Business chambers renew call for competitive mining fiscal regime

MANILA, Philippines - The Canadian Chamber of Commerce of the Philippines (CanCham) and the Chamber of Mines of the Philippines (COMP) are calling for a competitive mining fiscal regime and a review of “no-go zones” for the country to attract more mining investments.

In a newsletter from the COMP, CanCham president Julian Payne was cited as saying during the recent forum on Minerals Development Policy at the Development Academy of the Philippines that foreign investors want to hear a strong statement  in support of minerals development  to encourage inclusive economic growth from President Aquino in his upcoming State of the Nation Address (SONA).

Payne said the move of the government to get a bigger share of revenues from mining would render the local mining industry uncompetitive.

Citing a 2012 study of the International Monetary Fund, Payne said the total share of mining revenues received by the Philippine public sector is much more than that received in most other mining economies such as Chile, Peru and Papua New Guinea.

Under the proposed revenue-sharing scheme approved by the Mining Industry Coordinating Council (MICC), mining firms would have to remit to the government either 10 percent of the gross revenues or 55 percent of net mining revenues plus a percentage of the excess profit, whichever is higher.

Payne said such mining fiscal regime “increases the tax rates; taxes projects even when they become loss-making including when commodity prices are low; and imposes windfall-profit taxes when commodity prices are high.”

With such mining fiscal regime, he said the feedback received from potential foreign investors is that the current low level of investment in mining is likely to continue.

For her part, COMP executive vice president Nelia Halcon said the new revenue-sharing regime proposed by the MICC is way beyond the 50-50 sharing scheme under the mining law and would not encourage investments in the sector.

She reiterated the COMP’s call contained in a letter to the Office of the President, which proposes the development of a tax structure “that provides a fair share to the government while being competitive to attract investments, increase collection, and generate employment.”

At present, mining firms pay taxes to the government depending on their contract.

The Financial Technical Assistance Agreement  (FTAA), which allows mining firms owned by a majority of foreigners to operate in the country,  requires 50-50 sharing of revenues between the company and the government.

The Mineral Production Sharing Agreement (MPSA), which is given to firms owned by a majority of Filipinos meanwhile, specifies a two percent excise tax of gross sales of production, as well as regular corporate income tax, business tax and payments for indigenous people affected by the mining operations.

Apart from having a more competitive mining fiscal regime, Payne said the government also needs to review the “no-go zone” which makes 85 percent of the country off-limits to mineral exploration.

Despite accusations that large-scale mining companies abuse local communities, Payne said it is these firms that actually practice responsible mining operations.

 “They are subject to the public scrutiny of exchange listings, proactive shareholders concerned about environment, human rights, and labor conditions, and international watchdog groups – both governmental and nongovernmental,” he said.

Payne said foreign investors back proposals to create mining economic zones which are similar to the Philippine Economic Zone Authority zones.

He also said the government should consider allocating 50 percent of total mining revenues collected by the public sector to local government units, with 50 percent going directly to the province in which the mine is located and the other half to be given to municipalities and barangays.