MICC to review mining tax regime

MANILA, Philippines - The interagency Mining Industry Coordinating Council (MICC) is set to conduct a review of the country’s mining laws in order to come up with improved tax and revenue sharing schemes on local mining operations, officials from the Department of Finance (DOF) said.

In an interview late Friday, Finance Undersecretary Bayani Agabin said the MICC has taken up the task of reviewing the mining fiscal regime, following President Duterte’s stern warning to industry stakeholders during his second State of the Nation Address (SONA) last week.

This is on top of the council’s task to assess mining operations in the country, including those affected by former environment secretary Regina Lopez’s closure and suspension.

“The MICC fully supports the effort of the President to review the mining laws, and to look at the possibility of increasing upstream industries. In that regard, the MICC has several technical working groups who will undertake the review of the fiscal regime,” Agabin said.

Finance Secretary Carlos Dominguez III said the review would focus on the taxation schemes on mining companies, as well as the share of mining revenues to the local government units.

All recommendations to be gathered from the review will be considered for inclusion in one of the four other tax reform packages being drafted by the Department of Finance (DOF) under its Comprehensive Tax Reform Program.

During his SONA, Duterte called on all mining stakeholders to practice responsible extraction and utilization of resources, ensuring the full rehabilitation of all areas damaged by mining activities, and supporting communities affected.

“You have to come up with a substitute, either spend to restore the virginity of their source or I will tax you to death,” Duterte said.

“I will increase the taxes. Then I will think of something that will compensate or make up for the damage or at least the income restored. Otherwise, I’ll have to stop mining. I will ask you to stop it. It’s not good,” he added.

Duterte also encouraged investors to establish factories and manufacturing establishments in the country to process raw minerals into finished products, instead of exporting them to other countries.

Dominguez said this strong message from the President prompted the MICC to include the tax regime in its industry review.

The MICC is co-chaired by the DOF and the Department of Environment and Natural Resources.

Agabin said the MICC has already approved the terms of reference for the mining industry review to be undertaken by its technical working groups. The list of experts to be tapped for the review is being finalized.

However, he said there is currently a shortfall in the council’s budget due to issues on where it would be sourced.

“The initially proposed P50 million budget was to be taken from the emergency funds of Malacanang but this was not allowed. So the co-chairs of the MICC, the DOF and the DENR, agreed to share first P10 million each from their own budget to start the review process,” the undersecretary said.

Agabin said the amount would initially cover half of all the mining operations in the country, with the 28 firms affected by Lopez’s closure and suspension orders.

On Duterte’s call on putting up upstream and downstream industries, Dominguez said the DOF would support the move, and look into the economics of each.

“Actually, the government has already opened up the upstream industry, and this was done many years ago. That was the first step, and probably the second step is looking at encouraging local manufacturers to set up companies that will produce,” he said.

“But when you look at that, you have to look at how competitive we are from the really large downstream copper processing companies in China, etc. So I think what we want to do is go down the value chain, and that will depend on the economics of each industry,” he added.