Chile Green-Lights Mining Tax Reform to Boost Government Revenue

Legislators in Chile’s lower house of Congress on Wednesday gave final approval for a much-anticipated mining tax reform. It now requires just the signature of the country’s President Gabriel Boric to come into law, Reuters reports.

Boric has already publicly endorsed the reform, which will require large copper and lithium producers operating in the country to pay more taxes and royalties to the government. Lawmakers approved modifications to the bill by a majority vote of 101 to 24. Last week, the Senate moved to endorse the reform.

“With this legislation, we seek to avoid what happened many times with our country’s natural riches: they were exploited, they disappeared, which left very little for the country and its future development,” Chilean finance minister Mario Marcel told reporters after the vote.

The new legislation will raise the top tax rate to almost 47% for companies that produce more than 80,000 tonnes of fine copper per year. It also adds a 1% ad valorem tax on copper sales from companies that sell over 50,000 tonnes of fine copper, and an 8%-26% tax, depending on the producer’s operating margin.

The Sociedad Nacional de Minería de Chile (Sonami), an association of private mining companies, said via Reuters that it was relieved to see the measure approved because it ends uncertainty over potential future laws.

“Uncertainty lasted for almost five years and, without a doubt, hurt the country’s main productive activity,” Sonami said in a statement. The group also described the language of the legislation as “better” than initial proposals.

Chile is the world’s biggest copper producer and second largest lithium producer, in addition to holding the largest reserves of lithium in the world. Both metals are seen as critical to manufacturing electric vehicle batteries.

In April, Boric announced plans to nationalise the country’s lithium industry. “Any private company, whether foreign or local, that wants to exploit lithium in Chile must partner with the state. […] This is an opportunity for economic growth that will be difficult to beat in the short term,” he said in a statement at the time.

He also expressed hope that nationalising the industry would help control negative environmental impacts, referring particularly to the sector’s huge water use.

In the Atacama region in particular, tensions between lithium companies and indigenous communities remain high as water shortages, made worse by mining activity, continue to plague the area.

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