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The Government of Gabriel Boric presented on Friday, July 1, a long-awaited tax reform with which he seeks higher collection, in one of the OECD countries with the greatest inequality. The large mining companies are among those called to raise their contributions.
Chile’s finance minister, Mario Marcel, has presented a tax reform bill that, among other things, increases royalties for companies that produce more than 50,000 tons of copper a year, a basic metal used mainly in infrastructure works.
The initiative also aims to increase taxes on high-income people to finance the social programs and reforms proposed by the government, as well as strengthen the tools to control tax evasion.
The project would mainly impact world copper giants such as Codelco, BHP, Anglo American Glencore and Antofagasta, which have been operating for years in the world’s largest producer of the red metal.
“This means an increase in royalty income, an increase in the state’s share of mining income,” Marcel said. “But also ensure that the mining sector has enough income to encourage investment.”
The plan has two components: one is a tax of between 1% and 2% for companies that produce between 50,000 and 200,000 tons of fine copper a year, and a rate between 1% and 4% for those that produce more than 200,000.
The other component is a rate between 2% and 32% on profits for copper prices between two dollars and five dollars. Both components vary depending on the price of copper.
In this regard, Álvaro Merino, manager of Studies at the National Mining Society of Chile, told France 24 that “investors move around the world and they will go where they are granted greater facilities and conditions.”
Chile has developed its mining policy with relative success in recent decades. According to Merino, “many countries have mining resources, but many have not exploited them due to the institutional framework that has been established. Chile has had a radical change in the last three or four decades and that is due to the institutional framework that was created to develop mining. Legal certainty and stability in the rules are key here”.
A project that comes at a time of low prices
The three-month copper purchase contract on the London Metal Exchange fell 2.7% on Friday to just over 8,000 dollars per tonne, returning to levels of February 2021. In the quarter it fell by 20% as no it did in a quarter since 2011.
“The decrease in the price of copper is fundamentally explained by the growing fears that a tightening of monetary policy by central banks will lead to a world recession, which will contract the demand for metals, particularly copper”, Merino explained.
Copper is Chile’s main export activity and represents approximately 90% of mining GDP, which in the last 15 years has represented between 12 and 13% of GDP.
“For each additional annual average cent that the price of copper increases, export income increases by 125 million dollars and the treasury increases its income by 60 million dollars,” concluded the union leader.
With Reuters and EFE
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