Statement to the Public Opinion ACM and ACP

The mining-energy sector guilds (Colombian Mining Association, Colombian Oil and Gas Association), representing the companies in the sector, as major contributors to the Colombian state, allow us to issue the following public statement, within the framework of the debate on the Tax Reform and the upcoming submission of the proposal to the Congress of the Republic:

1. The mining-energy sector is already making additional contributions during times of high commodity prices. In fact, the mining-energy sector (mining and hydrocarbons) is one of the major contributors to the Nation, with its contribution in 2022 estimated at 72.7 trillion pesos; and for 2023 this contribution would reach 90 trillion pesos, without the entry into force of the reform. It is worth noting that a significant portion of these resources is linked to contractual obligations due to high coal and oil prices.
2. We warn about the risk of further increasing the tax burden on the mining-energy sector, and the consequences this would have for attracting the investments that the country currently needs, given that Colombia has one of the highest tax burdens in the region (the third in hydrocarbons and the highest in mining) and the tax reform would imply an increase in the Government take of between 20% and 22%.
3. The loss of investment puts the viability of hydrocarbon and key mineral projects at risk for the transition and energy security. In the case of the oil and gas industry, due to the loss of competitiveness, future oil production could fall between 50,000 and 70,000 barrels per day, and therefore tax collection would also fall (33 trillion pesos between 2023 – 2032), generating an effect contrary to the purpose of the reform.
4. The loss of investment would have repercussions for the regions with a presence of the hydrocarbon sector, as projects that are unviable translate into job losses (up to 20,000 direct vacancies). In addition, the hiring of goods and services would be affected, a category that in 2021 amounted to more than 29 trillion pesos, mostly in mining and oil municipalities. In that same sense, new resources for social and environmental investment from companies operating in these areas would be affected (in 2021, investment amounted to more than 537 billion in mining-hydrocarbon impact municipalities). The above shows that the decisions made must consider the importance of this sector in the socioeconomic dynamics of the regions and their communities.
5. While there is progress in the decision to maintain royalties deductible from the Income Tax base (considering that it is a technical decision, in accordance with accounting standards, jurisprudence, and the practices of other mining countries), it is important to note that the new proposal from the Government replaces this deductibility with a surcharge on the income tax of 5 points, which increases the tax burden on the sector.
6. We insist on the need to eliminate the tax on oil and coal exports, which, in addition to being untechnical, penalizes the exports of a sector that represents 56% of the country's total exports, increasing the risk of generating imbalance in Colombia's Balance of Payments and its implications on the cost of the dollar and inflation, which impact the pockets of all Colombians.
7. The mining-energy sector unions respectfully call on the national Government and the Congress of the Republic to consider adjustments regarding the surcharge on the income tax and the elimination of the export tax, considering its technical, regulatory, and constitutional inconvenience. That is, the surcharge proposed for the mining-energy sector should be in line with the tax burden of the region, apply from high prices and in a staggered manner, and be considered as a replacement for the proposals to not deduct royalties and to impose an export tax, so that the sector can ensure its viability and, consequently, continue contributing significant resources to the Nation's and regions' finances.

 

More information:

Communications ACM 
nasly.salcedo@acmineria.com.co

ACP Communications
shernandez@acp.com.co