Bolivia looks to raise taxes on mining companies to 50% of profit

Bolivia plans to hike taxes on mining companies to 50% of profit, from 35% now, as leftist President Evo Morales strives to reap more benefits from the country's mineral wealth, a mining official said.

After taking office as the country's first president of indigenous descent in January 2006, Morales drastically raised taxes on natural gas operations and nationalised reserves of the fuel.

He has repeatedly pledged to carry out similar reforms in the mining sector.

"They (mining companies) are taking 65% of profits ... and the government only collects approximately 35%. We want that percentage to be more equal, so they take 50%, and we take 50%," said the head of the mining ministry commercialisation and investment unit, Freddy Beltran,.
Bolivia hosts some major global mining companies, including US-based Apex Silver Mines and Coeur d'Alene Mines Corp.

Both companies are due to start production at large silver mines over the next year, and are so heavily invested in the country that pulling out because of the tax is not a likely scenario, Beltran said.

The government plans to send a draft law to increase the tax burden on mining companies to Congress soon, the official said.

The reform aims to introduce a new 10% tax on profits and close a legal loophole that grants miners hefty discounts on income tax payments.

It also aims to broaden the scope of the Complementary Mining Tax (CMT) – which acts like a royalty – to include minerals such as bismuth, iron, copper and antimony, which currently do not pay the levy.

The CMT ranges from 1% to 10% of the export value of the mineral.

The tax hike and efforts to revitalise state-run mining company Comibol are at the heart of government plans to tighten the state's grip on Bolivia's vast reserves of tin, zinc, wolfram, lead, silver and gold.

The bill to reform the tax code is likely to move quickly through parliament, where the official party has a clear majority, but its implementation could be held back by the opposition-controlled Senate.

"Their idea is not to ratify anything proposed by the official party ... so we're going to face a tough battle there (in the Senate)," Beltran said.

Earlier this year, opposition senators were able to delay for several weeks the implementation of contracts by which energy companies agreed to continue operating in the country under the rules outlined by Morales' energy nationalisation plan.

The contracts give the government an average of 82% of revenues generated from Bolivia's natural gas reserves, the second-largest in South America after Venezuela's.

The government has already pocketed hundreds of millions of dollars thanks to Morales' energy shake-up, but analysts argue his efforts to stamp out poverty with the extra cash are hampered by corruption, inefficiency and a lack of direction.

In January, the government said it was considering raising mining taxes sixfold but had to back down after thousands of independent miners staged a massive protest in the country's administrative capital, La Paz.

With an investment of some $600m, Apex's San Cristobal project is set to become the world's third-biggest silver mine once it starts operations later this year.

Meanwhile, Coeur d'Alene is investing some $175m in its San Bartolome silver project, which is scheduled to come on stream in January 2008.

Several Canadian companies have assets in Bolivia, including Eaglecrest Explorations, Apogee Minerals and Orvana Minerals Corp.





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