MAC: Mines and Communities

Government seeks to raise share in mines

Published by MAC on 2006-11-20

Government seeks to raise share in mines

By Likha C. Cuevas, Reporter, Manila Times

20th November 2006

THE House of Representatives is set to draft a bill amending the Philippine Mining Act to ensure the government is getting a fair share of the revenues generated by the mining industry.

This developed after the congressional oversight committee, chaired by Rep. Danilo Suarez, reviewed the contents of the Department of Environment and Natural Resources (DENR) Administrative Order 99-56 on the Mining Act (R.A. 7942).

The DENR AO establishes the fiscal regime that governs the financial and technical assistance agreements for the exploration, development and commercial use of the Philippines' mineral resources. Its provisions were discussed during the committee hearing, which concluded that the government should collect a "royalty" from the mining sector.

The oversight committee has also tasked the Department of Finance and the Bureau of Internal Revenue to come up with a formula for computing the royalty in the mining industry. This royalty, which represents the government's share from the right to use the state's natural resource, is apart from the usual taxes and duties that the government collects from the industry.

In the draft bill, the payment of the royalty starts the moment the company registers any sales.

The mining industry, unlike the energy sector, barely pays the government any royalty. BIR data showed that mining/mineral products generated only about P293.726 million in excise taxes from January to September 2006. On the other hand, BIR data showed that a total of P11.20 billion in corporate income and branch profit taxes were remitted by the energy sector from 2002 to 2005, while DOF projects the total government royalties from the Malampaya project could reach $8 billion to $13 billion.

The finance department said that as a sovereign taxing power, the Philippine government has responsibility to ensure that the natural resource owner makes its contribution to public revenues. On the other hand, the government as a resource owner should also determine when to "exploit" its natural resources and make sure it gets an appropriate price for these resources.

Since minerals are non renewable resource, the DOF said, therefore, there is a user cost associated with its extraction and the state should be justly compensated for the exhaustible resource.

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