Example of Export Tax Rates on Copper* Tax in US cents/lb. Tax Rate 50 cents 60 cents Electrolytic 15.3% 7.65 9.18 Unrefined bars 28.05 14.02 16.83 Concentrates 27.234 13.67 16.34 Ore 27.285 13.64 16.37 From the examples cited above, it is evident that, in the case of refined copper selling at 50 cents per pound, the production tax amounts to 15.2 percent, or 7.6 cents per pound and the export tax to 7.6 cents per pound. Thus, the combined tax is 15.2 cents per pound before application for special reductions under the "favored treatment" granted to Mexicanized companies. Tax Reduction Under Mexicanization A presidential resolution of March 1966 established the basis for a program of tax benefits for Mexicanized companies. A 50 percent reduction in the FNP (federal participation) portion of the production and export taxes is automatically granted to such companies. This and any other subsidy is applicable only on the FNP of the production and export taxes, which is approximately 85 percent of the two taxes. Consequently, instead of a full 50 percent reduction, the automatic reduction in these taxes is equivalent to something between 42 and 43 percent of the combined taxes. This incentive, therefore, has the effect of reducing the examples on copper cited above to 85 percent of 15.2 cents, or 12.8 cents per pound. A taxpayer who qualifies for the 50 percent reduction may apply for an additional reduction of up to 50 percent in accordance with Articles 52 and 56 on the limitations established by the law of revenues of the federation. Such additional reductions are negotiated on the basis of obtaining prior approval of exploration, development, or metallurgical plants that will increase the mineral production of key commodities or benefit the mine workers or both. Additional Tax Reduction Companies that qualify for the 50 percent automatic reduction may also qualify for an additional 25 percent reduction in the FNP portion of both the production and export taxes. To qualify, a company must demonstrate to the satisfaction of the Treasury Department that it has invested or spent, during the year for which the reduction is claimed, an amount equal to at least 200 percent of the tax reduction in one or all of the expenditures listed below; the relevant percentages are indicated for each item. A substantial portion of the reductions indicated in the tabulation could be lost in instances where a large investment is made in a single year. In such cases, companies may negotiate a special contract with the Treasury Department to permit them to spread the tax reduction over a five-year period. * Premised on published official export figures. 27