mostly engineering and planning, occurred on Danish soil. The bulk — the riskier construction, operation and maintenance phases — were handled by UK subsidiaries. These owe taxes to the UK, which subsidised the projects via power pricing deals.

Orsted has already paid the Danish government Dkr6.1bn in tax for any relevant income from both projects. It is not prone to hiding its income in tax havens.

One likely explanation for the tax authorities’ move is that Orsted is a bigger deal now, worth nearly £57bn. Selling a stake in Hornsea I back in September 2018 earned the group enough to cover all its previous investment in the wind farm. Danish tax authorities began an audit of Orsted shortly after. The green tingeing their view of UK wind farms may be born of envy. /London, December 3

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