Peru minister proposes making tax benefit for miners permanent

LIMA (Reuters) - Peruvian Energy and Mines Minister Francisco Ismodes on Thursday proposed making a temporary tax benefit for mining companies part of the country’s permanent tax code in order to reduce investment uncertainty in the world’s No. 2 copper producer.

FILE PHOTO: Peru's Energy and Mines Minister Francisco Ismodes next to Peru's President Martin Vizcarra speaks to foreign media during a news conference at the Government Palace in Lima, Peru June 5, 2018. REUTERS/Mariana Bazo/File Photo

Miners in Peru have enjoyed refunds on an 18 percent value-added tax rate for nearly two decades thanks to repeated renewals under market-friendly governments.

But the tax refund tends to face criticism as its expiration nears, and opposition lawmakers have proposed ending it this year. In 2017 and 2016, the government returned about $3.625 billion to mining companies as part of the refund, according to the country’s tax agency.

“If this is something that’s going to be renewed or extended repeatedly, it’s better to just make it part of rules for the (mining) sector,” Ismodes told Reuters in a brief interview, stressing that the Economy Ministry would make a final decision.

Ismodes said the government of centrist President Martin Vizcarra would at the least extend the tax benefit past this year, when it is now set to expire.

Mining is a key driver of economic growth in Peru, where international firms such as Anglo American, Glencore and Freeport-McMoRan Inc operate large mines, and scores of smaller companies prospect for new discoveries.

Peru is the world’s second largest producer of copper, zinc and silver, and the sixth biggest gold producer.

Ismodes also said he expects Congress to approve proposed legislation aimed at promoting investments in oil and natural gas. The proposal, which would extend the length of exploration and drilling contracts, could draw $6 billion in new energy investments, according to a local industry group.

“We expect that once the law is approved, oil production will rise by 30,000 barrels of oil per day from the current 40,000 average today,” Ismodes said.

Peru is a relatively small oil producer and has struggled to compete for energy investments with big regional players such as Brazil, Colombia and Mexico.

Reporting by Marco Aquino; Writing by Mitra Taj; Editing by Leslie Adler