If the decision is upheld, the estimated effect for Hydro will be an increase in costs of approximately BRL 60 million (NOK 150 million) per quarter in the Bauxite & amp; Alumina from Hydro.
"We are concerned about this sudden change in Pará state tax laws and we are doing everything we can to reverse this decision in dialogue with lawmakers," said Johnny Undeli, head of the Bauxite & amp; ; Alumina.
“Hydros goal is to develop robust and sustainable companies in Pará and to create the conditions for sustainable growth in this resource-rich region. In order to achieve this goal, we are dependent on stable and predictable framework conditions. "
ICMS is a tax on goods and services levied by the Brazilian states. The aluminum industry in Pará has a tax deferral that needs to be renewed by July 2015, which includes an exemption for domestic purchases of goods and services. However, following the recent changes in the taxation of heating oil, the ICMS tax levy is shifting to petroleum refineries located outside the state of Pará.
The decision is similar to that made in 2012 when Alunorte was forced to pay ICMS taxes on heating oil for three quarters. This decision was later overturned.
In addition, Hydro and the company's electricity supplier have accepted to pay ICMS taxes for Alunorte's electricity purchases and Paragominas bauxite mine in the period after the Vale transaction closed on February 28, 2011. The comparison amounts to NOK 280 million, including NOK 170 million for ICMS taxes on electricity purchases for the period and NOK 110 million in tax penalties.
The obligation to pay ICMS taxes for electricity has so far been disputed by companies, but given a recent court ruling against an electricity supplier to the state authorities, it was accepted to make the payment, giving the electricity supplier the opportunity to participate in the tax amnesty of the State of Pará. The amnesty provided the opportunity to end the taxation with significantly reduced penalties.
In the future, ICMS will incur electricity purchases of BRL 8 million (NOK 20 million) per quarter and will mainly increase Paragominas costs.
Tax penalties are treated as items that are excluded from the fourth quarter 2013 results, while ICMS costs are included in the same quarter's adjusted results.