Chile plans to increase royalties on copper mining and reform the tax system

SANTIAGO, July 1 (Reuters) – Chilean Finance Minister Mario Marcel on Friday introduced a tax reform bill that increases copper mining royalties on companies that produce more than 50,000 tonnes a year and raises taxes on high incomes to fund government proposals. social programs and reforms.

Chile is the world’s largest copper producer and home to global copper giants like Codelco, BHP, Anglo American Glencore and Antofagasta.

“It means an increase in revenue from royalties, an increase in state participation in mining revenues,” Marcel said. “But also ensuring that the mining sector has enough revenue to encourage investment.”

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A Treasury Department press release says the plan has two components. One is an ad valorem tax between 1% and 2% for companies that produce between 50,000 and 200,000 tons of fine copper per 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 $2 and $5. Both components vary depending on the price of copper.

Small copper producers will continue with the current system, Marcel added.

The bill aims to raise 4.1% of GDP over four years, including 0.7% for a new guaranteed minimum pension fund.

The proposal also increases taxes on high incomes, capital gains and introduces a new wealth tax for citizens with more than $5 million in assets.

Marcel noted that Chile, with a tax collection rate of 20.7% of GDP, is below the OECD median of 34.7%.

“Historically, few countries have achieved economic prosperity with a low tax burden,” Marcel said, adding that 97% of taxpayers will not be affected by the proposal.

The bill also attempts to reduce tax exemption and evasion while providing tax relief for rent and childcare for children under 2 and severely dependent persons.

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Reporting by Natalia Ramos and Alexander Villegas Editing by David Goodman

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