After I posted my previous article, Canada's $7.8 B a year tax revenues vs PH's $0.3 B last month in my
fb wall, several friends commented on it. Some lively exchanges here.
-------
December 17-18, 2013.
Andrew. Yep, pretty sad. I note that Indophil/Xstrata's
project is being delayed until 2019 thanks to an OC mining prohibition. Mind
you, with that large-scale project, in this economy, it was always probably
going to be delayed until then anyway. In fairness though, mining doesn't
proceed so easily in populated areas like East Coast Aust. i.e. Coal mining
conflicts with wineries and farming. Most mines in Australia are so far from
cities...even 200km from a significant urban centre of say 20,000 people.
Jayant. Nonoy: I don't think why the national
government should be ashamed. Filipinos are very muddleheaded about this
matter. They don't understand mining but want to tax it to death. They get what
they deserve--a muddleheaded, bad government.
What the Philippines has ended up with? The companies that are there are run by crooks, for the legal problems make it extremely difficult to make money there. So you have TVI Pacific in Mindanao, who have their own armed forces. And recently a bunch of crooked people--B2Gold--have bought a gold mine. This is what you get for making life difficult for good businessmen.
What the Philippines has ended up with? The companies that are there are run by crooks, for the legal problems make it extremely difficult to make money there. So you have TVI Pacific in Mindanao, who have their own armed forces. And recently a bunch of crooked people--B2Gold--have bought a gold mine. This is what you get for making life difficult for good businessmen.
Andrew. Mining is highly taxed in Australia.
In fact, taxes are 50% (oil, gas, iron ore & coal) compared to 3-5% for
Google. Its really the landowner conflicts and legal uncertainty...more than
taxes. Lower taxes for other minerals. And of course wage rates are very high.
Stephen. Well it’s what the CBCP and China
want. China would prefer to keep small scale miners.
Andrew. Not sure that is true Stephen, I
often hear about China forcing the closure of small scale mines. I think its a
regulatory nightmare, but they get away with it by paying kickbacks. Maybe you
are talking of Philippines?
Nonoy Oplas Thanks Andrew, Jayant, Steve.
Yes, it is anti-big business, anti-capitalism, anti-globalization, even
anti-geological science sentiments, that dominate public opposition to mining.
Some guys are not that anti-big business but they are socialist-leaning that
they want the government and the communities to get 60%, or 80%, of the total
revenues of mining firms to "fight poverty" or "fight climate
change" and so on. One result is adverse selection problem in the sector.
The players that people do not want to see doing mining -- those who just mine
and mine with zero environmental rehabilitation afterwards, those who pay
little or zero mining taxes -- are the ones who escape the various government
regulations and prohibitions.
Stephen. Andrew...China is forcing the
closure of small scale mines in the Philippines? How can they do that? Yes, I
thought Nonoy's posting was focused on the Philippines. Sorry. In the
Philippine context however, the small scale mines are reputed to sell all sorts
of ore to buyers who represent China. Most sales are "off the books.
"Since the LGU's are responsible for, but have not much capacity for,
regulation of the small scale mines, they are essentially unregulated. Unlike
the big mines.
Andrew. Stephen, I was just trying to make
sense of what you said, based on the crackdowns on small, under-capitalised
miners in China, who cause a lot of damage. The Philippines has them too, often
with kickbacks to local mayors. I can conceive of Chinese titleholders in the
Philippines, whether local Chinese or mainland/Singaporean entrepreneurs paying
similar kickbacks to get mining done. But it was your assertion, and I must say
your counterpoint clarifies. Thanks.
Stephen. Thanks, Andrew. One doesn't see much
in the way of crackdowns and enforcement on small scale miners in the
Philippines. Well...mother nature "spanks" them from time to time
with landslides, but not so much from the local government people who are their
"regulators." I've heard of the payments made "off the
books" to those regulators. Most of the gold and other ore that is mined
in the "small scale" system doesn't make it into the regulated
market, so I'm told, but rather goes to a variety of buyers who represent
China. Or so I'm told. But the large scale and centrally regulated mines are
the focus of the "anti-mining" groups.
Andrew. Yeah, I think about 8mths I heard
reported of a gun shoot-out as gold was reputedly run from Camarines Sur to
Manila...the gold disappeared...if my memory serves me. It probably doesn't'.
lol
Nonoy Oplas Now see this news report -- a 10% on gross
revenues of mining firms, wow.
Disadantage: this is big, whether the company makes a profit or not, govt share is already assured of its own share.
Advantage: Govt will hopefully become less prohibitionist, less bureaucratic, in allowing more players or in allowing expansion by existing firms as govt will get sure money from them.
Andrew. I don't so much mind that
Nonoy...because miners are using 'public resource'. I just don't want govts
custodians of said funds. Always private with counterparties. Its when the
amounts are excessive and imposed after, arbitrarily, or because there is a mining
boom, and they want to 'opportunistically' grab a cut. Socialist extortion.
Stephen. Nonoy, I can't find the law right
now, but my recollection is that the mining firms are also required to fund
social programs in their surrounding areas from gross revenues, not net. Not
sure and need to find out, if the social programs are on top of this 10%, or in
the mix somehow. It would seem to me that the Philippines would be well served
by studying what other nations, even outside of ASEAN, are doing in the mining
tax realm, and then adapting our system to at least be competitive. Maybe they
ARE doing such, and I'd appreciate the education and correction if that's the
case.
Nonoy Oplas Andrew, I think anywhere around
the world, the Regalian doctrine, "all lands belong to the state"
applies and hence, revenues from the use of such public lands also belong to
the state, it's a global curse that we have to live with. It is also in the
Philippine constitution. This doctrine is faulty because it assumes that use of
the Earth's resources is one way, only the extractive firms (oil, natural gas,
mining, quarrying) benefit. But the public benefit too, when those iron ores
become steel and big buildings, when silver, copper, nickel, other mineral
products become tv, cars, cell phones, watches, utensils, etc.
Steve, yes, the social development management program (SDMP), it's in the Mining Act of 1995. This is an imposition and is not considered as a tax. So I think the SDMP requirement will remain, only the corporate income tax, excise tax, royalties, will be consolidated into the gross revenue tax. Not sure if VAT is also consolidated here.
So overall, mining firms will pay: 10% gross revenue tax + SDMP spending + real property tax (RPT) + various local fees (occupation fee, business permit fee, wharfage fee,...) to LGUs. Plus VAT?
Steve, yes, the social development management program (SDMP), it's in the Mining Act of 1995. This is an imposition and is not considered as a tax. So I think the SDMP requirement will remain, only the corporate income tax, excise tax, royalties, will be consolidated into the gross revenue tax. Not sure if VAT is also consolidated here.
So overall, mining firms will pay: 10% gross revenue tax + SDMP spending + real property tax (RPT) + various local fees (occupation fee, business permit fee, wharfage fee,...) to LGUs. Plus VAT?
Andrew. I think the problem with the
Philippines is less about tax, and more about 'attitudes to mining' undermining
the rule of law. i.e. Obstructions to mining not seen elsewhere - anywhere.
Unprecedented
In fairness to Filipinos miners do seem to have a poor
track record 'environmentally' in tropical environs, and these people are
living off the land, so some hostility is understandable.
Nonoy Oplas The high or multiple taxes &
fees embody the anti-mining sentiment of the public, NGOs, media, government
and politicians in general. Discourage or kill mining by taxing it to death
whenever possible. Earlier, I argued that if such public opposition and
misinformation is minimized and the mining potential of the Philippines,
estimated at $1 trillion, is tapped, the mining tax alone, even from existing
tax policies, can wipe out the entire PH public debt.http://funwithgovernment.blogspot.com/.../mining-36-tax...
funwithgovernment.blogspot.com
Andrew. Well, I don't think those taxes are
excessive. The worst I've seen is Egypt, where they assume 50% of project
revenues, but there is concessions on fuel costs. Case in point being GIP.ASX.
I realise I'm being a moral relativist there.
Stephen. I'm actually not that upset about
taxes, but I am dismayed by the inequitable treatment of mines. Small scale
mines are essentially unaccountable to anyone and unregulated. In theory, the
local governments are supposed to control these folks. But the LGUs have no
training, no equipment and no resources even if they did care. ALL mines ought
to be managed by the same entity.
Andrew. True, but the track record of even
large companies seems pretty bad. I think it goes with developing world lack of
technical expertise that this happens. i.e. Red's poorly designed tailings dam.
Costing $30mil to repair. Massive writedown for shareholders.
I'd need a pretty compelling reason to invest in
the Phils mining industry.
Nonoy Oplas Yes, small scale mines can be
considered as the "black market" mining. When things are so
difficult, so complicated, so costly to do legal mining, go illegal via small
scale mining. The "legal small scale mining" allows only shovels,
piko, other small tools. Illegal small scale mining includes the use of
backhoes, bulldozers, graders, 10-wheeler trucks, and they carry the
"small scale" permit.
Andrew. It seems a common problem. Noted
cases in Congo (tantalum/diamonds), Indonesia (tin), PNG/Brazil (gold).
Stephen. Rio Tuba in southern Palawan is an
excellent example of a responsible mine. But I agree that not all large mines
are as careful. No doubt there are horror stories everywhere. But the small
scale mines are the "ants" that cumulatively destroy vast areas. THEY
are the ones who have caused landslides with many deaths, and many more
millions of dollars of damage than even the single tragic and ugly incident you
cited, Andrew. And they are, as a practical matter, unregulated.
Nonoy Oplas Even the DENR and EITI guys do
not know how big is small scale mining. The latest estimate I read is that this
sub-sector employs about 300,000 people nationwide, from the Cordilleras to
Mindanao. Would you believe that S. Cotabato, a huge mining province that
includes portion of Mt. Diwalwal/Diwata, the provincial government collected
only P6,560 in 2010 and P9,755 in 2011 from small scale mining? Full year
collection from so many small scale mines cannot even pay for one month salary
of a staff in the provincial capitol, http://funwithgovernment.blogspot.com/.../mining-31-prof...
See also:
Mining 35: Opposition to Mining, Where Do They Come From?, October 15, 2013
Mining 36: Tax that can Wipe Out All PH Public Debt, October 22, 2013
Mining 37: Adverse Selection of Anti-Corporate Mining View, November 21, 2013
Mining 38: Canada's $7.8 B a year tax revenues vs PH's $0.3 B, December 17, 2013
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