MANILA, Philippines — The Philippines is expected to lose billions of pesos in quality investments if the government decides to push through with its plan to slap royalty on all mining operations, the country’s biggest mining group said.
Imposing a five percent royalty on all mining companies, regardless whether they operate within mineral reservation areas or not, will push away international investors in the country, the Chamber of Mines of the Philippines said.
“If we end up with a mining tax structure that is not competitive, we will not see quality investments in our minerals sector. Why will they still come here?” COMP chairman and Nickel Asia Corp. president Gerard Brimo told reporters on the sidelines of Mining Philippines 2018 yesterday.
“We want to attract companies that are large, technically knowledgeable, have a lot of resources and can do things properly. But they will not come here if the tax structure is too expensive,” he added.
The proposal to impose royalty on all metallic and non-metallic mining operations is now moving in Congress.
Currently, only those operating in the nine mineral reservation areas in the Philippines are levied.
Mining royalty tax represents five percent of the market value of the gross output of the minerals produced by mining companies within a declared mineral reservation area.
Brimo said the proposed measure would make the Philippines a much expensive investment climate compared to the world’s large mining countries including Chile, Canada, Australia and Peru.
“For a country as blessed as us, that would be a shame. I don’t know any mineralized country that does not encourage a vibrant mining industry,” Brimo said.
The bill threatens to close down two large gold and copper mines in the country and lose three major projects in the pipeline.
“We are talking about billions of pesos in lost investments, lost taxes particularly employment and social development and that is critical,” he said.
While the Mines and Geosciences Bureau is supportive of the additional tax, it said it should be on a per mineral commodity basis.
MGB director Wilfredo Moncano said the five percent royalty is too heavy for mining firms.
The industry has just started to feel the impact of the doubling of the excise tax under the first package of the tax reform program.
Apart from the four percent tax, mining companies operating under a mineral production sharing agreement also pay the regular corporate income tax, business tax, and payments for indigenous peoples directly affected by mining operations, among others.
To date, there are only nine mineral reservation areas in the Philippines namely, Ilocos Norte Feldspar, Zambales Chromite, Biak-na-Bato, Siruma White Clay, Samar Bauxite, Zamboanga, Mt. Diwalwal Gold, Surigao, as well as all offshore areas within the country’s territorial limits.
The MGB identifies and recommends an area to be declared as mineral reservation by the Office of the President based on the area’s economic potential.
Once declared as mineral reservation, an area covered by the proclamation shall be “reserved” for future mining exploration and exploitation, and will be covered by the five-percent royalty tax under the mining law.