By Marco Aquino

LIMA, Reuters – Peru’s Mining Chamber ripped Monday’s proposal by the government to raise taxes in the sector at least 3 percent. They claimed it would threaten future investments in Peru’s second-largest producer.

Pedro Francke (Peru’s Finance Minister) stated that Sunday the government would like to raise the mining tax by 3-4 percentage points. Citing a study of the International Monetary Fund, Francke cited the IMF report which allowed for levy increases.

Since July’s election, President Pedro Castillo of the leftist party has been at odds with mining companies. He pledged to redistribute Andean nation’s wealth as well as raise taxes to finance social programs.

Protests have been rising against the mining sector with miners complaining that the government is not doing enough to remove blockades that sometimes halt production.

Francke’s proposal, according to the National Society of Mining, Oil and Energy, would cause irreparable damage to Peru’s mining sector, the economic engine of Peru.

The chamber stated that “there is sufficient evidence to show that the tax burden on mines is close to half of the profits currently.” The chamber noted that the tax rate in Chile is just above 40% and in Canada it’s 35.5%, 44.3% and 44.3 percent respectively.

“These mining countries are directly competitive with Peru.”

These numbers are in contradiction to what the government claims. Francke stated Sunday that Peru’s mining taxes were 41.7% less than Chile’s at 47.1%.

Castillo’s government wants Congress, which is dominated by the opposition to pass legislation before the end the year on tax reforms. This is primarily in the mining sector that has been benefited from the high prices of international metals.

According to the mining chamber, Peru’s economic ministry used “an unusual interpretation” of IMF preliminary reports. This report has yet not been made public.

Bad tax design will dissuade investments in the expansion of existing mines as well as in new mine projects. It stated that future investments exceeding $50 billion could be at risk.