In the context of both increasing mineral prices and mining companies’
profits, governments naturally seek to maximise their revenue in order
to achieve maximum social welfare. By taking a panoramic look at the
taxation regimes in place across Latin America, the authors compare two
different regimes: profit-based vs. production-based fiscal regimes.
This Brief uses the examples of Peru and Chile to highlight Latin
American experiences when migrating from production-based to
profit-based tax regimes, in particular arguing that profit-based
regimes seem to be the best choice in the current Latin American context
of a mining boom. It also addresses the institutional conditions needed
to successfully move from one regime to another. Finally, it underlines
enabling factors and policy lessons that may prove useful for other
Tax regimes need to be developed taking into account both state
capacities and socioeconomic contexts.
Profit-based regimes seem to be more suitable in the Latin American
context in order to maximise countries’ overall revenue collection,
while continue to attract foreign investment.
Institutional capacity is a condition for successfully implementing
Glave, M.; Damonte, G. ELLA Policy Brief: Profit-based versus Production-based Tax Regimes: Latin America&#8217;s Experience. ELLA, Practical Action Consulting, Lima, Peru (2013) 7 pp.