Investments at risk
The statement from the Chamber of Mining Entrepreneurs (Caem) assures that the tax on “unexpected income” would have a “strong impact” on future investments: “The mining industry is one of the few sectors that currently has projects that can attract significant levels of investment, between US$600 million and more than US$4,000 million, both for the expansion of deposits and for construction, generating in the short term a significant foreign exchange inflow from foreign direct investment (FDI)”says the text.
On the other hand, they added that “viola” the fiscal stability of the sector, “attacking the construction of a context of clear rules and certainties in tax matters.” The mining investment law, passed in 1993 during the government of Carlos Menem, establishes fiscal stability for the sector for 30 years from the moment of presentation of the economic feasibility of the project.
mobile withholdings
The Ministry of Economy is working on proposals to modify export duties for mining, currently at 8%. It could be a more “progressive” scheme, which varies according to international prices, and “adapts to volatile conditions”, according to official sources. Something like a scheme of mobile withholdings, although the Government does not want to speak in those terms because of the deja vu 2008 with the field.
Although it is still under study, it could be a scheme similar to that of hydrocarbonsthat as of 2020, a fixed rate was replaced by a formula in which the rate varies between 0 and 8%, depending on the price of oil. That’s how he defined them Robert Arias, Secretary of Tax Policies: “The withholdings on progressive exports are set by establishing a scheme tied to the international price. When it is high, a higher rate is paid and the collection for the treasury is higher (and vice versa), appropriating part of the extraordinary income, “as he wrote on his twitter account.
The official, who reports to the Minister of Economy, Martin Guzmandetailed that in 2020 the withholdings on hydrocarbons fell to 0% when international prices fell due to the pandemic, but then in 2021 the oil companies began to pay the maximum rate for the increase in prices in the post-pandemic recovery. “Thanks to this, the Treasury collected an additional $265 million dollars”Arias wrote on his social networks.
As this newspaper learned from sources in the mining sector, “the Government’s line goes down well, it has consensus”. Although they await the fine print, they consider that the fact that a limit of 8% of withholdings could be fixed would be positive, in a context of high international prices. Entrepreneurs and consultants from the sector commented that in Chile there is also a “tiered tax” system, according to the international price, but that it falls on royalties, not on exports.
The measure would be an intermediate point between what the Ministry of Economy and the Ministry of Mining, which reports to the Ministry of Productive Development, are looking for. In the mining portfolio, they consider retentions as “regressive” because they tax billing and not profitability, which is why it “harms” smaller projects or those in the final stages of production. “It does not solve the problems of the tax, but it improves what already exists,” said a source from the sector.
Source: Ambito
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