The Chamber of Mines of the Philippines (COMP) said it welcomes the plan of the Mines and Geosciences Bureau (MGB) to base the planned increase in mining tax on mineral output, instead of imposing a uniform levy.
But it should be benchmarked globally, or the Philippines will just lose mining investments to countries with a more competitive tax regime.
Ronald Recidoro, executive director of COMP, told the BusinessMirror in an interview that COMP’s proposal during the Aquino administration was, in fact, a commodity-based approach to mining taxation, which he described as more accurate and more correct.
“It’s more accurate if we treat gold and copper differently from iron ore, nickel and chromite, because they have different economics. That’s the direction to take
if we are to renew the fiscal regime for mining; a different treatment for a different commodity,” Recidoro said.
However, he added a tax hike based on commodity will require thorough study.
Asked if the COMP would be willing to help put in place such system of taxation, Recidoro said: “We entertained this before; certainly, we will entertain this again. Definitely, this should be studied.”
He stressed the need to look at what other countries are imposing under their mineral-tax regime.
“If it is too high, we will not become competitive; the investors will go elsewhere. So that should be a concern for the government. If the tax in Vietnam is lower, they will go to Vietnam,” Recidoro added.
He said the plan to impose a tax hike based on commodity or output of the mining companies will need a thorough study of the global market trends and historical records so the government can compare the tax rates in other countries.
Last Thursday MGB Director Wilfredo G. Moncano said the agency will soon come up with its proposal for hiking the excise tax on mining companies. An attached agency of the Department of Environment and Natural Resources, the MGB is the government’s primary mining-regulatory body.
He added one of the things the MGB is talking about is whether it will be a uniform increase or a per-commodity basis, and the direction is to push for a per-commodity basis.
Environment Secretary Roy A. Cimatu is pushing for a higher tax to increase the government’s share from mining revenue. He also challenged the industry to shape up and increase its contribution to the economy in terms of share to GDP.
In his brief speech during the 64th Annual National Mine Safety and Environment Conference held in Baguio City from November 22 to 25, Cimatu said he wants to see the country’s mining industry contributing to the economy as much as 17percent, like that in Chile and Indonesia.
Cimatu’s speech was welcomed with optimism by most of the participants.
Jose Leviste Jr., chairman of OceanaGold Philippines Inc. and concurrent vice chairman of COMP, said Cimatu’s message to the industry was “a very positive” message.
“The speech is very positive for the mining industry. I recall his decision, to make decisions on the basis of science. I welcome points defining responsible mining. I like his reference to Chile and Indonesia and the use of Chile and Indonesia as a reference point for the target of 17-percent contribution to GDP,” Leviste said.
According to Recidoro, such ambitious target is possible for the Philippines, but it will require the government easing regulations and allowing more mining operations to go on stream.
“We would really want mining to increase its contribution to GDP. But that can only come about when we increase the number of mines operating in the country. Our mining industry is so small, that is why the percentage contribution to the GDP is also small. If we want that to happen, then we must increase the number of operating mines, which necessarily means we need to issue more permits, which means approving new mining projects. This means lifting the moratorium on new mining projects,” Recidoro said.
The moratorium on new mining projects took effect in 2012 upon the signing of Executive Order (EO) 79 by then-President Benigno S. Aquino III. EO 79 calls for a periodic review of the performance of mining operations and a review to put in place a new mining fiscal regime to increase government share in mining revenue.
This, even as Recidoro argued that the mining industry is already contributing double digits in the regional GDP where mining is operating.
“If you look at Mimaropa and Caraga, the contribution of mining to regional GDP is between 20 percent to 25 percent. If you want to increase the percentage share of mining in other regions, then you have to increase the number of operating mines,” he said.
“If we can get Tampakan Project to go online, that will be a big boost to national GDP; King-King Project, Silangan Project,” Recidoro added. These big-ticket projects have been stalled because of the inconsistent and often erratic mining-policy changes imposed by the government.
Asked if COMP is willing to sit down with the government to seriously talk about an acceptable fiscal regime that will ensure mining’s increased percentage share in the GDP, Recidoro said the big players in the mining industry are very willing to talk with the government and other stakeholders to come up with a competitive fiscal regime for the industry.
“We’ve always offered to help in determining what a competitive tax is,” he said.
Finance Undersecretary Bayani H. Agabin said the multistakeholder Mining Industry Coordinating Council, which is cochaired by Finance Secretary Carlos G. Dominguez III and Cimatu, is set to undertake the review of the fiscal regime. The MICC, he added, is looking at the opportunity in conducting the review to be part of one of the tax-reform packages.
Currently, there is also a pending bill in Congress that seeks to compel mining firms to give the government 10 percent of their gross revenues, or a 55-percent share in their adjusted annual mining revenue.