Peru’s leftist government on Wednesday asked Congress for authorization to overhaul the country’s tax code with a focus on raising taxes on the mining sector, funds the administration wants to use on social programs.
The government wants to “perfect the mining sector’s fiscal regime,” according to a copy of the document filed with Congress. Specifically, the government wants to revise rates on royalties, income tax, and the so-called “special tax” that comes into effect when metal prices soar.
Socialist President Pedro Castillo has made lifting taxes on miners a cornerstone of his fledging administration. Peru is the world’s No. 2 copper producer and mining is an important source of tax revenue.
The request did not specify how much those taxes would be lifted.
Finance minister Pedro Francke previously said that the International Monetary Fund is advising Peru on how to raise taxes on the mining sector without affecting its competitiveness.
Peru has one of the lowest tax-to-GDP ratios in Latin America, according to the Organisation for Economic Co-operation and Development.
It remains unclear when Peru’s opposition-controlled Congress will consider the tax reform proposal, and to what extent it would support it.
Peru has a pipeline of about $50 billion in future mining investments, according to the mining ministry, and ensuring the realization of new projects while imposing higher taxes is a key challenge for the Castillo administration.
Some of the world’s largest mining firms operate in Peru, including Freeport McMoRan, Glencore, Newmont Corp, Barrick Gold and Southern Copper .
Still, several miners would be exempt from the core of the tax reform because they have in the past signed tax stability agreements to shield them from this kind of scenario.
Those miners include MMG LTd, Aluminum Corp and Anglo American, whose Quellaveco mine is only scheduled to start production next year.
(By Marco Aquino; Editing by David Gregorio)