Chile Senate Committee Passes New Tax Limit for Copper Producers

James Attwood and Valentina Fuentes

May 9, 2023 at 6:14 PM·1 min read

(Bloomberg) -- A Chilean bill to raise taxes on the mining industry took a key step forward Tuesday with the Senate’s finance committee approving a revised cap on the effective tax rate, one of the proposal’s most controversial issues.

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The committee agreed to a government proposal to lower the ceiling for large copper producers to 46.5% of operating profit from 47%. The bill is scheduled to go to the floor of the Senate on Wednesday, before heading back to the Lower House for a potential final vote.

The tax cap for units of global mining firms such as BHP Group and Anglo American Plc has been the focus of debate for months as the left-leaning government attempts to increase its take of copper earnings, without undermining Chile’s competitiveness. At stake are tens of billions of dollars in expansion projects.

The new cap translates into an average effective rate of about 45%, according to consulting firm Plusmining. Chile’s major competitors have a tax burden of 41% to 44%.

Late Monday, Finance Minister Mario Marcel said he’d reached an agreement with opposition lawmakers on the new tax ceiling. The government agreed to amend the bill after a series of electoral and legislative defeats.

Over the weekend, opposition groups secured more than the three-fifths majority needed to push through articles at will in a council charged with drafting a new constitution. That followed defeats of a previous constitutional rewrite and a broad tax reform proposal.