- Category: Top News
07 Jul 2014
- Written by Jonathan L. Mayuga
The Chamber of Mines of the Philippines (COMP) has asked Malacañang to thoroughly review the tax structure proposed by the Mining Industry Coordinating Council (MICC) for the industry.
According to the COMP, the tax structure discourages investments. The draft bill was submitted by the MICC to the Office of the President for approval.
In a letter dated July 3, the COMP said the industry’s suggestion was not considered by the MICC in coming up with its proposal.
“We are dismayed that the MICC had moved forward with a proposed increased tax policy without taking into consideration comments and observations not only from the mining industry that will be directly affected by said policy but by authoritative third parties,” the COMP said in the letter.
The MICC has proposed either a 10-percent tax on gross revenues, or a tax of 55 percent on adjusted net mining revenues (ANMR), plus a percentage of the windfall profit, whichever would give higher revenues to the government.
Under the MICC proposal, contractors shall still be liable to pay real property tax, stock transaction tax, documentary stamp tax, withholding tax on passive income, as well as regulatory fees and charges.
ANMR pertains to the difference between gross sales and direct cost, which refers to direct mining cost and administrative expenses.
Under the MICC proposal, contractors shall still be liable to pay real-property tax, stock-transactiontax, documentary-stamp tax, withholding tax on passive income, as well as regulatory fees and charges.
Incentives to mining investments shall be limited to duty-free importation of specialized capital equipment and five-year amortization of preoperating expenses.
The new revenue-sharing scheme would apply to metallic mining projects holding a mineral production sharing agreement (MPSA) and financial or technical assistance agreement (FTAA). According to COMP, the MICC-proposed tax regime is uncompetitive. “It will not attract quality investment that the country needs to be able to develop its mineral resources in a responsible manner,” the letter stated. The results of its financial modeling shows that the Philippine government’s share under such proposal would be “much higher” than the share of large mineral-producing countries, such as Canada, Australia, Peru, South Africa, Chile, Papua New Guinea, according to COMP.
Instead of the MICC-proposed tax measure, COMP Vice President for Legal and Policy Ronald Recidoro said the idea of a sliding tax rate is more acceptable. Sliding tax rate is a taxation regime where tax rates depend on metal prices.
Recidoro said this will help miners sustain production during difficult market conditions. In turn, the government would enjoy a higher share when miners rake in greater profit.
COMP Executive Vice President Nelia Halcon said the COMP may back the passage of a bill pending in congress for the imposition of a sliding tax rate system for the extractive industry authored by Rep. Silvestre Bello III of 1-BAP and Rep. Lino Cayetano of Taguig City.
Under House Bill 3586, or “An Act Rationalizing Revenue-Sharing in the Large-Scale Metallic Mineral Resource Industry,” the government will get 2 percent to 5 percent of the net mining profits from gold when world prices are below $1,440 per ounce to over $2,200 per ounce.
For copper, the government will get 2 percent from the net mining revenue when the price of metal in the world market is below $2.50 per pound, to a high of 5 percent if the price hits more than $4.40 per pound.
For nickel, chromite and other metallic minerals and ores, the government will get a fixed royalty of 7 percent from the net mining revenue if the resource is taken within a proclaimed mineral reservation.
If extracted outside a proclaimed mineral reservation, a fixed royalty of 4 percent will be imposed.