Chile mining companies say there is limited room to hike taxes

Taxes “can be raised a bit,” Diego Hernandez, the head of industry group Sonami was quoted as saying in an interview with the newspaper.

Mining companies in Chile pay taxes that total between 40 and 44%, he said, and any tax hikes should not exceed an overall tax burden of 50%.

The leftist administration of President Gabriel Boric who took power in March is pushing an ambitious tax reform that aims to raise funds worth 4.1% of Chile’s gross domestic product over the next four years. Raising taxes on miners and the wealthy is a major part of that program.

“You can’t overplay your hand either,” Hernandez said, “because if you do, there will be less production and investment and that’s the balance that this reform should preserve.”

Hernandez’s remarks follow a statement last week by global miner BHP, which operates in Chile the world’s largest copper mine, known as Escondida.

BHP said it would reconsider any future investments in the country if taxes are raised. The company has said it is willing to invest $10 billion more in Chile over the years, but only if the regulatory and fiscal conditions are appropriate.

Part of the reform includes tying taxes to the price of copper, which has plummeted in recent weeks.

“Indexing a tax to the value of copper is going to create a lot of distortions in the medium term,” Hernandez said.