* This is my article in BusinessWorld last August 30, 2017.
See also:
A repeated argument by many sectors clamoring for
suspension or closure or higher taxation of large mining projects is that the
taxes, fees, and royalties they pay is very small. So there is a need to
further raise the tax.
At the House of Representatives, there are bills
proposing to raise the mining excise tax from 2% to 10% to generate bigger
taxes from the industry.
However, is it really true that mining taxes and fees are
“very small” so government should raise them (or even shutter their operations
to preserve the environment?)
Table 1 was constructed to test their arguments’
validity. Please have patience reading what the numbers in various asterisks
mean.
These numbers show two important points.
One, of the Philippines’ 30 million hectares total land
area, only 700,300 hectares have mining permits from 319 companies, of which
only 81,000 hectares are in active mining. The balance of roughly 620,000
hectares are for the various structures like offices, housing, school
buildings, hospitals, sports, and training centers for personnel; roads, mined
out areas for rehabilitation; future mining sites.
Two, these 81,000 hectares or 0.27% of total land area
contributed an estimated of P420,000 per hectare in taxes, fees, and royalties
to the national and local governments in 2016. That is more than six times the
overall national taxes per hectare of the country.
Hence, the argument by many anti-mining groups that “government
tax revenues from big mining is small so government should overtax, suspend, or
close as many big mining firms as possible” is wrong. It is invalid.
Note further that the numbers on mining taxes and fees do
not include mining expenses that go direct to the communities as mandated by
law, not to the government. These include spending like (a) Social Development
and Management Program (SDMP), (b) the annual Environmental Protection &
Enhancement Program (EPEP), (c) Community development program (CDP), (d)
Environmental work program (EWP), (f) Safety and health program, others.
Plus mandatory environmental funds like (a)
Rehabilitation cash fund, (b) Mine monitoring trust fund, (c) Mine waste and
tailings fees reserve fund, (d) Final mine rehabilitation and decommissioning
fund, (e) Environmental trust fund, (f) Mine rehabilitation fund (MRF), and
several others.
Two of several fiscal reforms in the mining industry to
make the taxation system more transparent and easily understood would be the
following:
One, MGB is required to disclose in its regular “Mining
Industry Statistics” the annual cost of various mandatory/obligatory programs
and funds as mentioned.
Two, the mining excise tax of 2% can be raised to 6% or
10% or even higher but other taxes and regulatory fees, mandatory programs, and
funds should be reduced or abolished. It is not possible to keep raising the
taxes, fees, royalties, mandatory programs and funds without resulting in
business distortion. Like honest firms closing down or going bankrupt while
others will be forced to become dishonest just to remain in business.
MGB should show more updated data about small scale
mining — estimated land area covered, gold production, taxes and fees paid,
others. Lots of environmental damage with zero mine rehabilitation or
reforestation after are done by small-scale mining, like those in Mt. Diwalwal
as mentioned by President Duterte during his second SONA last July 24.
Government should always bear in mind the importance of
the rule of law. Mining laws should apply to both big and small players,
foreign and local. Creating exceptions and favoritism makes a mockery of the
law.
Bienvenido S. Oplas, Jr. is the President of Minimal
Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.
---------------
See also:
BWorld 148, Energy Trilemma Index 2016, September 16, 2017
BWorld 149, Free tuition and irresponsibility, September 17, 2017
BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017
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