Taking advantage of the "Commodity Super cycle" Chile's House of Commons passed a bill to increase taxes on copper and lithium producers.

Chile's lower house of parliament has approved a bill to tax copper and lithium producers for local social and environmental projects, but the bill still needs to be passed by procedures such as the Senate, media reported on Wednesday.

Simply put, the bill, first introduced by opposition lawmakers in 2018, requires copper and lithium producers such as BHP Billiton and Albemarle to pay 3 per cent tax on sales to support local development projects. It is worth mentioning that a number of resource exporters in South America are seeking similar legislation to help countries generate more income to cope with epidemic-related spending.

The bill still faces a Senate vote, but a bigger obstacle is that Chilean President Sebastian Pinera may exercise his veto. The Chilean government and industry groups have previously said the bill is "unnecessary" and will hurt investment enthusiasm. Juan Carlos Jobet, the minister of energy and mining, said the existing tax system could generate more income as commodity prices rise.

During Pinera's first term a decade ago, the Chilean government introduced a complex tax system that currently charges large producers a variable operating profit tax of up to 14 per cent. Joaquin Villarino, head of the local mining council, told the media that he opposes rushing forward with similar legislation just because the price of copper has reached $4 a pound in the past few weeks.

Cesar Perez-Novoa, a raw materials analyst at BTG Pactual, also said that while there is a consensus in the market that high-margin industries such as mining should take more responsibility for financing the economic recovery, the higher tax burden will lead to higher labor and environment-related costs. At the same time, as a whole, the performance-to-price ratio of investing in mining in Chile has also declined.