Peru govt. approves new mining royalty scheme
Peru's Finance Minister Luis Castilla reported on Tuesday that the government has approved three new mining royalty or tax schemes to fund anti-poverty initiatives and infrastructure projects, without specifying the new rates.
Posted: Wednesday , 14 Sep 2011LIMA (REUTERS) -
Peru's government has approved three new mining royalty or tax schemes to fund anti-poverty initiatives and infrastructure projects, Finance Minister Luis Castilla said on Tuesday.
The new system based on operating profits would replace the current 1-3 percent royalty miners pay on sales, Castilla told reporters without specifying the new rates. Congress must approve the proposal.
"It brings together three main objectives of the government: to maximize income for the state, to preserve competitiveness in the mining sector ... and to preserve tax security," Castilla said after a cabinet meeting.
Securing more state resources from miners to fund social programs in a country where a third of the population is poor was a campaign promise made by leftist President Ollanta Humala, who was elected in July. For a factbox, see:
Castilla specified that the new royalty applied to mining firms that did not sign tax stability agreements with the government in the 1990s. Those firms would also pay a "special tax" directly to the central government, he said.
Firms with tax stability agreements will pay a "special contribution," also applied to profits, he said.
"The government will be empowered to sign accords with companies that have tax stability agreements, and this scheme will be applied to them," Castilla said.
The "special contribution" will also be calculated based on operating profits, he said.
Many large international firms operating in Peru including Xstrata, BHP Billiton and Barrick Gold are protected by tax stability agreements.
However, some of the agreements have already expired. Southern Copper, controlled by Grupo Mexico, no longer counts on a tax stability in Peru. The country's largest precious metals miner Buenaventura does not have a tax agreement with the government.
Prime Minister Salomon Lerner announced last month that Humala's government and mining firms had agreed on a new system that would yield around $1 billion per year in contributions from mining firms.
Miners consulted by Reuters said a sliding scale of royalty rates was being devised to take into account individual company profits.
Last year, the state collected $646 million in royalties applied to sales. Miners in Peru also pay a corporate income tax of 30 percent.
Peru is the world's No. 2 producer of copper and silver and the No. 6 gold producer. Minerals account for about 60 percent of its exports.
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