Ecological Taxes, Mexico
Ecological taxes, Mexico
In March 2017, Newmont, along with other companies, challenged the constitutionality and legality of environmental taxes that the State of Zacatecas approved in December 2016. The wording of the December 2016 legislation is ambiguous and provides little direction for how the taxes are to be calculated and levied. There was an initial ruling in favor of the Company but overturned on appeal. However, several other courts have found the tax unconstitutional creating ambiguity as to the viability of the tax. The State of Zacatecas has not issued a notice of tax or assessment to the Company.
In August of 2020, Newmont paid to the State of Zacatecas an amount of tax calculated by the Company for years 2017-2020, reserving the right to dispute the constitutionality or future assessment of the tax. Since the initial tax payment was completed, Newmont and the State of Zacatecas government have been meeting on a regular basis to review and agree on the technical basis of the tax calculations. In December 2020, Newmont held meetings with the Secretary of Finances of the State of Zacatecas to provide evidence of the calculations used by the company to substantiate the tax calculation based on the articulation of exemptions in Mexico’s mining law (including Articles 4 and 8), emission calculations and the composition of mine waste. Newmont completed a second tax payment to the State of Zacatecas on December 18, 2020 to demonstrate our commitment to meet our legal tax obligations. The payment was based on company’s calculations in line with its technical basis as presented to the State government.
The company is committed to ongoing engagement with the State of Zacatecas officials to agree on the technical basis for the tax calculation. Newmont believes that our current position is fair and legitimate and will continue to engage in good faith dialogue and negotiations with the government who should be providing the evidence used for their calculations in the coming weeks.
The Zacatecas State Government approved an amendment to correct the current wording of the law to facilitate interpretation. The amendment changes the basis of future tax calculations and Newmont will continue to engage with the Government to better understand the changes to improve clarity. The amendment may also provide an opportunity for future injunctions in cases where the State Government and the taxpayer have differing interpretations of the tax basis.
Newmont discloses its tax and broader socio-economic contributions in our Annual Report and in our annual sustainability report which includes information about 2019’s payment of $141M in taxes and royalties in Mexico. Further detail on this issue is provided in Newmont’s 10-K and 10-Q forms as follows: 10-K (pg.31 and 174: Note 32, “Commitments and Contingencies - State of Zacatecas’ Ecological Tax", and "Risk Factors" under the heading "New legislation and tax risks in certain operating jurisdictions could negatively affect us”), 10-Q (pg. 41 and 42: Note 26, “Commitments and Contingencies - State of Zacatecas’ Ecological Tax”).