Tax hike threat seen as top concern among Brazil's mining players

The threat of tax increases appears to be the main concern among mining firms in Brazil in a year that the country will hold presidential and state governor elections.

"We live in a very challenging scenario in relation to public resources and we’re also in an election year, while on the other hand, the mining sector continues to experience a strong performance. This combination motivates these discussions," Rinaldo César Mancin, director of institutional relations at mining association Ibram, told BNamericas. 

According to a survey produced by EY of executives of mining companies with operations in Brazil, tax issues are main topic of concern in the industry. 

The top concerns, according to the survey, were tax-related issues (cited by 55% of respondents), ways to attract foreign investment (30%), carbon pricing (30%) and the need to change laws to speed up permitting (25%).

The survey can be seen here.

Brazil’s mining sector has become a potential target of tax increases in both congress and some important mining states as companies have been reporting strong results in recent quarters.

One issue is that the government is working to reduce taxes in certain areas, such as on fuel and imported products, to mitigate inflationary pressures. So at some point, the thinking goes, the government is likely to look at other sources of revenue to make up for the lower tax collection.  

"To give you an idea of how diverse these pressures are, there is a bill under discussion currently in congress to increase the minimum wage for nurses and this increase, if authorized, would be funded by an increase in the CFEM [mining royalties]," said Mancin.

According to the Ibram executive, talk of tax increases for the sector can hurt investment decisions and make Brazil less competitive. 

"Brazil is the country that most imposes taxes on mining in the world. Currently, the average tax burden in Brazil is between 36% and 38%, while, in Australia, which is Brazil's main global competitor in terms of iron ore, the burden is 18%," he said.