Ollanta Humala, President-elect of Peru, fulfilled a campaign promise Thursday in announcing his government's intention to hit mining companies with higher royalty taxes.
Humala, who was elected in July, campaigned on a promise to tax mining company profits and distribute them to the poor — a development that had investors and mining company CEOs running for cover in a country that is the world's second largest producer of copper and the sixth biggest gold miner. Companies now pay between 1% and 3% in royalties.
While the new royalty rates have not yet been set, they are expected to be on a sliding scale based on each company's profit, according to a story in MercoPress:
Mines Minister Carlos Herrera said the new levy will be applied to operating profits instead of sales, a change that mining companies supported.
“We want to announce today that we have ensured mining companies will make tax payments of approximately 3 billion soles a year,“ Prime Minister Salomon Lerner told Congress, where he was presenting Humala's government plan.
This tax will not affect investment or companies' competitiveness,” he said.
According to The Wall Street Journal (sub required), mining sector analysts say the deal removes a cloud of doubt over the policies of the new government of left-leaning nationalist Ollanta Humala. During the election campaign this year, Humala promised to place a windfall tax in the mining sector, but it was unclear if the government would be able to reach a friendly agreement with the mining companies.