Corporate News

Miners claim planned revenue tax too onerous

Posted on July 08, 2014

THE CHAMBER of Mines of the Philippines (CoMP) reiterated its opposition to the Mining Industry Coordinating Council’s (MICC) proposed tax on revenues, which it said will lead to an average effective tax rate of 79.3%, well above what major mining countries collect.

In a letter to Executive Secretary Pacquito N. Ochoa, Jr. dated July 3, CoMP, a trade group of large mining companies, said that the MICC-proposed tax structure “cannot, by any measure, be considered as fair or equitable.”

Last week, CoMP appealed to Malacañang to review the proposed taxation system.

“We are dismayed that the MICC has moved forward with a proposed increased tax policy without taking into consideration comments and observations not only from the mining industry that will be directly affected by said policy but by authoritative third parties,” CoMP said.

The MICC proposed a payment of 10% of gross revenue, or 55% of the Adjusted Net Mining Revenue, whichever may be higher.

According to CoMP, “(t)here are other countries with more reasonable tax structures and are equally well-endowed (if not better) than the Philippines.”

The CoMP claimed that the Average Effective Tax Rate of 79.3% is much higher than that charged by Australia (58.8%), Canada (58.3%), Peru (54.7%), South Africa (52.6%), Chile (40.8%), and Papua New Guinea (34.5%).

The government take means internal rates of return on projects will not hit the 15% standard required for most projects.

CoMP also cited several studies to support its case, including a 2012 study by the International Monetary Fund commissioned by the Department of Finance which found that the current regime is already “tough for investors” and “not competitive internationally.”

The Asian Institute of Management also found in 2013 that average tax payments made by large local mining companies are much higher than the industry-wide average reported by the government.

The Foreign Chambers of the Philippines wrote the President earlier this year, saying that “(w)e
believe such a fiscal regime will have an extremely negative impact on future investments in the minerals sector; and we urge the Administration to reconsider its proposal in this light.”

CoMP Vice-President for Legal and Policy Ronald R.S. Recidoro also said that the association is open to the idea of a sliding rate indexed to metals prices.

Under Executive Order 79 signed by President Benigno S. C. Aquino in July 2012, no new mineral agreements shall be entered into until a law rationalizing existing revenue sharing scheme is enacted. -- Jon Viktor D. Cabuenas