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Mexican senate approves 7.5% mining tax

Keywords: Tags  Mexican senate, mining tax, Camimex, Enrique Peña Nieto, Jose Angel Hernández Puente, National Mining, Metallurgical and Similar Workers Union of Mexico, Grupo Mexico Rodrigo Alonso

MEXICO CITY — The Mexican senate has approved a 7.5-percent tax on mining firms’ earnings before interest, taxes, depreciation and amortization (Ebitda) as part of a wider package of tax reforms.

There is an additional 0.5-percent charge on sales of gold, silver and platinum, according to the senate.

The new tax, which will introduce royalty payments for the first time in Mexico’s history, will come into effect Jan. 1, 2014.

The national government will take 20 percent of all money raised by the tax.

Of the remaining 80 percent, 62.5 percent will benefit local communities where mining operations are established while 37.5 percent will be earmarked for other states with mining activities.

Miners operating in Mexico currently pay only a charge that is largely based on the area of their mining concessions. There is no payment on the revenue or profit generated from their mining operations.

Some mining companies and associations have expressed opposition to the new mining tax.

These new taxes "represent a decline in our competitiveness, which will cause a collapse of 60 percent for the mining program, estimated at $30 billion between 2013-18," Mexican mining chamber Camimex warned in a statement last month.

The country’s mining industry generated $23.12 billion last year, up 14 percent year on year, with investments by mining companies up 43 percent over the same period to $8.43 billion, Camimex said.

The tax is one of 95 proposals listed in the Pact for Mexico document released in December last year, the day after Enrique Peña Nieto’s presidency began. It is aimed at boosting the country’s economic growth through structural reforms.

"Taxes paid by mining concessions here are minimal. It is both logical and necessary to impose higher rates so that the nation itself can benefit," Jose Angel Hernández Puente, treasurer of the National Mining, Metallurgical and Similar Workers Union of Mexico, told AMM sister publication Steel First.

Grupo México SA de CV, one of Mexico’s largest mining companies, didn’t respond to requests for comment on the new mining tax.

A version of this article was first published in AMM sister publication Steel First.

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