The "Pay Your Taxes" Debate

Perspectives on Corporate social Responsibility in the Chilean Mining Industry

Contributors

Manuel Riesco

Gustavo Lagos and Marcos Lima

"As part of a series of studies on the uptake and impact of CSR in developing countries, the United Nations Research Institute for Social Development (UNRISD) requested Manuel Riesco of the Centro de Estudios Nacionales de Desarrollo Alternativo (CENDA) to prepare a paper that would examine the fiscal performance of foreign mining companies in Chile, the extent and dynamics of tax avoidance, the issue of double standards, the role of government policies in shaping fiscal behaviour, and the nature of policy reforms that might enhance the developmental contribution of TNCs."

"The Riesco study, presented in part I, attempts to understand why it is that a flourishing private mining sector pays so few taxes in Chile, and why the reported pre-tax profits of a large, modern, foreign-owned copper mine are on a par with those of what Riesco describes as “the ageing and ailing state-owned corporation, CODELCO”. To explain these situations, Riesco identifies an overly permissive neoliberal policy and legal environment; intracorporate financial flows that allow mining affiliates not only to repay loans to related off-shore financial affiliates at generous rates but also to benefit fiscally by being indebted; the sale of copper and by-products at reduced prices to companies that are part of the same corporate structure; and the over-charging of shipping, and treatment and refining charges, by these or other related companies."

"The preliminary findings of the Riesco study were posted on the CENDA Web site, and were presented to two commissions of the Chilean Senate dealing with the mining industry and picked up by the press, fuelling a national debate on the question of why foreign mining companies paid no royalties and so few taxes. Certain regulatory authorities and business interests criticized the study. One of the companies examined in the study, BHP Billiton, sought a third-party opinion and subsequently submitted to UNRISD a paper, by Professors Gustavo Lagos and Marcos Lima from the Engineering Faculty of the Pontificia Universidad Católica de Chile, which was highly critical of the Riesco paper. In view of the polemic, UNRISD has decided to publish both papers in the form of a debate, which also includes a reply by Riesco and a rejoinder by Lagos and Lima."

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