Finance Secretary Cesar V. Purisima said in a roundtable discussion with BusinessWorld last Aug. 26. that the government should not soften its stance in pursuing a new fiscal regime for mining despite industry lobbying against the measure.He added that, in seeking a “balance” in the industry’s development by increasing the government’s share while managing impact on host communities, the Philippines can afford to have a steeper tax rate than its rivals for mining investments.

“I think we are more on the aggressive side,” Mr. Purisima replied when asked how the proposed new tax regime compares with those of competitors.

“But the situations of our competitors are different from us… We cannot just make a blind comparison because even though it’s copper to copper or gold to gold, the situations of countries are different and, therefore, our standard can be higher,” the Finance chief added.

“What’s important to think of when it comes to mineral resources is when you tax mineral resources, a country must get returns two ways: one is the normal tax, just like when you tax economic activity. The other is the value of the mineral that they are actually taking out.”

Mr. Purisima said the government cannot be rushed into adopting a new fiscal regime that may attract more investors to the detriment of other considerations.

“Do we lose anything by not extracting these immediately? If you ask me, no, because we’re talking of finite resources,” the Finance chief said.

“If it’s a finite resource and the resource is dwindling, then theoretically, the prices and the value would be increasing, and therefore we should not be pressured to agree to give away [such resources].”

The DoF led the inter-agency Mining Industry Coordinating Council (MICC) that drafted the proposed law that would increase the government’s total take in mining revenues to an average effective tax rate of as much as 71% — against as much as 62% currently and potentially the highest in Southeast Asia — according to preliminary simulations of DoF’s Fiscal Policy Division.

The House of Representatives’ Ways and Means committee has started deliberations on the MICC’s proposal filed as House Bill 5367 on Aug. 18, and will pick up discussions on Wednesday.

HB 5367 provides the government as “owner of the minerals” will get each year 10% of a miner’s gross revenues or 55% of “adjusted net mining revenues” (ANMR: gross revenue less production and other deductible costs but not to exceed 10% of direct mining, milling and processing costs), whichever is higher; and 60% of any windfall profit (in case the “ANMR margin” — ANMR divided by gross revenue — exceeds 50%, the government gets 55% of that threshold of 50% of gross revenue plus 60% of the excess).

The proposed new regime will be in lieu of corporate income tax, royalty to indigenous cultural communities, duties on imported specialized capital mining equipment, mayor’s fee and/or business permits as well as other fees and charges imposed by host local governments.

But mining companies will still have to pay other levies, namely: value-added tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive income, donor’s tax, environmental fee, real property tax, Securities and Exchange Commission fee, water usage fee, as well as administrative and judicial costs and penalties.

Source: www.bworldonline.com