Peru's government on Wednesday asked Congress to authorize an overhaul of the country's tax code that would focus on raising taxes from the mining industry, which the government wants to use for social programs.
The Peruvian government wants to improve the financial system of the mining industry, according to congressional documents. Specifically, the government wants to revise royalties, income taxes and special taxes on metals when prices soar. However, the Peruvian government did not specify in the document how the tax rate would be adjusted.
Mining is an important tax earner for Peru, the world's second-largest copper producer. Castillo, Peru's current president, campaigned on the idea that mining companies were robbing Peru of its wealth. If elected, he would sharply raise taxes on mining companies and use the money for health care and education to reduce income inequality.
The International Monetary Fund has made recommendations to Peru on how to raise mining taxes without harming competitiveness, Pedro Francke, Peru's finance minister, said earlier. Peru has one of the lowest tax-to-GDP ratios in Latin America, according to the Organisation for Economic Co-operation and Development.
It is unclear when Peru's opposition-controlled Congress will consider the tax reform proposal or to what extent it will support it.
Peru has about $50 billion in future mining investments, and securing new projects while raising tax revenues is the challenge for Castillo's government, according to the mining ministry.
Some of the largest mining companies have operations in Peru, including Freeport McMoRan, Glencore, Newmont Corp, Barrick Gold and Southern Copper. To be clear, several mining companies won't be affected by the core of the tax changes because they signed tax stabilization agreements in the past to avoid that, including MMG LTd., Aluminum Corp. And Anglo American.
