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Mining Royalties
to collect and spend the royalty, this power has been limited through the mechanism of a federally imposed upper cap of 3 percent.15 The result has been that some provinces have opted to levy the maximum rate of 3 percent, but others have decided not to impose a royalty. For example, in the case of Catamarca, a principal mining province, the royalty rate has been set at 3 percent. Of the amount collected by the province, 15 percent is for distribution to the municipalities where the mining project is located to finance public investment projects; the remaining 85 percent is used to finance provincial projects or public investments in other departments or municipalities. Brazil. In Brazil, taxation authority is set out in the constitution. It also states that, with regard to mineral resources, the states, federal district, and municipalities, as well as the federal government, are assured a “share in the results� of mineral resource exploitation in their respective territory. In accordance with the constitution, statutory law provides that certain proportions of royalty are to be paid to lower levels of government and other parties.16 The distribution is defined as follows: 23 percent to the states and federal district, 65 percent to the municipalities, 2 percent to the national fund of scientific and technological development, and 10 percent to the mining and energy ministry, which shall give 2 percent of its share to environmental protection of the mining regions.17 Peru. In Peru, provincial and local community dissatisfaction with perceived nonparticipation in the benefits of mining led to political pressure that culminated in a royalty tax being imposed in 2004.18 The royalty is to be paid to the central government and then distributed as follows: 20 percent to the district municipalities where the exploitation takes place (50 percent of that goes to the communities where the mine is located); 20 percent to the provincial municipalities where the exploitation takes place; 40 percent to the district and provincial municipalities; 15 percent to the regional government; and 5 percent to the national universities of the region where the mine is located. As is illustrated above, in some cases the affected communities share directly in royalty revenues. However, such examples remain the exception. It is more prevalent for communities to share in a property tax, that is, a levy based on the book or market value of a mine’s capital assets, than to have access directly to royalty. Many countries have no direct tax link between mines and communities.