Mining returns for gov’t ‘must be twofold’

A CABINET OFFICIAL said he would push mining companies to pay bigger shares of their revenue to the government even though the industry maintains that taxes are already too high and higher ones could kill the business.

Taxation of Philippine miners is a thorny issue that has delayed development of the country’s vast mineral resources. President Benigno S. C. Aquino III, seeking to raise revenue from mining, has met stiff resistance.

Finance Secretary Cesar V. Purisima told the Reuters ASEAN Summit yesterday that the government should be getting one-half of gross revenue from mining.

Last year, according to a government agency, direct state revenue from mining was worth only 2% of total output, though miners also pay corporate income tax of 32% and other fees.

“Where I start is 50-50,” Mr. Purisima told the summit, held at the Reuters office in Manila. “The return of the government must be twofold -- as owner of the mineral, and two, as a taxing authority.”

Still, Mr. Purisima said it was the Philippine Congress that would decide the revenue-sharing formula, taking into account the industry’s position.

Within the next year, he said, the government is committed to getting tax legislation passed that features “a fair sharing where both the one who took risk, the mining company, and the one who owns the assets, are fairly rewarded.”

Current mining laws, including income tax holidays for start-up projects, have not created a win-win situation for the government and industry, Mr. Purisima said.

Government statistics show mining has been declining as a source of revenue. Taxes, fees and royalties from mining in the first nine months of last year came to P1.55 billion, only about 8% of the P18.8 billion collected in all of 2012, according to the Mines and Geosciences Bureau (MGB).

With nine million hectares of highly mineralized areas, the Philippines is believed to have some of the world’s biggest reserves of nickel, gold, and copper.

Last year, the government valued the Southeast Asian country’s untapped mineral deposits at about $850 billion. But investments and mineral production have slowed in the last three years as inconsistent policies and tax uncertainty have deterred investors. Mining investments between January and September last year totalled $787 million, according to MGB. That compared with $807.7 million for all of 2012 and $1.15 billion in 2011.

Miners say their risks are greater than elsewhere, and investments in infrastructure such as power and roads are costlier in less developed countries such as the Philippines. Given higher costs, they expect a higher rate of return from investing.

Anti-mining groups, including Roman Catholic Church leaders, say local communities have not benefitted from mining revenue and have been left with denuded mountains and silted rivers.

“We don’t want a situation where we’ll end up with holes in the midst of communities and once the rich minerals are gone and prices are down, they leave and the people will have nothing there,” Mr. Purisima said.

“That’s why we’d like to do it in the manner they do it in Canada and more advanced countries, where there is really a plan at the beginning on how to restore the environment they have,” he said. -- Reuters

source:  Businessworld