LEGISLATIVE INITIATIVES IN THE CONTRARY TO PROMOTING MINING INVESTMENT

Once again, the Congress of the Republic proposes bills that seek to increase the tax burden of the mining sector. The objective would be to obtain more fiscal resources to improve the closing of social gaps. However, this would only discourage new investments in the sector.
Bill No. 04429/2022-CR seeks to increase the tax burden of the mining sector through modifications of the cumulative progressive scale of the Mining Royalty Law and the Law that creates the Special Tax on Mining and the Framework Legal of the Special Tax on Mining, according to the explanatory statement, due to the taking advantage of the high prices of minerals in the international market. Its purpose would be to promote the recovery of the economy through a greater contribution from the sector that helps sustain public spending.
For its part, Bill No. 05738/2023-CR seeks to modify articles 3 and 4 of Law No. 28258, Mining Royalty Law, in order to calculate said royalties based on the value of the concentrate or its equivalent, and increase the percentages to be applied.
Mining represented, on average, 12% of total GDP in the last 10 years. The sector contributed S/ 98,747 million in internal taxes in the last 10 years, according to Sunat. This represents 10.1% of the total internal taxes collected in said period. In 2023 alone, it contributed S/ 12,650 million, 9.7% of the total collected in that year.
In addition to the tax contributions of any company that generates profitability, formal mining is taxed through other concepts, such as canon, royalties, the Special Mining Tax and the Special Mining Tax. Last year, the sector contributed S/ 7,665 million in fees, royalties and validity and penalty rights. As of February of this year, these transfers for mining concepts already total S/ 2,351 million, according to the Ministry of Energy and Mines.
COMPETITIVENESS IN DECLINE
According to the Mining Competitiveness Index (ICM), which measures the competitiveness of seven countries with mining potential, prepared by Macroconsult and the Institute of Mining Engineers of Peru (IIMP), Peru is in last place, given that It fell one position compared to 2019. The ICM compares countries with high mining potential in five pillars: tax policy, geological potential, infrastructure, institutions and regulation, and social environment (see Semanario 1139).
The annual survey of Mining Companies seeks to identify the conditions that make a country more attractive for investment in the sector. To do this, it considers geological, legal, tax, institutional variables, among others; and is prepared by the Fraser Institute of Canada. In its latest edition, Peru climbed 8 positions as the most attractive country to invest in mining, going from 42nd place in 2021 (out of 84 countries) to 34th in 2022 (out of 62 countries), above Chile (35th place).
The positive jump in the ranking occurred despite the fact that the country fell 0.96 points in the mining investment attraction index. When evaluating historical results, it is observed that Peru lost competitiveness over the years. The result of the last edition was due to concerns about the workforce in the country, the tax regime and the uncertainty surrounding the disputed land claim. Additionally, all respondents expressed concern about political stability in the country, according to the Fraser Institute.
Mining production reached historic figures in 2023. In the case of copper, 2.76 million fine metric tons (FMT) were extracted, 12.7% more than in 2022. However, the Democratic Republic of the Congo managed to produce 2.84 million FMT in the same period, which displaced Peru as the second world producer of this metal.
If the objective is to increase tax collection, the focus should be on administrative simplification, which would accelerate the execution of the mining exploration and investment portfolio. The first are 75 projects for a combined sum of US$642 million. The second, 51 projects with a total investment of US$ 54,556 million. In addition, the powers and use of resources from mining should be reconsidered. In 2023 alone, regional governments and municipalities stopped using S/ 6,067 million of resources from the canon, overcanon and mining royalties.

Source: ComexPeru