ACM COLOMBIAN MINING SECTOR DEVELOPMENT 2018 2022 12 ROYALTIES MANAGEMENT PROJECTS INDEX MARCH 2017 Suorce D N P httpswwwsgrgovcoSMSCEIndicedeGestiondeProyectosdeRegaliasaspx Outstanding IGPR RANGES Medium Low Critical No executor generated of that very low prots are generated situa tion that is not caused under other models in the moments of low prices which would discourage invest ment in the industry Perry also estimated in his study the NPV net present value in the payments of royalties of the different models from the historical series where the NPV of the effective collection of the Colombian model is 6 time greater than that which had been applied with the regimes of other countries for the case of coal while for nickel and goal it is approximately 50 higher Therefore it recommends the migration to a progressive scheme which in addition according to the consultor it has the virtue by way of taxes or returning greater resources to the country and to the regions in times of high prices when the business prots exceed the normal operation conditions but in turn does not stie the investment at times of low prices The second challenge around the model of royalties is to achieve an efcient distribution of the mining resources in the areas where the activity is developed As it is well known the current model has brought a great rejection from several communities where the extractive opera tion is carried out given that they do not perceive a greater or direct benet derived from the location of these operations in their territory In turn the proliferation of OCADs Collegiate Bodies of Administration and Decision and the institutional weak ness of various municipalities where mining is located has resulted in a very low or critical royalty projects management in most cases as it is shown in the map below Therefore the reform of the system of distribution of royalties is necessary to recover the political and social interest in the projects at political and social level In this sense it is proposed to amend articles 360 and 361 of the Constitution via a legislative act seeking for a more efcient mechanism in the distribution and execu tion of the royalties where the producing municipalities are favored in an important way Finally it is necessary to give full legal clarity to the deductibility of royalties to avoid in this way possible interpretations of the auditors of DIAN on the decisions of the State Council that declared the nullity of concept 015766 of 2005 of DIAN but ratied the deductibility if they comply with what is stipulated in article 107 of the Tax Statute 25 Customs and Foreign Trade Given that our main markets are the external ones we propose to encourage a commercial policy that allow to access to markets where agreements are not yet in place In this sense it is fundamental to access EuroAsiatic countries like Turkey Japan and China amongst other Asian markets that are strategic both in the sale of minerals and in the supply of goods for the operation of the industry In this sense commercial agreements made in the framework of the Pacic Alliance should be used enhancing the mining offer of the countries that make up the alliance Mexico Peru Chile and Colombia with regard to the current and future important demand for minerals which takes place in East Asia Also it is proposed to optimize the customs model eliminating or modifying some of the obstacles associa ted with import processes such as the request of certi cates of conformity for electrical and lighting products the requirements associated to the import of yellow machinery the handling of physical and virtual docu mentation and other details that make the foreign trade processes expensive and difcult Today only 12 is destined in the funds to direct allocations to producing municipalities ports and Regional Autonomous Corpor ations The main markets for Colombian coal today are Turkey the Netherlands United States and Brazil For gold United States and Switzerland for nickel China Japan South Chorea and India and for emeralds United States Hong Kong and Thailand