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The World Bank and the Extractive Industries Transparency
Initiative (EITI) International Secretariat will hold a “Conference on the
Adoption of the 2013 EITI Standards” this coming 26-27 September 2013, at
Crowne Plaza Galleria in Ortigas.
EITI is a non-government, non-UN, non-foreign aid
international system that requires both the government and the private
enterprises in the extractive industry (petroleum, gas, mining) to report among
others, information like how much government has collected and how much private
enterprises have paid to the government, both local and national. Exploration
and operating contracts will also be reported and published online. The goal is
to make both the regulator (government) and regulated (private enterprises) to
become transparent to each other and be more accountable to the rest of
society.
The World Bank is interested in this initiative mainly on
the taxation aspect. The WB, along with the ADB, UN and other foreign aid, have
lots of “inclusive growth” programs and projects in many developing countries,
to be funded by “inclusive pockets” of course. In a recent Philippine
Development Report 2013 for instance, the WB has proposed three new taxation
measures. One is creating a land surtax, two is raising petroleum tax, and
three is further raising the sin tax. See Why
the WB report on PH jobs is alarmist, if not simplistic.
One glaring characteristic of Philippine taxation of the
mining industry is the double standard applied on large scale metallic mining
(LSMM) vs. small scale gold mining (SSGM). Probably almost 100 percent of all
mining tax collections by the Bureau of Internal Revenue (BIR) and fees by the
Bureau of Mines and Geosciences (BMG) come from LSMM + large non-metallic
mining. SSGM pay only local taxes and fees to LGUs.
Output by SSGM is not small. Gross value production by LSMM
and SSGM for 2008 were P29.7 B and P33.9 B respectively. In 2010, P69.1 B and
P42.9 B respectively; and in 2011, P88.0 B and P34.1 B, respectively.
In the literatures by EITI International and EITI
Philippines that I saw, there is very little mention about making SSGM be as
transparent and accountable as LSMM. There is the implicit and wrong equation
that “mining = LSMM”.
Actual costs of regulation to the private enterprises are
composed of (a) cost of compliance (getting external accounting, auditing and
law firms), (b) cost of “compromises” with regulators, including dealing with
extortion and special favors/requests,
and (c) actual taxes and fees paid.
What is often noted is (c) only, this will be reported
under the EITI system. The public do not know the costs of (a) and (b). Hence,
actual costs to private enterprises are larger than what is reported.
Consider also the cost to a firm that has spent
substantial amount complying with (a) national regulations (SEC, BIR and BOC,
MGB-DENR, DOLE, etc.) plus (b) local regulations plus (c) social development
management program (SDMP) while doing exploration and research activities, then
limited operations and extraction. Then rules are suddenly changed in the
middle either by the national government (like EO 79) or by the local government
(like the S. Cotabato ruling on Tampakan project), and some of those players
will consider pulling out or reducing the project scope, reducing also
employment, SDMP, and so on.
Such costs are not likely to be captured by the EITI
system as it is focused on existing operating firms.
Another cost is when a big mining firm that pays various
taxes and fees is further being extorted by rebels or other armed bandits. Or
worse, its expensive machineries and facilities were destroyed and burned by
those groups and the government armed forces have done little or nothing to
prevent such large scale destruction of properties.
I wrote/tweeted EITI Philippines last week and expressed
interest to attend their conference and hopefully bring the above and other
issues. They replied that “unfortunately slots for the event have already been
filled. Please check our website, fb &twitter accounts for upcoming events.”
Let the EITI system become a drive to institutionalize
real and meaningful transparency and accountability in the extractive sector.
The system should not be used as a new harassment scheme against LSMM by the
vocal and militant environmental NGOs and media that will press for more public
disclosure of their data, while the same vocal and militant NGOs and media will
remain silent on the non-transparency and non-accountability of SSGM. Or at
least in pressuring municipal and provincial governments to apply existing
environmental regulations and revenue charges
to SSGM.
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See also:
Mining 22: Philippines as EITI Candidate, June 05, 2013
Mining 31: Prof. Winnie Monsod's Faulty Tax Proposal, August 22, 2013
Mining 32: Output Contraction in 1st Half 2013, September 02, 2013
Mining 33: Job Creation, Taxes and the Politics of Envy, September 13, 2014
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