* This is my column in BusinessWorld last week, March 15, 2018.
— Ronald Reagan, former US president
See also:
“Government does not tax to get the money it needs;
government always finds a need for the money it gets.”
Under the Mining act of 1995 (RA 7942), mining firms pay,
among others, an excise tax 2% of sales. For many years and decades, this has
been deemed “too low” despite the presence of many other taxes, fees,
royalties, mandatory contributions, obligatory community expenditures.
So under the new law Tax Reform for Acceleration and
Inclusion (TRAIN), RA 10963, the mining excise tax has been raised from 2% to
4%. And this was a belated insertion because this idea was not present in both House
and Senate bills before the Bicameral Committee meetings.
Now there is TRAIN 2 bill in Congress and the Department
of Finance (DoF) has voiced out that it wants all tax reforms ratified by
December 2018. The DoF wants a “comprehensive mining tax that will give the
government a bigger share of miners’ revenues.” Translation: another round of
mining tax hikes.
Philippine mining taxation is not exactly modest or low.
Globally, it is somehow midway based on taxes, fees and royalties paid to the
government, national and local. Or high if mandatory and obligatory
expenditures for communities are included, like the Social Development
Management Program (SDMP) that amounts to hundreds of million pesos yearly.
One international non-governmental organization, the
Natural Resource Governance Institute (NRGI), produces an annual report called
the Resource Governance Index (RGI) that measures how good or bad the
governance of extractive industries are — oil, gas and mining (metallic and
nonmetallic). The index is constructed using a framework of 149 critical
questions answered by 150 researchers, drawing upon almost 10,000 supporting
documents. Scores are on a scale of zero to 100 at each level of the index.
The RGI is composed of three components and several
sub-components:
1. Value Realization — sub-components are licensing,
taxation, local impact, and state-owned enterprises.
2. Revenue Management — national budgeting, subnational
resource revenue sharing and sovereign wealth funds.
3. Enabling Environment — open data, political stability,
control of corruption, rule of law, regulatory quality, government
effectiveness, voice and accountability.
The RGI 2017 report was released last year covering 89
country-level assessments (in eight countries, both oil-gas and mining sectors
were assessed). In the table below, I did not include countries in the oil-gas
sectors, also low-score African, S. American countries after S. Africa, but I
included low-score ASEAN countries to have a regional overview (see table).
So in the overall score, the Philippines ranked 21st out
of 89 country-assessments, it belonged to the top, which is good. In the
component Value Realization, it scored a midway 55 and in sub-component
taxation, it scored high at 60. Which means that the statement “Philippines
mining taxation is low” is not correct.
In that report, I was surprised to see that there is a
government-owned Philippine Mining Development Corporation (PMDC). It is not
involved in actual mining exploration and extraction though, perhaps one of
those white elephants among the remaining government-owned and controlled corporations
(GOCCs).
Among the big state-owned mining firms in the world are
Codelco (Chile, 2016 revenue was $11.69 billion), Erdenes Mongol (Mongolia,
$1.25 billion 2016 revenues) and Antam (Indonesia, $680-million revenues).
Aside from TRAIN’s tax-tax-tax in the sector, there are
other proposals that seem idiotic and too interventionist. Like a bill in
Congress, HB 5674, requiring a legislative franchise as prerequisite to the
issuance of a Mineral Agreement or Financial and Technical Assistance Agreement
(FTAA) for any mining project in the Philippines. Why bring in the legislators
and politicians on top of national and local bureaucracies inspecting and
investigating companies even before they can do mining exploration and
extraction?
Then there are other bills declaring this and that
province to be a “mining free zone and providing penalties therefor.” Example:
HB 6727 for Nueva Vizcaya. Not all provinces have big mining potential and even
in provinces which have such potential, not the entire province is
resource-endowed.
Mining is either good or bad. If it is bad, people should
stay away from using materials that use mining products so that they can reduce
or avoid creating new demands for mining. Like cars, TV, mobile phones,
computers, watches, electrical wires and cables.
If mining is good, then get the good practices in other
countries and have them applied here. But blanket prohibitions like “no
open-pit mining,” “no mining in this province,” “over-tax mining” should be
avoided because they are based on emotions, not reason and economics.
Government should prioritize reason and economics in its
legislation and implementation. Create values and consumer products from
nature, create lots of jobs for the people, generate taxes for its
social-economic programs.
------------See also:
BWorld 192, Cobalt mining and TRAIN, March 16, 2018
BWorld 193, TRAIN, inflation and emerging DOE price control, March 16, 2018
BWorld 193, TRAIN, inflation and emerging DOE price control, March 16, 2018
BWorld 194, How ‘pro-labor’ policies work against labor, March 17, 2018
BWorld 195, Health alarmism in TRAIN sin tax hike, March 19, 2018
