Chile's New Deal: Raise Copper Royalties And Reform The Tax System

Chilean Finance Minister Mario Marcel proposed a tax reform bill that would increase copper royalties for companies that produce more than 50,000 tonnes of copper a year and raise taxes on higher income groups to fund social programs and reforms proposed by the government.

Chile is the world's largest copper producer and is home to global copper giants such as Copco, BHP Billiton, Anglo American, Glencore and Antofagasta.

Marcel said higher royalty revenues lead to higher mining revenues for the state, which ensures that the mining industry has enough revenue to encourage investment.

Chile's finance ministry said the plan had two parts, one of which would impose an AD valorem tax of 1 to 2 per cent on companies producing 50,000 to 200,000 tonnes of refined copper a year, and 1 to 4 per cent on companies producing more than 200,000 tonnes.

The other would impose a tax of 2% to 32%, depending on commodity prices, on income from copper prices between $2 and $5 a pound. Smaller copper producers will continue with the current system.

It also raises taxes on high earners and capital gains, and introduces a new wealth tax for citizens with assets of more than $5 million. Noting that Chile's tax take of 20.7 per cent of GDP is lower than the OECD median of 34.7 per cent, Mr Marsel said: "Historically, very few countries have achieved economic prosperity with low tax revenues... Ninety-seven percent of taxpayers will not be affected by the proposal."