MANILA, Philippines - Businessman Manuel V. Pangilinan, who controls one of the largest gold mines in the country, is urging the government to implement reforms in the extractive industry so mining firms can cope with the difficult business climate.
During the closing ceremonies of the 61st Annual National Mine Safety and Environment Conference in Baguio City last Friday, Pangilinan said the tax increase proposed by the Mining Industry Coordinating Council (MICC) discourages miners from maximizing the benefits from resources.
“We should endorse a revised taxation scheme which can provide government with a more appropriate share of the benefits derived from the resources it owns… A business like ours is risky – no influence on the price we sell our minerals, and little say on the yield we extract from our ore. Taxing revenues alters the risk/reward balance in mining,” he said.
The MICC is proposing either a 10- percent tax on gross revenue or a tax of 55 percent on adjusted mining revenues plus a percentage of windfall profit, whichever would give higher revenues to the government.
Adjusted mining revenue is defined as the difference between gross sales and direct cost (direct mining cost and administrative expenses).
The new revenue sharing scheme would apply to metallic mining projects holding a mineral production sharing agreement (MPSA) and Financial Technical Assistance Agreement. (FTAA). The draft revenue sharing bill is still being reviewed by the Office of the President.
Pangilinan is more amenable to taxing pre-tax income rather than taxing revenues.
“I submit that taxing our pre-tax income is the more sensible and fair arrangement,” he said.
“These higher taxes must be placed in the context of an industry facing more difficult times ahead— declining metal prices; lower demand due to faltering economies in China and India, Europe and Latin America; continuing anti-mining sentiment. Our industry must be resilient to stay in shape or keep afloat,” he said.
Pangilinan is also proposing the separation of the regulatory functions of the Department of Environment and Natural Resources (DENR) and the industry management and promotion function of the Mines and Geosciences Bureau (MGB).
“We should encourage the government to separate the function of regulation under the DENR, from the function of promotion under MGB. At this moment, this lack of delineation puts us in some regulatory uncertainty and finds no advocate for us within government,” he said.
Sought for comment, Mines bureau director Leo Jasareno said the regulatory functions of the DENR and the MGB are structured to harmonize industry regulations with industry interests.
“Some sectors in the industry view the inclusion of the mines bureau in the DENR as something that restricts the growth of the industry. That’s why there have been calls for the separation of the MGB from the DENR so it can function as a promotion body for the industry” he said.
Jasareno noted, however, that the MGB does not purely function as enforcer of environmental laws but rather as a manager of the country’s resources.
“The mandate of the MGB under the Mining Act is to manage and administer mineral lands and mineral resources. It is not an agency that purely exercises enforcement,” he said.