Tax reform will impact mining sector, says industry
Representatives of Chile's mining industry told a congressional hearing that the proposed tax reform presented by the government of President Michelle Bachelet will have a negative impact on the sector, despite government assurances that it will not.
Alberto Salas, president of the private sector mining association Sonami, said that the proposed abolition of the DL 600 mechanism would hurt competitiveness and make the country less attractive to invest in.
The industry leader said that if the proposed reform aims to collect more for state coffers - some US$8.2bn annually, according to government estimates - then eliminating the tool used to attract more investment by companies, which in turn would also pay taxes, was counterintuitive.
Salas said that if the government wants to collect more in taxes, then attracting foreign investment was part of the solution, "as it will contribute to putting more projects into motion, it will create jobs and act as a multiplier for other productive areas, thus resulting in more in taxes for the government," according to a Sonami press release.
For his part Joaquín Villarino, president of the mining council, which groups together the country's large-scale mining companies, said it was a myth that the mining industry would not be touched by the reform.
"That is false, as the corporate tax rate will go up from 20% to 25%, and because the elimination of the FUT [tax credit mechanism] will also have an impact," Villarino said in a senate press release.
Scrapping the FUT would ensure that company owners pay the full rate of personal income tax on deferred dividends, and not enjoy the current tax credit.
Villarino added that the reform will add insult to injury given Chile's deteriorating condition as a mining destination, the result of raising production and energy costs, dwindling ore grades and lower metals prices.
The proposed tax reform is currently at its second legislative stage, being discussed in the senate finance committee.
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