News Bulletin

Chile looking to revive tax royalties on global miners.

Friday, 30 Jul 2010
Chile looking to revive tax royalties on global miners.
Following Australia’s recent foray into the highly contentious world of the proposed MRRT and its predecessor, the RSPT, Chilean President Sebastian Pinera said yesterday he will revive legislation to boost taxes on global miners operating in the world's top copper producing country.
Mr Pinera’s initial proposal to overhaul the mining royalty was blocked by the opposition-led Congress, which believed the proposal did not go far enough. The centre-left section of Congress is calling for a larger slice of company profits in the wake of high copper prices, which would be put towards the rebuilding of cities devastated by the massive earthquake in February this year.
The Chilean government proposed a sliding-scale royalty scheme that varies depending on a company’s margins in exchange for extending a tax freeze for eight years. Royalties are currently applied on a fixed rate basis.
Mining trade groups have said any tax increase would discriminate against a sector that contributes the most to the state's coffers. Global miners Anglo American PLC, Xstrata Copper and BHP Billiton PLC all operate in Chile. Sector experts, however, have declared that the proposed scheme would be unlikely to curb mining investment in Chile, while mining executives said that the South American country, which holds the world's biggest copper reserves, remains one of the best mining districts to do business.
Mr Pinera has not ruled out reviving his proposal via a partial, executive veto, but will continue his dialogue with the opposition.The new royalty scheme was included in a US$3-billion post-quake financing bill, which temporarily raised taxes on corporations. The bill was approved by lawmakers with the exception of the royalty reform.
Meanwhile, several regions and mining operations have been variably impacted by power blackouts over the last few months following substation and transmission failures, believed to be a result of grid damage suffered in the 8.8 magnitude earthquake on February 27.
 
Sources: The National Post, Mining Weekly, Bloomberg

     

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