Brazil may put new tax on mining projects - Report

Wednesday, 22 Jun 2011

Brazil could create a new tax on large mining projects as part of the government's overhaul of the mining code, a move that would be costly for mining firms.

The Folha de S Paulo newspaper, without naming sources, reported that the mining and finance ministries are considering imposing a so called "special participation" tax on large mining projects similar to one that already exists in the oil sector for high productivity fields.

As per report
1. The proposal would levy the tax on 25% of the existing mining concessions.
2. The proposal would make up part of a broader overhaul of regulations covering Brazil's mining sector, which would also include a potential increase in royalties that companies must pay to the government.
3. The special participation tax would be applied to gross revenues from production and deducted from investments in exploration and operational costs.

It would come on top of royalties that mining companies already pay that currently stand at roughly 2% of net revenue.

The mining industry opposes tax increases, particularly the royalty increase, saying that it would reduce the Brazil's competitiveness because mining companies already have a high overall tax burden.

The government expects to send a draft bill to Congress in the second half of 2011, after more than a year of discussions with the industry. (sourced from Reuters)