Binay says mining tax proposal needs further study

MANILA, Philippines - Vice president Jejomar Binay yesterday called for further studies on the proposed taxation scheme for the mining industry, saying policy reforms must not strip the industry of its competitiveness.

 “Global competitiveness is crucial to industry and is an objective that must guide any fiscal policy reform. The economic effects of proposals to alter taxation must be  carefully studied to avoid stifling the mining industry’s competitiveness. The government’s push to increase revenues through the imposition of even higher taxes on mining is a concern, particularly for the long-term effect these may have on the industry’s competitiveness. It is my plea that further study be devoted to this matter,” he said in an address in the ongoing Mining Philippines 2014 Conference and Exhibition.

Binay said the mining industry has the potential to become a great contributor to the economy if the country’s abundant natural resources could be tapped, the noted that the extractive industry contributed to the progress of developed nations such as the United States, Canada and Australia, as well as Southeast Asia neighbors Indonesia and Malaysia.

Binay also called for the harmonization of national and local mining laws to make the industry conducive to investments.

 “We have a mining law that is considered to be one of the most sophisticated and well-crafted pieces of legislation worldwide. It ensures the protection of the environment, and requires companies to institute social development programs, and guarantee the rehabilitation of a mine after its lifetime. This should supersede local laws that run contrary to what the mining law seeks to achieve,” said Binay, referring to the Mining Act of 1995.

He cited the case of the $5.9 billion Tampakan copper-gold project in South Cotabato, the development of which is stalled partly because of the standing ban on open-pit mining method imposed by the provincial government.

The Tampakan project would be operated by Sagittarius Mines Inc. (SMI), the joint venture entity of Indophil Resources NL and Glencore Xstrata Plc, once all government approvals have been secured.

 “What could have been one of the largest copper mines in the world, with tangible economic impact on the region is still on hold, awaiting a resolution on local permits. We do not know when this legal instrument will be obtained, but we pray that it will come soon enough,” said Binay.

He also said having consistency in the country’s policy on the mining industry would enable investors to plan for the long-term as “a sound policy should survive the changing of administrations and remain responsive in the long term.”

 “Advanced technologies minimize risks to personal safety and the environment as a whole. To attract investors with the capacity to deploy such technologies, we ought to have clear policy guidelines and rules that foster strong cooperative relationships between the national and local governments. Nothing will discourage investment more than a disparity between the positions and policies of government units and we need to provide a unified conviction distilled from the inputs of all stakeholders and actors,” said Binay.

The vice president also said the mining industry should also be positioned as a strategic growth area through the establishment of a strong mineral processing industry.

 “The mining sector should be elevated, viewed, and established as a strategic economic pillar. Of course, this means spurring the creation of high value added businesses with commensurate employment potentials. Moving from mineral ores, importance should be given to processing intermediate products that will eventually encourage manufacturing of finished products. Copper and nickel are indispensable to many products ranging from electronics and construction materials, to cars. With proper complementary initiatives in place, the Philippines can entice big industries to locate their factories here to achieve a wider multiplier effect,” he said.

MICC has approved the imposition of either a 10 percent tax on gross revenues or a tax of 55 percent on adjusted mining revenues plus a percentage of windfall profit, whichever would give higher revenues to the government. Adjusted mining revenues were defined as the difference between gross sales and direct cost (direct mining cost and administrative expenses). 

The new revenue sharing scheme would apply to metallic mining projects holding a mineral production sharing agreement (MPSA) and Financial Technical Assistance Agreement. (FTAA). The draft-revenue sharing bill is still being reviewed by the Office of the President.