Congressional committee in Chile approves mining royalty bill

January 6, 2023

A controversial mining royalty bill was approved by a Chilean congressional committee, putting it a step closer to final approval as part of the government’s sweeping tax reform.

Reuters reported that the proposal, strongly criticized by the industry, was presented in the middle of 2022 by the government to increase royalties on copper sales in Chile, the world’s largest producer of the metal.

In October, an amended proposal was announced by the finance and mining ministers. It would impose a flat-rate ad valorem tax of 1 percent on large-scale copper miners that extract more than 50 kt/a (55,000 stpy). The ad valorem tax would not be assessed if operating margins are negative.

Additional royalties would be assessed at rates fluctuating from 8 percent to 26 percent based on miners’ operating margin, rather than being adjusted according to the price of copper as was originally proposed in the bill that was proposed in July.

In the original proposal two components for royalty payments were established. The first was an ad valorem tax ranging from 1 percent to 2 percent for producers of between 50 kt and 200 kt and (55,000 and 220,000 st) of fine copper, and from 1 percent to 4 percent for those over that range.

Following approval on Jan. 4 by the mining and energy commission, the bill passes to a Treasury commission, where it will again be reviewed and need approval before it goes to a final vote.

Nonetheless, there continues to be disagreement over some aspects of the bill.

“The tax rate is a formula that has not convinced all of us,” said Senator Loreto Carvajal, president of the mining commission, during the session. “The issue of our future competitiveness in relation to nearby countries and others is still pending,” she added.

The government modified the bill in October, proposing a fixed sales royalty of 1% for large miners and removing provisions that linked payments to copper prices. The mining industry welcomed the change, but said the tax burden remained too high.



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