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Chile to limit copper royalty bill after industry complaints - Minister

22nd March 2023

By: Reuters

  

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SANTIAGO - Chile's government plans to limit a long-running mining royalty bill amid criticism of its impact on the industry's competitiveness, Finance Minister Mario Marcel said on Tuesday.

Speaking to the Senate treasury committee, Marcel said that certain limits that do not alter the bill can be modified during the legislative stage.

"One of them is to make up start-up expenses as a cost for the calculation of the adjusted mining operational taxable income," Marcel said, adding this change would leave the mining operational income calculation "as it currently works with the specific tax".

Another adjustment would be to establish a limit to the potential tax burden for the combination of various taxes, which would give "greater security or predictability to collection."

Additionally, Marcel said companies with operating losses would be exempt from the ad valorem component and "when there is a very low or close to negative profitability, the same ad valorem component is also adjusted."

With the latest adjustments, the royalty would have a fixed "ad valorem" component of 1% on copper sales and a part between 8% and 26% that depends on the mining operating margin.

Marcel clarified that although the project initially included lithium, it has since been left out since current contracts with a state development agency have better collection rates.

Chile, the world's largest copper producer, hosts a number of mining giants like BHP, Antofagasta, Glencore and State-run Codelco.

The industry has criticized the initiative, saying it could affect investment at a time when several deposits are facing a drop in mineral grades and require an influx of capital to maintain their production levels.

The mining royalty bill is part of the government's ambitious tax reform package meant to finance key elements of President Gabriel Boric's progressive agenda, but lawmakers shelved the tax reform bill earlier this month.

Edited by Reuters

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