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Alas, there is an
even greater scam that is being perpetrated on the Filipino people, beside
which, in terms of orders of magnitude, the pork barrel pales in
comparison. A scam that allows the rich to get richer, and the poor to
get screwed coming and going. A scam that affects not just the present
generation, but also generations to come….
What humongous scam
is this? That foisted by the Philippine Mining Act of 1995 or Republic
Act 7942.
Why is it a
scam? Because the Filipino people, as owners of the minerals, receive,
under RA 7942, only TWO Percent of the value of the mined ore, as their share
of the proceeds from the mining development enterprise. Period. And
for so-called FTAAs (financial and technical assistance agreements), our share
would consist of 50 percent of the net income of the operation after taxes—from
which would be deducted all taxes paid to the government. Which
effectively reduces that 50 percent to, as former Environment Secretary
Angel Reyes commented, “zero or nil,” and which Supreme Court Justice Antonio
Carpio termed a “sham.”
Let us see official data from the MGB-DENR to check the
validity of some points by my former teacher in UPSE in the mid-80s.
Table 1. Gross
Production, Taxes and Fees Paid, by Philippine Mining Enterprises, 2008-2012
These facts then may have overlooked by my former
teacher:
One, there are
many taxes and fees imposed by the national government other than the excise
tax: corporate income tax, VAT, royalties, documentary stamp tax, capital gains
tax, withholding tax on dividends, withholding tax on interest payment, customs
tax on imported vehicles, vehicle registration tax, MGB fee, other national
taxes and fees.
Plus taxes and fees by local government units (LGUs):
business tax, real property tax, community tax, occupation fee, extraction fee,
wharfage fee, other taxes and fees. In 2011, government, national and local,
collected P22.23 billion.
Two, small
scale mining (SSM) do not pay national taxes, only small local fees, despite
producing some P43 billion in 2010 and P34 billion in 2011. Just how small is
tax payment by SSM to LGUs? Take the case of two of the most mineral-rich
provinces in the country.
Table 2.
Provincial Tax Collection from SSM, South Cotabato and Benguet, in P ‘000
|
2007
|
2008
|
2009
|
2010
|
2011
|
S. Cotabato *
|
|
4,935.5
|
5,067.4
|
6,559.8
|
9,754.6
|
Benguet
|
6.7
|
10.7
|
8.1
|
22.1
|
|
* For South Cotabato, includes tax collection from sand
and gravel.
S. Cotabato is a mineral rich province. Tampakan
copper-gold mining project is supposed to be located there but the provincial
government stopped it as it will not allow open-pit mining. Yet the provincial government
collected only P6.6 M in 2010 and P9.7 M in 2011 from SSM.
Benguet’s provincial collection was even smaller, only
P8,100 in 2009 and P22,100 in 2010. From the same AFRIM report, it says that of
the 69 SSM operators in 2010, only 8 were registered and only 5 have payment
records.
Three, with
such minuscule tax payment to LGUs and zero tax payment to the national
government, it is safe to assume that up to 99 percent of the P22.23 billion collection
in 2011, or P22 billion, were paid by large-scale metallic mining (LSMM) and
non-metallic mining (NMM) firms.
We can construct this computation from the above numbers.
Table 3. Taxes and
Fees Paid by LSMM and NMM, 2010 and 2011, in P Billion
|
2010
|
2011
|
|
LSMM
|
NMM
|
Total
|
LSMM
|
NMM
|
Total
|
Gross Revenue
|
69.1
|
33.3
|
102.4
|
88.0
|
41.1
|
129.1
|
Less Operating Cost
(60% LSMM, 50% NMM)
|
41.5
|
16.6
|
58.1
|
52.8
|
20.5
|
73.3
|
Net Revenue
|
27.6
|
16.7
|
44.3
|
35.2
|
20.6
|
55.8
|
Taxes and Fees Paid *
|
11.9
|
1.5
|
13.4
|
|
|
22.0
|
Taxes/Net
Revenue, Percent
|
43.1
|
9.0
|
30.2
|
|
|
39.4
|
* 2010 tax breakdown source: Dr. Artemio Disini, COMP.
Presentation at the Philippine Economic Society Conference (PES), November 27,
2012, PICC, Manila.
No breakdown of tax payment among LSMM, NMM and SSM at
the MGB data.
At 39.4 percent combined payment by LSMM and NMM in 2011,
and seeing their proportional payment in 2010, it is safe to assume that LSMM
paid about 50 percent of their net revenues to the government.
Four, on top
of those taxes and fees paid, LSMM are also required by RA 7942, Chapter X, and
DENR Administrative Order (DAO) 2010-21 (IRR of RA 7942) requires LSMM to have
Social Development and Management Program (SDMP) for the communities where they
are operating. In 2010 alone, this was more than half billion pesos from
members of the Chamber of Mines of the Philippines (COMP) alone.
Since SDMP (school, hospital, livelihood trainings,
tractors, etc.) is not counted as part of operating expenses, then it can be
considered as additional tax and fee that goes direct to the people in the communities,
not to the BIR and LGUs.
Prof. Monsod was silent on SSM in her article, she only
lambasted LSMM. She further wrote,
About 10 or so
years ago, the value placed on the metallic minerals in the country was
something like $900 billion. Assuming an exchange rate of P40=$1, we’re
talking P36 trillion. Subtracting development and production costs
assumed to be 60 percent of that value, the gross profits before tax would be
P14.4 trillion.
Using the Malampaya
formula, the share of the government/Filipino people would come out to P8.64
trillion. Using the 2-percent formula of the Philippine Mining Act, our
share is P720 billion—or eight hundredths of one percent (0.08 percent) of what
we would have gotten using Malampaya. In effect, if all those mineral resources
had been extracted, under RA 7942, the loss to the Filipino people would be
P7.92 trillion. And this does not even take into consideration the cost of the
adverse environmental effects of mining.
The above computation by my former teacher is wrong, here
is why.
One, based on
taxes and fees paid by LSMM in 2010 (43 percent) and 2011 (about 50 percent),
the tax multiplier to be used should be around 46 percent, not two percent. A comparison of Prof. Monsod’s numbers vs more
realistic numbers can be constructed.
Table 4. Projected
Tax Revenues from the Philippines’ Metallic Potentials
|
Monsod
computation
|
Realistic
numbers
|
Potential metallic mineral value
|
P36.0 trillion
|
P36.0 trilion
|
Gross taxable profit
|
P14.4 trillion
|
P14.4 trillion
|
Government share
|
(a) Excise tax: 2%
(b) Malampaya: 60%
|
(c) Average taxes + fees payment: 46 %
|
Projected tax collection
|
(a) P288 billion
(she wrote P720 B)
(b) P8.64 trillion
|
(c) P6.62 trillion
|
“Underpayment” to government
|
(b) – (a) = P8.35 trillion
(she wrote P7.92 trillion)
|
(b) – (c) =
P2.02 trillion
|
Two, even if
an amendment to RA 7942 in mining taxation will be enacted and move from excise
tax of two percent ++ existing taxes and fees to a Malampaya gas revenue
sharing (government 60%, private/Shell 40%), the potential difference in
revenue collection will only be around P2.02 trillion and not P8.35 or P7.92
trillion).
And if SDMP spending is included, the difference will
narrow down to perhaps only P1.8 trillion.
Three,
“adverse environmental effects of mining” applies mainly to practices by SSM
(see Mt. Diwalwal for instance) and not by LSMM. But again, Prof. Monsod was
silent about SSM in her article.
In short, Prof. Monsod’s paper is more about revenue
exaggeration and alarmism and not based on realistic numbers based on existing
revenue policies of the government, both national and local.
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PALE PILSEN
