Smorgon To Spearhead Legal Challenge Over Alcoa's Power Levy
The Age
Friday May 30, 2003
Several industrial companies are considering mounting a legal challenge to a Victorian Government levy designed to pay for subsidised electricity to Alcoa's Portland aluminum smelter.
The action could threaten up to $500 million of revenue paid to the State Government since 1997 and curtail a further $1 billion to $1.5 billion likely to be collected by 2016 when the Alcoa subsidy deal expires.
Smorgon Steel sparked a potential levy revolt by power users after it received legal advice that the levy was unconstitutional. It then called meetings of other large companies, explaining its position and saying it might run a test case.
Major manufacturers such as Carter Holt Harvey are examining their positions and may support any action.
A Smorgon spokesman said the company had ``been concerned for some time about the equity of the situation. We're very actively considering our options". These options included legal action against the State Government.
Smorgon's concern relates to the Victorian Smelter Reduction Payment levy on large electricity users, which was introduced in 1997 to finance the Alcoa subsidy. That subsidy dates to 1984 when the smelter was built and the then Cain government offered an inducement by guaranteeing electricity price ceilings if aluminium prices fell below certain levels.
Soon after the inducement was made the aluminium price fell permanently and the deal has been a drain on the Victorian Treasury ever since. Contracts relating to the Alcoa deal underpinned the privatisation of the Loy Yang B power station in 1992 and still underpin the operations of that generator.
Smorgon regarded the levy as ``a tax on all manufacturing industry for the benefit of one entity (Alcoa)", the spokesman said. Smorgon is believed to have paid about $5 million since 1997 as a result of the levy.
A spokeswoman for Victorian Treasurer John Brumby said the Government had been advised that the Alcoa levy was ``legal and constitutional".
Smorgon is planning to take the issue to the High Court. If it succeeds, other companies would be able to go to the Victorian Supreme Court seeking redress for taxes wrongly levied.
© 2003 The Age