| MEXICO CITY, April 18
MEXICO CITY, April 18 A proposal to levy a new 5
percent royalty tax on mining profits in Mexico, the world's
largest producer of silver, passed a congressional committee on
Thursday as the country attempts to boost its paltry tax take.
The plan put forward by lawmakers in President Enrique Pena
Nieto's Institutional Revolutionary Party (PRI) aims to boost
revenues from an industry where companies enjoy a more generous
tax regime than in other Latin American countries.
The proposal, which was approved by the economics committee
of the lower house of Congress, aims to redistribute profits to
the states where foreign and domestic companies mine.
The plan is part of a broader drive by Pena Nieto to improve
Mexico's tax take, which is the lowest in the 34-nation
Organization for Economic Co-operation and Development.
Under the proposal, mining firms would pay a 5 percent
charge on net profits before tax. Mines not yet producing would
pay a low, almost symbolic per-hectare fee on their concession.
Seventy percent of the revenues would go to the states and
municipalities where mining occurs, for infrastructure and
development, with the rest going to a federal development fund.
If it becomes law, the plan could generate between $250
million and $500 million in extra revenues per year, experts
"We don't want this to be seen like vengeance," said PRI
congressman Adolfo Bonilla, the architect of the bill. "These
companies have been reaping the benefits for years. We're not
talking about an industry without revenues, without profits."
Unlike regional competitors like Brazil and Peru, which have
already imposed mining royalty schemes in addition to charging
mining companies an aggregate tax levy on profits of more than
34 percent, Mexico only charges miners income tax of 30 percent.
Introducing a royalty scheme in Mexico, which has yielded
precious metals to foreigners and locals since the Spanish
conquest nearly 500 years ago, is overdue, supporters say.
If the law passes another committee vote early next week,
the bill could be put to the floor of the lower house later that
week, Bonilla said. If approved, it would move to the Senate.
While the PRI and its allies should be able to muster a
majority in the lower house, it is short of votes in the Senate.
Mining in Mexico accounts for nearly 5 percent of gross
domestic product and is the fourth-largest industry behind
carmaking, electronics and the oil sector.
Reforming the mining sector was part of a pact Pena Nieto
unveiled in December between the country's main political
parties to work together on economic reforms. But Bonilla's bill
was drawn up outside the pact, and has come under fire.
The conservative National Action Party (PAN) and senior
figures in the Party of Democratic Revolution (PRD) have
withheld their support for the initiative, and officials say a
more comprehensive law should be presented.
"It's a poor initiative," said PRD Senator Armando Rios
Piter, calling the bill "incomplete" and too focused on just
royalties. He did not think the bill could pass as it is now.
If it is approved, it would likely take effect by March
2014, when companies file tax returns, the PRI's Bonilla said,
The planned measures also face opposition from the country's
mining industry, which fears they will hurt business.
"It will, without doubt, affect investment, the creation of
jobs and finally competitiveness, and that's why we're opposing
it," said Sergio Almazan, director of mining chambers Camimex.
A recent drop in gold prices means additional costs should
be avoided, Almazan added.
Nonetheless, most foreign miners said they did not oppose
the royalty regime as long as it remains stable.
"I think Mexico has always been a pretty decent country for
mining investment," said John Gravelle, PricewaterhouseCooper's
mining industry leader for Canada and the Americas.
"And I think Mexico will still be a good investment."