Mining’s tax regime ‘uncompetitive’ The government needs to develop a single fiscal regime that is internationally competitive to attract mining investments, a ranking official of the Sagittarius Mines Inc. said. Justine Hillier, executive vice president of Sagittarius Mines Inc., said that while the Philippines might be attractive to mining investors because of its rich mineral deposits, its current mining fiscal regime is not globally competitive. Speaking on the topic “Philippine Mining Fiscal Regime: Is it Globally Competitive?” at the ongoing Mining Philippines 2013: Conference and Exhibition at the Sofitel Hotel in Pasay City on Wednesday, Hillier underscored the need to make the country’s mining fiscal regime competitive to encourage investments in the mineral resource industry and enable the country to realize its potential. Published on Wednesday, 11 September 2013 Written by Jonathan L. Mayuga In developing a single fiscal regime for mining, Hillier said the government should make sure there is an equitable sharing of proceeds between the state and private investors. It should also deliver a higher and steady revenue stream for the government, progressive and streamlined to enable efficient and transparent revenue collection. The Philippines currently imposes two different sets of taxes for mining companies, depending on their contract with the government. The contracts are either for minerals processing sharing agreement (MPSA) or financial or technical assistance agreement (FTAA). Taxes for both the FTAA and MPSA are high, as cited by the International Monetary Fund report, which puts the government’s take in the total cost of the mining project at above 50 percent. Hillier compared the country’s mining fiscal regime with that of Chile, Peru, Canada, South Africa, Australia, Indonesia and Papua New Guinea (PNG) using the Average Effective Tax Rate and Internal Rate of Return. He said that despite the tax holidays, mining companies in the Philippines pay taxes more than those in most of the countries in comparison. This tends to discourage investors, he said, and is the reason other countries have attracted more mining investments. In his presentation, income taxes in Indonesia, Chile, South Africa and Canada are lower. The Philippines charges mining companies 30 percent of their income. Aside from income tax, the Philippines charges mining companies 2-percent excise tax and 5-percent royalty tax for mining operations within mineral reservations, royalty to indigenous peoples at 1 percent, local business tax at 1 percent, dividend withholding tax to foreign shareholders at 15 percent and dividends to local shareholders at 10 percent. Hillier also cited rankings in the Risk and The Fraser Institute Survey of Mining Companies 2012/2013, Policy Potential Index wherein the Philippines ranks 88 out of 96 jurisdictions, indicating a high level of policy risk, higher than PNG (77) but lower than Indonesia (96). Chile is 23rd. Policy Potential Index measures the effects of exploration on government policies, including uncertainty in interpretation and enforcement of existing regulations, regulatory duplication and inconsistencies, taxation, native land claims and protected areas, infrastructure, socioeconomic agreements and political stability. The same study, under the Mineral Potential Assuming Best Practices Policy, revealed that the Philippines ranks 12 out of 96 jurisdictions, indicating very high mineral potential—higher than Peru (35) but lower than Chile (8) and Indonesia (3). The Mineral Potential Assuming “Best Practices” Policy Regime is an indication of the pure mineral potential of a jurisdiction under a policy regime that represents “best practice” and stable. Horacio Ramos, a discussant for the topic that touches on the competitiveness of the country’s fiscal regime, shared the mining industry’s concern and view on the issue of formulating a new mining-revenue-sharing scheme. Ramos, a mining economist who served as chief of the Mines and Geosciences Bureau (MGB) before assuming the top DENR post, said there are a number of fiscal regimes that can serve as models for the Philippines. Born out of perception, he said, the government is pushing for a new mining-tax measure. The perception, he said, is that mining companies are earning so much, especially with higher prices and that the government and the people are not getting a fair share. In coming up with a fiscal regime for mining, he said: “The government must move fast. Since the issuance of Executive Order 79, Philippine Mining Industry has been in virtual standstill. Unless the situation is stabilized, there will be uncertainties.” He cautioned the government that unless it acts with dispatch to address the issues raised by the industry, there will soon be no industry to speak of.
Posted on: Wed, 11 Sep 2013 20:58:43 +0000
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