Mexico mining taxes to have "dramatic" impact - PwC

Wednesday, September 11, 2013

Plans to impose additional taxes on Mexico's mining sector will have a major impact on the industry and harm investment, Héctor García, mining tax partner at PwC, told BNamericas.

The tax reform bill, presented by the PRI government, proposes an additional 7.5% tax on sales from mining activities, minus certain deductions permitted under income tax rules, and a 0.5% tax on gross revenues of gold, silver and platinum production.

The impact of the taxes "will be very dramatic, not only because the rate is very high, but also because of the formula of the calculations, which is not fair," García said, with depreciation and accumulated losses non-deductible.

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Taxes currently paid by mining companies in Mexico are already "very high" compared to other jurisdictions, he added, including 30% income tax, 10% for profit sharing agreements with workers and per-hectare fees charged on mining concessions.

The effect of the additional proposed taxes will be a reduction of mining companies' profits and investors "hesitating to invest" in the sector, García said.

The 7.5% tax is expected to replace the 5% royalty proposals which were due to be debated in the senate in the current parliamentary session, although there has been no written confirmation of this, García said.

The 5% royalty proposals, calculated on Ebitda, were approved by the lower house in April.

The tax reform bill is expected to be debated by the lower house in the coming two months.