Chilean President Boric Open to Discuss Changes to Mining Tax Law
- September 1, 2022
- Posted by: Quatro Strategies
- Category: Mining
Chile’s President Boric said on Tuesday that he is open to discuss changes to the country’s mining tax law that would affect the mining sector as lawmakers are scheduled to vote on the proposed reform on September 13. However, Boric said history suggests that the industry had been unwilling to share wealth with the government at a gala organized by Chile’s national mining association, Sonami. Boric invited companies to have a “technically sound debate” regarding the mining tax reform and said terms were still up for discussion.
Chile’s mining industry has been on alert since the new government introduced tax reforms earlier this year. The industry argues that new tax reforms would add uncertainty to investment decisions needed to help fill a global supply gap as demand rises during the clean energy transition.
The bill includes a 1% to 2% tax on sales for companies that produce 50,000 to 200,000 tonnes of copper a year, and 1% to 4% for those that produce more than 200,000 tonnes.
Miners producing more than 50,000 tonnes annually would also be subject to a 2% to 32% tax on operating profits, using a sliding scale of copper prices between $2 and $5 per pound.
Sonami President Hernandez said at at the event that Chile’s mining sector had not been listened to during the introduction of new taxes. He said the government’s proposals were “dogmatic and extreme”.
Hernandez also suggested that the proposed modifications to mining royalties, with their current state, would make the country’s sector less competitive, putting “a good part of the higher-cost mining operations at serious risk.”
If approved, the changes would come into force partially in 2024 once tax stability contracts expire. Total taxes for a mining company operating in Chile will increase by around 20% according to some estimates, making the Latin American nation have one of the heaviest tax burdens in the world.
Copper is a vital element in the global quest to achieve carbon neutrality due to its use in the batteries that power electric vehicles, wind turbines and solar panels.
Chile, the world’s largest copper producer, produces 5.6 million tonnes of copper a year, but has the potential to generate 7 to 8 million tonnes of the metal if projects currently in the pipeline get the go-ahead.
Hernandez said he hoped the final reform would be clear enough for miners to feel confident pouring in an estimated $80 billion into the country over the next few years.
The nation’s copper output has been dwindling as of late, recording a fall of 8.6% in July, compared to the same month last year, to 430,028 tonnes.
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