Review tax plan for mining industry

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Sunday, July 13, 2014


FOREIGN investors and local mining companies are asking the Philippine government to review the proposed mineral production sharing agreement (MPSA) that would raise mining taxes as well as the planned expansion of "no-go zones" that is seen to further restrict mining areas in the country.

Julian Payne, president of the Canadian Chamber of Commerce in the Philippines, called for a strong statement in the State of the Nation Address of President Benigno Aquino III on July 28 in support of minerals development as "a key element in the administration strategy of encouraging inclusive growth and economic development."

Speaking to a forum on minerals development policy at the Development Academy of the Philippines on July 10, he also called for actions to make investments in mining competitive with that in other countries.

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Payne said that investors -- especially foreign investors -- want the government to uphold and enforce the "progressive" Mining Act (of 1995).

He added that the government should review the recent "no-go zones" in maps that have been published, which, he said "make 85% of the country off limits to minerals exploration."

Payne stressed that, despite the rhetoric by authorities supporting environmentally and socially responsible mining, foreign investors see many actions by national and local authorities that discourage mining. They see what he described as "forward talk with backward walk."

He said that a 2012 study by the International Monetary Fund showed that the Philippines mining fiscal regime was already "tough" for foreign investors. He added that, with recent unilateral moves by the government to cancel the investment tax holiday for national investors, and to cancel the cost-recovery period for foreign investors, the fiscal regime for mining has already become completely uncompetitive for both local and foreign investment compared with other countries and… "could kill the mining industry and its great potential to contribute to inclusive growth and development."

He said reports that the authorities are considering new legislation proposing a new fiscal regime that would increase tax rates for the industry would not help attract potential foreign investors to venture into local mining.

Payne said foreign investors support proposals for the creation of Mining Economic Zones, similar to the Philippine Economic Zone Authority (Peza) zones. He also proposed that 50 percent of mining revenue received by the national government should immediately be allocated to the local government units, where the mining projects operate and the impacts occur.

"Currently, 40 percent of direct taxation is earmarked for LGUs, but actual distribution to them has been very slow," he added.

In the same forum, Nelia Halcon, executive vice president of the Chamber of Mines in the Philippines (CMOP), said that based on their own research, the new sharing regime proposed by the Mining Industry Coordinating Council would increase the annual effective tax rate of the government to 79 percent.

She said this was "way beyond the 50-50 sharing scheme" under the mining law and "will not be a go [signal] for the mining industry" to invest and develop the industry.

She reiterated the CMOP's call contained in a letter to the Office of the President, saying the country needs to "develop a tax structure that provides a fair share to the government while being competitive to attract investments," increase collection, and generate employment.

Published in the Sun.Star Davao newspaper on July 14, 2014.

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