SANTIAGO, (Reuters) – Chile’s mining industry said yesterday the sector is still dissatisfied with a proposed mining royalty bill, because despite recent adjustments the increased rates would hurt the country’s competitiveness.
The government had on Tuesday announced modifications to a proposed mining royalty bill, lowering a variable “ad valorem” rate to a flat 1% for large producers and tying another rate to operating margins, instead of the price of copper as was originally proposed.
Jorge Riesco, president of Chile’s National Mining Society (Sonami) which represents 76 medium and large companies including Anglo American AAL.L, BHP BHP.AX and Glencore GLEN.L, as well as associations representing more than 2,000 small-scale miners, said that while the adjustments benefited medium-sized miners, he believed the tax burden would still be too high.
“It is undeniable that this proposal still lacks if it wants to be at a level comparable to other countries for attracting investment in terms of total tax burden,” Riesco said in a local radio interview.
He added that dialogue between the government and companies was frank “but not totally fruitful” and that according to Sonami’s calculations, the tax burden on mining companies could be between 50% and 55%.
“We can reach 55% of the total tax burden for those times when higher prices allow higher margins and the truth is that this will leave us out of competition for investments in our industry,” Riesco said.
Riesco argued that the government should consider promoting more mining production instead of increasing taxes, arguing this would make a greater contribution to the treasury.
“I don’t understand the commitment to types of total contribution that leave us out of competition and can affect what’s precisely our most valuable element, which are production increases,” Riesco said.
