April 19, 2010 / 7:26 PM / 9 years ago

Peru to fine miners for evading taxes via wildcatters

* Tax agency to fine miners buying gold from wildcatters

* Up to a dozen companies investigated

* Mining ministry says industry to be revamped after probe

By Luis Andres Henao and Patricia Velez

LIMA, April 19 (Reuters) - Peru’s tax agency plans to fine four mining companies for buying gold on the black market from wildcat miners to avoid paying taxes, according to a government official.

Up to twelve companies are under investigation and others could eventually be fined, said the official, who works for Sunat, Peru’s tax agency.

News of the pending fines comes only days after the head of Sunat, Nahil Hirsh, told Reuters that several companies, including “some medium-sized miners” and some possibly with “foreign participation” were under investigation.

The probes have highlighted broader disputes over the spoils from mining in Peru, the world’s sixth-biggest gold producer, where unions have denounced big mining companies for underreporting earnings to cut profit-sharing payments owed to workers. [ID:nN12230547]

“We’re closing the last files with evidence and we’re getting ready to go to court,” the official, who works for Sunat and requested to remain anonymous, told Reuters.

“Four of them have serious proof of committing crimes,” said the source, who declined to identify the companies by name because of the ongoing investigations. He did not say when the penalties would be imposed.

Some 20 percent of gold in Peru is produced by wildcatters — independent miners who usually work without permits using picks and dredges. Because wildcatters cannot easily export, they sell their gold to middlemen, and much of the gold eventually winds up in the hands of export-oriented companies.

Two people intimately familiar with the sector — Teodulo Medina, leader of Peru’s association of wildcatters, and Miguel Santillana of the think tank Instituto del Peru — had concerns that at least four companies trade wildcat gold, but might not always pay taxes on it or labor used to extract it.

These were: Minera Titan, Minera Dynacor (DNG.TO), Minera Laytaruma, and Colibri. Though these companies lack the global reach of major mining firms they nonetheless move millions of dollars a year in gold that is taken to refineries before export.

Colibri, Titan, and Laytaruma rejected the claims and said their operations fully comply with tax and labor rules.

“It’s true that, we, like the other companies mentioned, are buying the mineral from wildcatters to process it but we process it and comercialize it legally,” Ulises Solis, a Colibri official, said. “Go to Sunat and ask about us. We’re paying our taxes and sharing profits with workers.”

Titan’s general manager, Luis Bensa Arias, said his company produces half of its own gold and buys the rest from established companies or small-scale miners.

“You can be absolutely sure that Titan acquires its gold legally,” he said.

Laytaruma’s accountant, Luis Garrido, said the company buys gold from small miners using all documents required by Sunat. He added that Laytaruma requested a meeting with Sunat officials to talk about their concerns about the sector.

Dynacor could not be reached for comment on several occasions.

The source at Sunat would not say if the four companies mentioned by critics are the ones facing potential fines.

MINISTRY EYES CRACKDOWN

Peru’s government has long-struggled to control wildcat miners and Sunat’s current push is part of a broader effort to bring 300,000 wildcatters nationwide into the formal economy.

Environmentalists argue that wildcatters pollute the Amazon basin by using mercury to separate gold from chunks of dirt.

Congress recently passed laws to force wildcatters to pay taxes and stop polluting. But miners, who are mostly poor, said the laws would interfere with their jobs and cut off income needed to support their families.

This month they blocked the country’s main highway in protest and six people died in clashes when police tried to break the roadblock, which was lifted after the government said it would revise the laws in Congress.

Medina, the head of the wildcatters union, asked Sunat to fight tax irregularities in the sector last year.

“These companies are paying us a lower price but in reality many companies are living and benefiting from wildcat mining. We want this to stop.”

The Mining Ministry said it was waiting for results of the Sunat probe to take action and revamp the wildcatting sector.

“The results of this audit will help us take measures,” Fernando Gala, Vice Minister for Mining, told Reuters. “One of these will be forcing mineral buyers to prove who they are buying from.” (Reporting by Luis Andres Henao and Patricia Velez; Editing by Alden Bentley and Terry Wade))

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