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The Peruvian Mining Chamber of Commerce on Monday attacked the government's tax increase, saying it would put more than $50 billion of future investment in the country at risk.
Earlier, Peruvian Finance Minister Pedro Francke said the government wanted to raise mining taxes by 3 to 4 percentage points, citing a study by the International Monetary Fund ((IMF)). According to Francke, IMF's research provides room for the Peruvian government to increase mining taxes.
(National Society of Mining, Oil and Energy), Peru's national mining, oil and energy association, said Francke's proposed tax increase would irrevocably damage the competitiveness of Peru's mining industry. As the second largest copper producer in the world, mining is the engine of Peru's economic development.
The chamber claims that there is ample evidence that Peru's mining industry currently has a tax burden of nearly 50 per cent of profits, compared with slightly more than 40 per cent in neighboring Chile, 35.5 per cent in Canada and 44.3 per cent in Australia. These are mining countries that compete directly with Peru.
The figures listed by the Peruvian Mining Chamber of Commerce are not consistent with those of the government, and Francke quoted an IMF study on Sunday as saying that Peru's mining tax rate is 41.7%, lower than Chile's 47.1%.
In response, the Peruvian Mining Chamber of Commerce said that the government had adopted a special interpretation of IMF's preliminary report. It should be noted that IMF's preliminary report on Peruvian mining taxes has not yet been publicly released.
The chamber added that if bad tax increases were implemented, both mines already in operation and new mining projects would be adversely affected, with future investments of more than $50 billion at risk.
Since taking office in July, Peruvian President Pedro Castillo has had strained relations with mining companies. On the left, he has promised to redistribute mineral wealth and fund social projects by raising taxes. Large mining companies generally reap large profits thanks to high international metal prices.
Castillo's government hopes to pass a legislative plan for tax reform by the end of the year, but the Peruvian Congress is currently dominated by opposition parties.
At the same time as Castillo pushed for the tax increase, there have been a series of protests against the mining industry in Peru, the most common method of which is to block the transport roads of mining companies. Mining companies complain that the Peruvian government has not taken sufficient measures to ease the blockade, thus affecting production.
