MANILA, Philippines - The Philippines needs to put in place a fiscal regime which would impose an average effective tax rate (AETR) for the mining industry that would be similar to those in other countries, if it wants to attract investments here, business groups said.
In a press conference Wednesday by the Joint Foreign Chambers (JFC) and the Philippine Business Groups’ policy brief on mining, Canadian Chamber of Commerce of the Philippines president Julian Payne said the country needs a competitive fiscal regime for the mining industry to get more investments here.
“Basically, if you want mining, you have to be competitive. Therefore, if you want mining, if you want revenues from mining, jobs from mining, then you will have to set the rate (in a way) that the AETR will be lower than other countries or in the same range,” he said.
The AETR is the rate which takes into account all the taxes firms have to pay during the life of the mine.
Payne noted that at present, mining firms operating under a Mineral Production Sharing Agreement have an AETR of 60 percent which is not considered competitive.
The current AETR in the Philippines is higher than Canada and Australia’s 58 percent, Peru and South Africa’s 50 to 55 percent, Chile’s 41 percent and Papua New Guinea’s 35 percent.
Payne said the proposed fiscal regime for the mining industry of the Mining Industry Coordinating Council (MICC) imposes an even higher AETR of 79 percent.
Last June, the MICC approved the scheme in which mining firms would have to remit to the government either 10 percent of the gross revenues or 55 percent of adjusted net mining revenues, plus a percentage of the excess profit, whichever is higher.
The MICC’s proposal still needs approval by Congress and must be signed into law by the President.
“Mining investors will go where they can earn money. With the proposed fiscal regime, many will not invest in the Philippines. They will go to Canada, Australia, Chile, South Africa, Papua New Guinea. The end result is less investments in mining and less revenues,” Payne said.
Australian-New Zealand Chamber of Commerce Philippines president Ian Porter shared the same view noting that the 79 percent AETR under the proposed mining fiscal regime does not help make the country become a more attractive location for investments.
“If it is a question of looking at where companies will go, clearly at 79 percent, that will not happen,” he said.
European Chamber of Commerce of the Philippines president Michael Raeuber said in the same event a competitive fiscal regime will allow the country to benefit from a strong mining industry, particularly in supporting development in rural areas, creating jobs, as well as having physical and social infrastructure.
He noted that the Philippines has the opportunity to develop the mining industry given its estimated $1.4 trillion mining reserves, making it the fifth largest in the world.
“The Philippines is a country of enormous potential and we hope it doesn’t stay that way in terms of mining,” he said.
Aside from having a competitive fiscal regime, the business groups made other recommendations in the policy brief to promote the development of the industry such as having regular meetings between MICC and industry representatives on the implementation of Executive Order 79 or the mining policy as well as the implementation of the Philippine Mining Act.
The groups are also calling on the government to continue processing mining applications and start approvals for new projects, make clear the supremacy of national law over local ordinances, allow mining firms to directly remit to local government units share of taxes, as well as have a careful review of sites before declaring them as no-go zones.