Tax hike proposal risks $50 billion investment in Peru
A proposal from Peru’s finance minister, Pedro Francke, to raise taxes on the mining sector by at least 3 percentage points was lambasted by that country’s mining chamber which said such an increase would jeopardize more than $50 million in future investment.
Francke said that the government wants to increase mining taxes by 3 to 4 percentage points, citing a study from the International Monetary Fund (IMF) which gave room to hike levies.
The government of leftist President Pedro Castillo has been at loggerheads with mining firms since he came to office in July, pledging to redistribute the Andean country's mineral wealth and hike taxes to fund social programs.
Reuters reported that there have also been a spate of protests against the mining sector, with mining firms complaining that the government has not done enough to resolve blockades that have at times hit production.
The National Society of Mining, Oil and Energy said Francke’s proposal would “irreparably” damage competitiveness in Peru's sector mining, the engine of the country’s economy.
“We consider that there is ample evidence that the tax burden on mining is currently close to 50 percent of profits,” the chamber said. It added the rate in neighboring Chile was just over 40 percent, while it was 35.5 percent in Canada and 44.3 percent in Australia.
“These are mining countries with which Peru competes directly.”
Those numbers clash what the government says. Francke claimed, citing the IMF study, that Peru’s mining tax rate was 41.7 percent, lower than Chile's 47.1 percent.
Castillo's government is pushing the opposition-dominated Congress to approve plans before the end of the year to legislate on tax reforms, mainly in the mining sector currently benefiting from high international metal prices.
The mining chamber said Peru’s economy ministry had used a “a particular interpretation” of the IMF's preliminary report, which has not yet been publicly released.
“A bad redesign of the tax scheme will discourage investments in expansions of mines already operating and in new mining projects. Future investments of more than $50 billion are at risk,” it added.