How to maximize the chilean government's revenue with the National Lithium Strategy?

One of the goals of the Chilean Government's National Lithium Strategy is to increase tax revenue, which can be accomplished through levying an ad valorem tax or via government ownership of projects. A key consideration when designing the tax system is the Laffer curve, which demonstrates that although higher taxes lead to more revenue, the tax burden can reduce the number of projects undertaken.

We computed the ideal revenue for Chilean salt flats based on cost estimates for both operating and capital expenses, utilizing data from various salt flats worldwide. Our analysis indicates that if it is not possible to discriminate by project, the optimal ad valorem tax rate and government participation rate are 10.94 % and 15.97 %, respectively, generating about US$ 3600 million per year in revenue for the government. If a separate rate is applied for each project, the total amount increases to US$ 4355 million, irrespective of the mechanism type. If both mechanisms are implemented simultaneously, the collection does not increase in relation to the amount already obtained.

This research demonstrates that if the Chilean government persists in demanding a majority stake in the partnerships engaged in the exploitation of lithium, it is probable that few agreements will come to fruition in the following years. A successful strategy should balance revenue optimization with environmental sustainability and community engagement, factors already incorporated into Chile's regulatory framework. Consequently, this approach would help Chile maintain its position in global lithium production despite competition from other countries with significant reserves.