Study carried out by the Center for Studies on Mining and Sustainability of the Universidad del Pacífico also warns of the negative impacts of eventual modifications in the tax policy.
On the second day of Keynote Speeches of the central event of Heading to PERUMIN - Bicentennial Edition, the dean of the Universidad del Pacífico, Carlos Casas, presented the study "The tax burden of mining activity and characteristics to take into account." The study calculated that the estimated tax collection of the mining sector for the 2021-2025 period would be around S/ 70,000.
Likewise, the analysis determined that the estimate of potential tax collection for the end of this year would reach S/ 17 billion. In this sense, and according to the table of projections of income from taxes and royalties generated by mining until 2025, it determined that the combination of both would generate a total income of S/ 77.503 billion for the country.
The study was carried out by the Center for Studies on Mining and Sustainability of the Universidad del Pacífico commissioned by the Peruian Institute of Mining Engineers (IIMP), and included four areas of analysis on the current mining taxation scheme, focused on the description of the mining activity, the mining tax burden, the collection estimates and the analysis of the imposition of a new tax.
In this regard, Casas argued that it is necessary to understand that mining activity is not homogeneous, so in order to make changes in tax policy, it is necessary to consider the heterogeneity in which it is managed. In addition, he added that it must be considered that mining is exposed to price risks, geological forms, regulations, among others, which make it a complex activity.
The current mining situation and the tax reform
As Casas indicated, the heterogeneity refers to the vast majority of companies in the country that do not make such a high investment. According to the study, in 2020, few mining companies will exceed USD 100 million a year, most mining companies reach only US $ 10 million.
Casas also pointed out that the competitiveness of costs in Peru, in the case of copper, gold, silver, lead and zinc, metals on which the study focused, is very varied; this means that operating costs are very unequal between companies. Of these, the most heterogeneous operating costs are those of copper and gold; while the most homogeneous are zinc and lead.
"The particularity of mining activity in Peru lies in the processes and the investment it requires: the one prior to the operation is more significant; while for extraction, it decreases; and, finally, when the mines are closed, it increases", said the economist, in addition to pointing out that the total investment of the mining sector is related to the extraction of gold and silver.
In this scenario, the economist stressed that the current mining tax policy - Special Mining Tax (IEM), together with mining royalties, allows providing the proportionality of a direct tax on Operating Profit, such as the new mining royalties that govern since 2011. These amounts were hypothetically exemplified in similar cases in the study.
Thus, the study projected tax collection estimates from the beginning of this decade until 2025, taking historical data from 2005 and 2011. This showed that mineral prices are increasing and that a plateau forms from 2022 to 2025.
Therefore, if a new mining tax were added, the study indicated that under the high degree of heterogeneity analyzed in the financial situation of 15 companies of the Superintendency of the Securities Market (SM), due to their high dispersion of costs, there would be a differentiated impact among companies with a negative impact on the vast majority of them.