First Majestic said at the time that Mexico had ignored an advanced pricing agreement (APA) with its subsidiary Primero Empresa Minera. The deal, it said, set up the basis for taxing silver sales from the San Dimas mine between 2010-2014.
The government, which has made cracking down on tax breaks a priority, claims that First Majestic’s subsidiary artificially kept its silver prices low over the past decade to pay less taxes.
The Vancouver-based miner, which refutes those claims, said it has attempted to initiate talks with Mexican authorities, but noted they have refused to engage.
President Andrés Manuel López Obrador recently criticized First Majestic for “failing to pay outstanding taxes” and accused the company of hiding behind the threat of international litigation to shirk its obligations.
War on tax breaks
Shortly after taking office, Mexican President Andrés Manuel López Obrador said his government would order an end to “tax forgiveness” for the country’s largest companies.
He noted at the time his predecessors had granted about $20 billion in exemptions, which he said it was akin to theft by gangsters.
Of the firms that allegedly benefited from tax breaks, 58 are listed on the benchmark S&P/BMV IPC and they include the Mexican unit of US retailer Walmart and Mexican conglomerate Femsa.
Nearly 70% of foreign-owned mining companies operating in Mexico are based in Canada, according to Global Affairs Canada. They hold assets in the country worth C$20.1 billion (about $15.7bn) in 2018, according to Natural Resources Canada.
First Majestic has proposed three settlement offers since 2018 before launching arbitration proceedings this week. Each of them have been rebuffed.
The company’s three producing mines and several projects are all located in Mexico, the world’s top silver producer.