Untapped potential

It is unfortunate that one of the country’s biggest industries has virtually lost the support of the government.

When President Aquino issued Executive Order No. 79 on July 2012. providing for a new mining policy, stakeholders saw it as a ray of hope for the mining industry as it will lay down a clear-cut revenue-sharing scheme between the government and mining companies.

It turned out that they were wrong.

When the EO was implemented, a moratorium on new mining projects was put in place by the Department of Environment and Natural Resources (DENR) while the Mining Industry Coordinating Council (MICC) began looking for ways on how to  increase government’s share in mining projects.

Almost two years later, EO 79 and the MICC have done nothing to improve the sorry state of the country’s mining sector.

In fact last year, mining investments were 43 percent lower than originally projected by the Mines and Geosciences Bureau.

The metallic and non-metallic mineral reserves of the country has an estimated value of P73.47 trillion, a large part of which remains untapped.

Whether or not this will be tapped appears to be bleak.

A study by Nelia Halcon, executive vice president of the Chamber of Mines of the Philippines, a recommendation of the MICC for a 10-percent tax on gross revenues or a 55-percent share of the adjusted net mining revenues (ANMR) would have a profoundly negative impact on future mining investments and on the industry and ultimately on government’s long-term revenues from mining.

In her report, Halcon said the country’s current revenue sharing scheme is already uncompetitive by world standards, and is even perceived as “tough” by some investors.

Halcon stressed that increasing the tax rate would only make the country more uncompetitive, and the internal rate of return (IRR) for investors, unattractive.

In 2013, the Fraser Institute’s annual global survey of mining executives ranked the Philippines as one of the worst places for investors, behind Kyrgyzstan and Venezuela, due to our taxation system.

It was a sad day for the mining industry as the Commission on Appointments confirmed the appointment of Environment Secretary Ramon Paje.

Some sectors say the confirmation came as a surprise because Paje’s name has been connected to several controversies. However, Malacanang did not even budge amid the strengthening call for Paje’s resignation.

They emphasize that Paje should be blamed for the current situation of the mining industry. He pushed his own provisions in the mining guidelines even without the approval of the MICC.

PhilRealty back on track

Philippine Realty & Holdings Corporation (PhilRealty) is determined to once again be among the leading real estate developers in the country.

PhilRealty recently introduced five new projects, including the new phase of its upscale residential community development Andrea North in New Manila, Quezon City.

According to company president and CEO Andrew Alcid, they are challenging how everyone looks at luxury as they make their  comeback in the business.

 PhilRealty intends to move strongly and aggressively towards the upscale market segment, beginning with the introduction of the Sky Villas at Andrea North.

The 31-story Sky Villas Tower is the second phase of the five-tower, two-hectare Andrea North community, PhilRealty’s P10-billion investment in Quezon City, whose total property value is pegged at around P25 billion.

Alcid points out that PhilRealty remains commited to offering best-of-class developments that stay true to what luxury really is.  He defines luxury as being the least dense development and offering the most generous space in an upscale market segment.

At the Sky Villas Tower, only 108 families will get to enjoy their own private spaces at a density of only four units per floor.

Meanwhile, PhilRealty will be developing Project Cube 5th Avenue, a mixed-use vertical development that will host retail, residential, office, serviced apartments, and a hotel facility in Bonifacio Global City. They are also set to begin work in El Pueblo, a 5,900-square-meter mixed-use development with a retail anchor within the Ortigas central business district.

Alcid said they are also eyeing other projects outside of Metro Manila.

PhilRealty was responsible for innovative landmark projects, such as the Philippine Stock Exchange Centre (the Tektite Towers), The Alexandra, La Isla Condo, Casa Miguel, and The Alexis, among others. It pioneered the concept of home replacements here in the Philippines—the concept of vertical living within urban communities—when it introduced The Alexandra in Ortigas.

Turning a blind eye

Recent studies have shown that revenues lost due to illicit tobacco trade have reached staggering proportions.

The study, conducted by the International Tax and Investment Center (ITIC) in partnership with Oxford Economics, revealed that the excise tax increase on cigarettes  (341 percent for low-end brands, 231 percent for mid-priced and 108 percent for premium-priced), contributed to a 59 percent hike in the pack price of the most sold brands in both the low-price and premium-price segments. The price increase in the most sold brand in the “super-low” price segment was highest at 175 percent.

Legal domestic sales of cigarettes in the Philippines dropped almost 16 percent in 2013 from the previous year but was offset by a significant increase in illicit consumption, which accounted for 18.1 percent of total consumption during the same period. Thus, computing both legal and illicit consumption, total consumption of cigarettes dropped by only 3 percent in 2013.

The trade in counterfeit cigarettes grew an estimated 800 percent last year, accounting for 1.8 percent of total consumption or 1.8 billion cigarettes, as compared to 0.2 percent the year earlier.

Based on these findings, revenues lost from the illicit tobacco trade, both representing excise and VAT, was estimated at P15.6 billion in 2013, which ITIC said corresponds to an increase of 497 percent from P2.6 billion  in 2012.

For excise taxes alone, the government lost 15.3 percent of the potential total excise tax revenues from the illicit tobacco trade in 2013.

What the study is saying is that illicit consumption rose not because of smuggling, but due to the proliferation of domestically produced illicit cigarettes. Bringing in cigarettes manufactured abroad, whether legally or illegally, would be unprofitable because the price per pack of the cheapest smokes here remain relatively low compared to other countries despite the excise tax hikes.

It estimates domestic illicit consumption to account for 16.3 percent of total consumption or 17.1 billion cigarettes in 2013 compared to 6.1 billion cigarettes in 2012.

In dismissing the results of the ITIC-Oxford Economics study, BIR commissioner Kim Henares claims that excise tax collections from alcohol and tobacco products have exceeded expectations.

Some quarters say this isn’t surprising considering the hefty tax hikes for the most-consumed cigarette brands in the country.

The BIR and the Bureau of Customs just need to get their acts together to put a stop to illicit trade practices which are depriving our government of much-needed revenues.

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