Peru Imposes a One-Billion-Dollar Tax on Mining Companies

Macro Watch: On July 28th, Ollanta Humala swore in as Peru’s new president. During his campaign, Humala promised to increase the state’s role in the economy and to redistribute wealth to Peru’s poor majority. In particular, he announced that he would seek to establish a windfall tax on the key mining sector in order to raise government revenue for social spending. The mining industry accounts for approximately 60% of Peru’s export revenues, due to the fact that Peru is the second largest copper producer and the sixth largest gold producer in the world. As a consequence, the introduction of this new tax is a sensitive matter for the Peruvian economy.

Government Revenue from Mining Royalties

Chart provided by: CEIC Data

At present, the mining companies pay royalties of 1% to 3% of their sales. However, the new tax will be applied to operating profits instead of sales. This significant change is aimed at not affecting the mining investments or companies’ competitiveness. The new agreement between the government and mining companies will raise the industry’s annual payments to the government to about one billion dollars. In 2010 mining revenues from royalties increased by 31% in comparison to the previous year, due to higher commodity prices.
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By Marfiela Fernandez in Argentina – CEIC Analyst