A tax reform proposed by Colombia’s leftist government will put mining investment and production at risk, despite modifications to the bill announced this week, the head of the country’s mining association said on Tuesday.
Colombia’s new leftist President Gustavo Petro has said he wants to raise an additional 25 trillion pesos (some $5.6 billion) in tax revenue in 2023, before eventually adding about $11.5 billion annually for social programs to government coffers.
The government agreed on Monday to modify the reform to continue to allow oil and mining companies to deduct royalty payments from taxes in exchange for raising income taxes on them by 5% and increasing an export tax for oil and coal sold above certain threshold prices to 20%.
Oil and coal are Colombia’s principal exports and sources of national income. Petro campaigned on promises to move toward renewables and halt new oil exploration.
Juan Camilo Narino, Colombian Mining Association (ACM) president, said even the modified bill put an undue tax burden on miners, citing what he said was 90% effective tax rate.
“The tax structure must coincide with the realities of the business,” Narino told reporters. “These contributions are going to diminish and fall drastically in the short and medium-term,” he said referring to pressure the new tax regime will put on the industry.
Narino said the mining industry would contribute 48% of the revenue raised by the tax reform – some $2.62 billion.
The bill may compromise production of minerals, especially coal, Narino added, and reduce foreign investment by up to 17%.
“It puts at profound risk the viability of the Colombian mining sector, future investments and most seriously, the stability of 640,000 families” involved in the industry, he said.
Coal exports will pay the 20% tax when prices exceed $86 per tonne, based on a 20-year average, the ACM said.
The group has asked the government to remove that proposed charge in exchange for higher income tax, Narino added, similar to taxes levied on the financial industry.
Mining companies will pay 14.7 trillion pesos in taxes, royalties and high price duties this year, he said, a figure that could rise to 25 trillion pesos next year.
(By Luis Jaime Acosta and Julia Symmes Cobb; Editing by Jane Merriman)