The outbreak has hit Chile's finances hard and caused serious economic problems, and Chile is mulling a bill that would be the world's heaviest tax on copper mines.
According to Bloomberg data, the current royalty rate in the world's largest copper producing countries is around 41 percent, with Peru at 40.7 percent, South Australia at 44.6 percent, British Columbia at 40.1 percent, Mexico at 41.6 percent and Chile at 41.6 percent. Chile's proposed royalty rate would rise to 82.3 percent. Another proposed tax to replace the current profits tax would be levied at a rate of 56%, both big increases from the current rate.
Chile's senate mining committee voted 3-2 on Tuesday to approve a draft legislation on the Copper Royalty Bill, which will then go to the upper house for debate, where senators are likely to make changes to soften a version passed by the lower house in May. If approved, the bill would be the most heavily taxed among the world's leading copper-producing countries.
While supporters of the new royalty system say it would replace the current profits tax, it is not included in the bill and administration officials have suggested the two systems could run concurrently. Most of Chile's big mining companies have signed tax stabilisation agreements that run until 2023.
Of course, the bill has drawn warnings from the industry. They argue that the current draft would make the sales tax proportional to the price of copper, which would discourage companies from investing in mining and make them less competitive in the copper industry.
Separately, on the same day that the mining council approved the draft, Chile's government also unveiled a roadmap for the copper industry over the next three decades, including a 57 percent increase in copper production while maximizing social benefits through a fair and competitive tax system. In addition, Chile is drafting a new constitution that could require tighter regulations, including on water and minerals.
International mining giants are cashing in on rising copper prices as the coronavirus pandemic wreaked havoc on the global economy. At the same time, Chile's recession has reduced domestic revenues and increased inequality, so the Lower house of Congress passed legislation in May that predated 2018, calling for royalties to be levied on mining giants and linked to the international copper price, perhaps as high as 75 percent.
