Mining 9: Supreme Court Hearing on RA 7942

This morning, I saw this poster in the facebook wall of one or two friends, about the Mining Act of 1995 (RA 7942). I think this was made by the Legal Rights and Natural Resources Center, Inc. (LRNRCI).

Three things caught my attention. One, oral debates at the Supreme Court. Some groups could be contesting the constitutionality of that law until now. But it’s an 18 years old law now, why would its Constitutionality be questioned and not earlier?

This law is a product of Congress, not the SC. So people can initiate and support new legislation that will scrap or significantly amend that law. Why can't they go through this legislative process? 

Two, Tax Regimes. The focus of the oral arguments is on taxation? But a new bill on mining taxation will be introduced when the new Congress resumes in late July this year, so why would the Supreme Court hear arguments on things that are Constitutionally a function of the Legislature?  I also read that the BIR made recent Revenue Regulations that seem to reverse the Mining Act on taxation. The Act says taxation should start "after a cost recovery period" or similar term, while the BIR wants taxation to start "during cost recovery period." The BIR is the mini-legislator and implementer at the same time, weird. 

Three, the photo. Am curious which mining project it came from, and if it is the actual mining site or a mine tailings pond? If it is the latter, then that company is doing responsible mining, preventing mine tailings from going into the sea. Mine tailings ultimately dry up, wild grasses can grow on them later. A company may also cover a dried up tailings pond with ordinary soil, then plant trees on them. After a few years, there is zero trace that it was once a mine tailing pond.

Then there were two news reports yesterday about this event in Baguio next month, below. Portion of the news report from PhilStar says that the SC will hear “alleged adverse effects of mining to the environment, health of the community and human dignity.” 

I didn't know that the SC is also into oversight function, I thought it is the job of the Executive branch (DENR, MGB) and Legislative branch that creates or amends existing laws.

The Consti provision, “All lands of public domain, waters, minerals, coal, petroleum and other mineral oils,... are owned by the State.” (Art XII, Sec. 2, PH Constitution)  I think is misunderstood. When a mining company removes top or mid-soil and rocks, say 10 meters below the original level, the land is still there. One can dig 20 kilometers of the planet's crust, deep into the mantle (but they will burn due to intense heat from the planet's core) and the "land area" is still there, owned by the state.

Many anti-mining groups and individuals argue that mineral deposits and products are non-renewable and must be protected by the government from commercial interests. This position is questionable actually.

In a mining forum at DLSU that I attended, a mining engineer from UP, Rodalee Ofiaza, said that geologic processes -- movement of magma (molten rock, still underground), various hot gases from the planet's core to the mantle, onto the crust (the soil where we stand) can turn ordinary soil and rocks into mineral deposits via igneous process or sedimentary process. With the help of volcanoes and earthquakes, which allow the trapped magma and gases at the outer core to move upwards.

The implication here is that since those geologic processes are going on endlessly, and rain water seepage deep into the ground, the heated water turn into gases (some become "hot spring") that contributes to the formation of mineral ores. In short, mineral products are renewable through geologic processes and cycles. Like rain is renewable through hydrologic cycle.

No mining, no modern life. No cell phone, no tv, no computer, no internet, no electricity, no cars, no bicycles, no buildings, no nails and hammer. And yet mining is the most over-taxed sector in the country as if it is a useless activity, as useless as over-politicking.

Below are two news reports yesterday from Business Mirror and Philippine Star. Generally similar content and titles,

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(1) from Business Mirror

SC to hear arguments on constitutionality of mining law

Published on Sunday, 24 March 2013 21:01

Written by Rene Acosta / Reporter

THE constitutionality of Republic Act (RA) 7942, or the Philippine Mining Act of 1995, will be scrutinized by the Supreme Court (SC), which is set to hear oral arguments for and against the law.

The High Court has ordered both the government and petitioners to argue their case on April 16, when it will tackle a temporary restraining order sought by two lawmakers against implementation of the controversial law.

The lawmakers have been joined in their petitions by several residents of Davao Oriental province in southern Mindanao supposedly affected by mining activities of Hallmark Mining Corp. and Austral-Asia Link Mining Corp. They and the residents also named as respondent the Department of Environment and Natural Resources (DENR).

In January this year, the petitioners asked the SC to stop the DENR from acting on any application for Mineral Production Sharing Agreements (MPSA) that cover 17,215.4474 hectares of land in the municipalities of Mati, San Isidro and Governor Generoso in Davao Oriental….

(2) from Philippine Star 

SC tackles constitutionality of Mining Act

By Edu Punay | Updated March 25, 2013 - 12:00am

MANILA, Philippines - The Supreme Court (SC) will take a second look into constitutional issues regarding Republic Act 7942 or the Philippine Mining Act of 1995 as it tackles petitions of lawmakers against the widely criticized law during oral arguments in court’s summer session on April 16 in Baguio City.

In the guidelines released last Friday, the high court listed four common issues in the petitions filed by Quezon 4th district Rep. Lorenzo Tañada III, Bayan Muna party-list Rep. Teddy Casiño and former Akbayan party-list Rep. Risa Hontiveros.

The debate will tackle the legal standing of the petitioners and whether or not the legal questions they raised can be subject to judicial review.

The SC also directed parties to argue on whether or not it could still rule on the case given that it had already decided on a similar case of La Bugal-B’laan Tribal Association vs. Ramos administration in December 2004…

Lastly, the high court wanted the petitioners and respondents to discuss the “alleged adverse effects of mining to the environment, health of the community and human dignity.”

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See also:
Mining 5: Benefits of Mining Even Without Taxes, December 09, 2012
Mining 6: Large Investments vs. Large Bureaucracies, February 19, 2013 
Mining 7: Mining Taxation and Government, March 08, 2013
Mining 8: Rio Tuba Mining in South Palawan, March 17, 2013

Mining 7: Mining Taxation and Government

* This is my 3rd guest post in antipinoy.com.
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The large-scale mining sector  is probably the most taxed sector in the country. National taxes and fees include corporate income tax, tax on stockholders dividends (local and foreign),  excise tax, value added tax (VAT), capital gains tax, documentary stamp tax, tax on bank interest, tax on interest payment for foreign loans, vehicle registration tax, import tax for mining equipment and heavy machineries,  royalties to indigenous communities, mine tailing fees and occupation fees.

Local taxes include community tax, business permit tax, real property tax, registration fees, occupation fees, other taxes and fees.

In addition, big mining companies are also expected to provide various hard and social infrastructures to the residents and workers of the mining area, on top of the various taxes and fees to the national and local governments.

In contrast, the small-scale  mining enterprises are minimally  taxed and regulated.  

On top of these, there were a few recent moves by the government that expands the taxation base of big mining companies. One is the draft scheme by the Mining Industry Coordinating Council (MICC) through the Department of Finance and the Department of Environment and Natural Resources where big mining companies will be taxed twice, first on the gross revenue and second, on the end of year net income.

The other is the Revenue Memorandum Circular (RMC) No. 17-2013 dated February 15, 2013, saying that companies under the Financial or Technical Assistance Agreement (FTAA) must pay taxes throughout the duration of their contract with the government, and not just after the cost recovery period as provided under RA 7942 or the Philippine Mining Act of 1995.

These new revenue measures are created to further tax the sector which many people believe is “not taxed enough” yet and hence, endangers the environment.

Let us review how valid is this statement.

In 2010, the different players in the mining sector paid P13.4 billion in various taxes and fees to the government. There are different interpretations of what this figure represents as share of the government, local and national.

The three tables below collapsed into one image are from Dr. Artemio F. Disini, Chairman of the Chamber of Mines of the Philippines (CMP) in his paper, Getting a Fair Share: The Industry Perspective on Mining Taxation, presented at the Philippine Economic Society (PES) 50^th Annual Conference last  November 27, 2012, held at the PICC, Manila.

I attended that conference and the panel on mining taxation. The other speakers in the panel were Shanaka Peiris, IMF Resident Representative to the Philippines, Tristan Canare of the Asian Institute of Management (AIM), and Donna Gasgonia of the UNDP.

Dr. Disini was saying that the actual contribution of the large scale metallic mining industry to the government coffers was not just 9 percent but 13 percent of gross value production, as the small scale mining (SSM) sub-sector does not pay any taxes, at least to the national government.

After deduction of production cost, 60 percent for metallic and 50 percent for non-metallic, the total taxes, fees and royalties paid to the government of P11.9 billion in 2010 comprised 43 percent of the large scale mining companies’ net revenue.

This government share of nearly P12 billion in 2010 alone and constituting nearly one-half of big mining companies’ net revenue is big. It is hard to find other sectors that are taxed this much.

Thus, the statement that large scale mining is “not taxed enough” is not valid.

For one, humanity benefits from mining because no mining and mineral products means no modern life. From spoon and fork, nails and hammer, cellphones and laptops, cars and airplanes, engines and buildings, all of these came from mining. A mining expert Kennedy “Kori” Coronel aptly put it this way: “Everything that humanity needs that cannot be grown, must be mined.”

So, a “No to mining whatsoever” statement is a non-option. A corollary statement “tax mining as prohibitively as possible” is next to non-option as this will drive the legal, large and responsible mining companies and leave the country’s mineral resources to the guerilla type small-scale mining enterprises that are hardly taxed and regulated.

The appropriate attitude for government and the rest of society is to keep taxation at the minimum and go for full transparency and accountability of all mining companies, from small to medium to large firms. Putting strict regulations and high taxes only to large players but allowing small players that are often owned or protected by local politicians to disobey those regulations do more harm than good, to the environment, economy and society.

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See also:
Fat-Free Econ 3: Mining and Environmentalism, March 15, 2012
Mining 3: Debates on Mining, March 17, 2012
Mining 4: EO 79 and the MICC, July 12, 2012
Mining 5: Benefits of Mining Even Without Taxes, December 09, 2012
Mining 6: Large Investments vs. Large Bureaucracies, February 19, 2013