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2008
Global Tax Practice of the Mining Industry
Objective of the Study
Comparative analysis of the major contributions and taxes levied on the activities of the mining companies in the world:
The high tax burden in Brazil
Tax revenueTax load in relation to GNPExponencial (tax revenue)
• For purposes of estimating the total tax in the main countries engaged in the global mining market, we have established a company whose revenue model is strictly derived from its operating activities: the extraction of minerals.
Countries: 21
Types of mineral: 12
Net Profit margins simulated: 3 (20%, 30% e 40%)
Annual revenue simulated: 5 ( USD 100 mi, 500 mi, 1 bi, 2 bi e 10bi)
Sales proportions between domestic and external markets simulated: 101
• The combination of these parameters, resulted 4,848 different scenarios.
Characteristics of the study
• The slides shows the positioning of the Brazilian tax load in the ranking of the largest producers of each ore.
• For demonstration purposes, limiting the sample to the following premises:
Net profit margin of 30% of model company;
Adoption of the proportion of the production target minerals, according to the Brazilian scenario and revenue simulated:
Assumptions
Bauxite Coal Kaolim Copper Phosphate Manganese Iron Ore Nickel Gold Potassium D.
Stones Zinc
Domestic Market 76% 100% 8% 51% 100% 35% 24% 68% 23% 100% 66% 100%
Export 24% 0% 92% 49% 0% 65% 76% 32% 77% 0% 34% 0%
Revenue Simulated
USD 1 bi
USD 500 mi
USD 500 mi
USD1 bi
USD500 mi
USD500 mi
USD10 bi
USD1 bi
USD1 bi
USD100 mi
USD1 bi
USD500 mi
Fonte: IBRAM/MME/DNPM/MDIC/SECEX
Royalties
In Brazil they are made up of CFEM (de 0,2% a 3%) plus the compensation paid to the surface owner (50% of the CFEM);
Income Tax (IT)
Tax on consumption or aggregate value tax(VAT, which in Brazil correspond to PIS, Cofins and ICMS)
Tax considered
Comparative analysis of the tax load
• Brazil: 35% - 2nd in ranking• Domestic/Export: 76% / 24%• Revenue Simulated: USD 1 bi
BAUXITE – Biggest Producers
CountryProduction
2005 2006 2007
Austrália 60.000 61.400 64.000
China 18.000 20.000 32.000
Brazil 22.000 22.100 24.000
Guinea 15.000 15.200 14.000
Jamaica 14.100 14.900 14.000
Índia 12.000 13.000 13.000
Rússia 6.400 7.200 6.000
Venezuela 5.900 6.000 5.500
Kazakhstan 4.800 4.900 4.900
USA - - -
Million Ton
Comparative analysis of the tax load
• Brazil: 40% - 2nd in ranking• Domestic/Export: 100% / 0%• Revenue Simulated: USD 500 mi
MINERAL COALBiggest Producers
CountryProduction
2004 2005 2006
China 2.156 2.430 2.482
USA 1.112 1.131 990
Índia 444 473 427
Austrália 391 414 309
Rússia 309 320 233
South Africa 268 270 244
Indonésia 142 168 169
Poland 178 175 95
Kazakstan 96 95 92
Brazil 6 6 6
Million Ton
Comparative analysis of the tax load
• Brazil: 15% - 2nd in ranking• Domestic/Export: 8% / 92%• Revenue Simulated: USD 500 mi
Kaolim – Biggest Producers
CountryProduction
2005 2006 2007
USA 7.800 7.740 7.330
Germany 3.750 3.770 3.800
Koréia 2.770 3.000 2.500
Brazil 2.200 2.460 2.500
UK 2.400 2.400 2.100
México 877 900 900
Índia 750 750 750
Poland 190 191 191
Rússia 45 45 45
Mil Ton
Comparative analysis of the tax load
• Brazil: 27% - 1st in ranking• Domestic/Export: 51% / 49%• Revenue Simulated: USD 1 bi
COPPER – Biggest Producers
CountryProduction
2005 2006 2007
Chile 5.320 5.400 5.700
Peru 1.010 1.050 1.200
USA 1.140 1.220 1.190
China 755 760 920
Austrália 927 950 860
Indonésia 1.070 800 780
Rússia 700 720 730
Canada 567 600 585
Zâmbia 436 540 530
Poland 523 525 470
Kazakhstan 402 430 460
México 429 380 400
Brazil 132 148 200
Argentina 188 190 190
Mil Ton
Comparative analysis of the tax load
• Brazil: 40% - 1st in ranking• Domestic/Export: 100% / 0%• Revenue Simulated: USD 500 mi
Phosphate – Biggest Producers
CountryProduction
2005 2006 2007
China 30.400 32.000 35.000
USA 36.300 30.700 29.700
Marocco 25.200 25.300 28.000
Rússia 11.000 11.000 11.000
Tunísia 8.000 8.400 7.700
Jordânia 6.230 6.400 5.700
Brazil 6.100 5.680 6.000
Síria 3.500 3.600 3.800
Austrália 2.050 2.050 2.200
Canada 1.000 550 500
Mil Ton
PhosphateNOTE: Consider the tax benefit of PIS and COFINS for use in fertilizers and phosphate
fertilizers - Law No. 10925/2004
Comparative analysis of the tax load
• Brazil: 42% - 1st in ranking• Domestic/Export: 100% / 0%• Revenue Simulated: USD 100 mi
Potassium – Biggest Producers
CountryProduction
2005 2006 2007
Canadá 10.120 10.200 11.000
Rússia 5.500 5.300 6.300
Rússia 4.800 4.000 5.400
Germany 3.600 3.660 3.700
Israel 2.060 2.100 2.000
USA 1.200 1.200 1.200
Jordânia 1.230 1.200 1.100
China 600 700 700
UK 600 600 450
Spain 500 500 450
Brazil 405 403 410
Chile 370 350 350
Mil Ton
Comparative analysis of the tax load
• Brazil: 24% - 2nd in ranking• Domestic/Export: 35% / 65%• Revenue Simulated: USD 500 mi
MANGANESEBiggest Producers
CountryProduction
2005 2006 2007
South Africa 2.100 2.200 2.300
Austrália 1.450 1.500 2.200
Brazil 1.590 1.550 2.000
Gabão 1.290 1.550 1.550
China 1.100 1.200 1.600
Ukraine 770 770 820
Índia 640 650 650
México 180 133 130
Mil Ton
Comparative analysis of the tax load
• Brazil: 20% - 3rd in ranking• Domestic/Export: 24% / 76%• Revenue Simulated: USD 10 bi
IRON OREBiggest Producers
CountryProduction
2005 2006 2007
China 420 520 600
Brazil 278 317 350
Austrália 231 280 320
Índia 121 140 160
Rússia 97 95 110
Ukraine 66 69 76
USA 55 55 52
South Africa 39 40 40
Canada 28 30 33
Venezuela 22 22 20
Argentina 1 1 1
Million Ton
Comparative analysis of the tax load
• Brazil: 31% - 1st in ranking• Domestic/Export: 68% / 32%• Revenue Simulated: USD 1 bi
NICKEL – Biggest Producers
CountryProduction
2005 2006 2007
Rússia 315 320 322
Canada 198 230 258
Austrália 189 191 180
Indonésia 160 145 145
New Caledônia 112 112 119
Colômbia 89 90 99
Brazil 74 82 81
China 77 79 80
Cuba 72 74 77
Repúblic Dominicana 46 46 47
South Africa 42 41 42
Mil Ton
Comparative analysis of the tax load
• Brazil: 18% - 2nd in ranking• Domestic/Export: 23% / 77%• Revenue Simulated: USD 1 bi
GOLD – Biggest Producers
CountryProduction
2005 2006 2007
South Africa 295 270 270
Austrália 262 260 270
USA 256 260 240
China 225 240 250
Peru 208 210 170
Rússia 169 162 160
Indonésia 140 145 120
Canada 119 120 100
Brazil 37 41 47
Argentina 30 30 30
Ton
Comparative analysis of the tax load
• Brazil: 28% - 2nd in ranking• Domestic/Export: 66% / 34%• Revenue Simulated: USD 1 bi
Dimension StonesBiggest Producers
CountryProduction
2005
China 15.000
Itály 10.000
Índia 8.000
Spain 7.000
Brazil 6.900
Mil Ton
Comparative analysis of the tax load
• Brazil: 40% - 1st in ranking• Domestic/Export: 100% / 0%• Revenue Simulated: USD 500 mi
ZINC – Biggest Producers
CountryProduction
2005 2006 2007
China 2.450 2.500 2.800
Austrália 1.330 1.400 1.400
Peru 1.200 1.210 1.500
Canada 755 725 680
USA 748 725 740
México 470 450 480
Kazakhstan 400 450 400
Índia 446 446 440
Brazil 160 169 200
Argentina 28 28 30
Mil Ton
• Brazil, invariably, as one of the top 3 tax burdens in the world in the sector, a situation that only gets significant improvement as the vast majority of production is for export, with the exemption of taxes on added value.
• The tax burden in Brazil certainly would be substantially higher if still consider the following factors in calculating the comparative load:
Limitations to non-cummulativity established by law –Brazilian mining companies are not allowed to compensate credits paid in the purchase of goods to their permanent assets (export companies).
High labor costs – the cost of labor in Brazil is about 63% of a company’s payroll.
Less competitive fiscal benefits – in comparison to other mining countries, as regards depreciation, amortization and exhaustion.
Excess of taxes and additional obligations – (cost of fiscal bureaucracy), which generates additional costs for mining companies.
Conclusions