Despite changes to the bill announced this week, the head of Colombia’s mining association said on Tuesday that the leftist government’s proposed tax reform will jeopardise mining-related investment and production. Gustavo Petro, the left-leaning president-elect of Colombia, has stated that he wants to increase tax revenue by 25 trillion pesos ($5.6 billion) in 2023 before increasing government spending on social programmes by about $11.5 billion annually.
The government decided on Monday to change the reform so that mining and oil companies can still deduct royalties from taxes in exchange for raising their income taxes by 5% and raising an export tax for oil and coal sold above a certain price threshold to 20%. Colombia’s main exports and sources of income are oil and coal. In his campaign, Petro pledged to stop new oil exploration and shift to renewable energy sources.
The president of the Colombian Mining Association (ACM), Juan Camilo Narino, claimed that even the modified measure still imposed an excessive tax burden on miners, claiming that the effective tax rate was 90 percent.
“The tax structure must coincide with the realities of the business,” Narino told reporters. In reference to the strain the new tax structure will place on the sector, he added, “These contributions are going to diminish and fall drastically in the short and medium-term,”
According to Narino, the mining sector would provide $2.62 billion, or 48%, of the tax revenue obtained under the tax change.
Narino added that the law might threaten mineral extraction, particularly coal production, and lower foreign investment by up to 17%.
“It puts at profound risk the viability of the Colombian mining sector, future investments and most seriously, the stability of 640,000 families” involved in the industry, he said.
Upon prices exceeding $86 per tonne over a 20-year average, the 20% tax will be applied to coal exports, according to the ACM.
The organisation has requested the government to eliminate the planned fee in exchange for a higher income tax that is equivalent to the levies imposed on the banking sector. According to him, mining corporations would fork over 14.7 trillion pesos in taxes, royalties, and high-priced levies this year; the amount could reach 25 trillion pesos the following year.
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