Mining Taxation and Regulations
Bienvenido “Nonoy” Oplas Jr.
Presentation at the Rotary Club of Taguig Fort Bonifacio
Metr...
Outline
I. Mining Images
II. Some Taxation Theory
III. Mining Tax Policy, PH vs. Chile
IV. Conclusions
I. Mining Images (wanton deforestation, soil erosion…)
Mining Images (Protests, rallies)
Mine tailings, well-enclosed. When fresh, they looked like thick
reddish blood of a monster or giant animals. When they dr...
Urban tailings (left, Manila
Bay, mouth of Pasig River)
Vs.
Mine tailings -- none (lower
left, Rio Tuba, S. Palawan)
The k...
Mining Image (@Rio Tuba, S. Palawan) Not shown by activists
MAY 2008
Developmental stages of a rehabilitated totally mined...
2008
2011
Another mined out area rehabilitated, @Rio Tuba
2009
II. Some Tax Theory
Deadweight loss of higher tax rate
* Deadweight loss arises bec. of monopolistic pricing incl. govt ta...
Arthur Laffer (and JM Keynes): the higher the tax rate, the lower
the tax revenue/collection
At tax rates approaching 100%...
B. LOCAL TAXES/FEES
• Business tax
• Real property tax
• Registration fees
• Occupation fees
• Community tax
• Other local...
The difference between the cumulative present value of net
mining revenue and cumulative present value of total govt
share...
A. Mining Contribution to PH Economy
* Share to GDP, 2011 = P99.2 Billion (1.0% of GDP)
* Mineral Exports, 2011 = US$ 2.66...
Table 1. Breakdown of Tax Payment in 2010
source: Dr. Artemio Disini, presentation at the Philippine Economic Society
(PES...
The above table shows that:
* Actual contribution of large scale metallic mining (LSMM) to taxes not just
9 but 13 percent...
How About Tax Collections from SSM? S. Cotabato and Benguet
Data source: Alternative Forum for Research in Mindanao (AFRIM), 2012. A
Background on Small Scale Mining in Benguet and S...
Mining Regulation: Mandatory CSR and SDMP
Source: JB Baylon, presentation at DLSU Mining Forum, January 2013
Source: Roberto Mayorga, Chile
Ambassador to the Philippines.
Presentation at Mining
Conference, Manila, September
14, 201...
Positive results in Chile look like
this – up to $67 B of new
investments by 2017.
PH projected mining investments
of only...
High-Potential
Potential High Tax Base: Of the country’s total land area
of 30 million hectares…
Of which only 2% currentl...
Table 2. Projections for New Mining Projects
2011* 2012 2013 2014 2015 2016 2017 2018
Investments
(Million $)
730 1,369 2,...
Anti-mining Claims:
(1) “From 2000 to 2009, ave. contribution of mining only 0.91 % of GDP, 2.5 % of
total investments, an...
(2) “Better develop agriculture than mining.”
Should be no conflict between the two. But labor productivity and
income per...
• Mining is a useful and productive economic activity. People
benefit from it even if taxes are zero. From spoon and fork,...
• The statement that large scale mining is “not taxed enough”
is not valid. The phrase applies to small scale mining.
• Ra...
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Mining taxation and regulations, Philippines

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Photos, graphs, charts and tables about Philippine mining taxation policies, with comparison with Chile's policies.

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Mining taxation and regulations, Philippines

  1. 1. Mining Taxation and Regulations Bienvenido “Nonoy” Oplas Jr. Presentation at the Rotary Club of Taguig Fort Bonifacio Metro Club, Rockwell, Makati City 15 July 2013
  2. 2. Outline I. Mining Images II. Some Taxation Theory III. Mining Tax Policy, PH vs. Chile IV. Conclusions
  3. 3. I. Mining Images (wanton deforestation, soil erosion…)
  4. 4. Mining Images (Protests, rallies)
  5. 5. Mine tailings, well-enclosed. When fresh, they looked like thick reddish blood of a monster or giant animals. When they dry, they become huge blocks of hardened red soil. @Rio Tuba.
  6. 6. Urban tailings (left, Manila Bay, mouth of Pasig River) Vs. Mine tailings -- none (lower left, Rio Tuba, S. Palawan) The key are several rows of these structures below (encaged charcoal + rocks). * Disclosure: this writer has visited Rio Tuba Nickel Corp.
  7. 7. Mining Image (@Rio Tuba, S. Palawan) Not shown by activists MAY 2008 Developmental stages of a rehabilitated totally mined-out area at GP-4 SEPT 2008 SEPT 2009 OCT.2011
  8. 8. 2008 2011 Another mined out area rehabilitated, @Rio Tuba 2009
  9. 9. II. Some Tax Theory Deadweight loss of higher tax rate * Deadweight loss arises bec. of monopolistic pricing incl. govt taxation, externalities, price controls. Higher tax, people will produce less even if a product is publicly needed. * Assume that corporate income tax + excise tax + royalty tax + other taxes is equiv. to 6% gross mining revenues. Mining output at this rate is 12 million tons. * Raising the tax to 10% will result in that shaded area, higher revenues for govt but lower mining output to society. Existing players willing to supply only 8 million tons.
  10. 10. Arthur Laffer (and JM Keynes): the higher the tax rate, the lower the tax revenue/collection At tax rates approaching 100%, private enterprises will either stop working, or they work but understate output and bribe tax assessors/collectors
  11. 11. B. LOCAL TAXES/FEES • Business tax • Real property tax • Registration fees • Occupation fees • Community tax • Other local taxes C. OTHER PAYMENTS • Special allowance as defined by the Mining Act • Royalties to indigenous cultural communities III. Mining Taxation MPSA/FTAA Other benefits: SDMP & CSR A. NATIONAL TAXES / FEES * Corporate Income tax * Excise tax * Value-added tax * Royalties (for those in mineral reservations) * Capital Gains tax * Tax on interest payment to foreign loan * Tax on foreign stockholders dividends * Documentary stamp tax * Vehicle registration tax
  12. 12. The difference between the cumulative present value of net mining revenue and cumulative present value of total govt share to achieve a 50%-50% sharing Net Mining Revenue = Gross Output – Deductible Expenses Gross Output = actual market value of minerals or mineral products from its mining area as defined by the National Internal Revenue Code Deductible Expenses = Allowable expenditures incurred by the Contractor directly, reasonably and necessarily related to the mining operations as defined in Section 3 of DAO 99-56 PLUS: Additional Government Share (Net Mining Revenue-Based)
  13. 13. A. Mining Contribution to PH Economy * Share to GDP, 2011 = P99.2 Billion (1.0% of GDP) * Mineral Exports, 2011 = US$ 2.66 Billion (5.6% of Total Exports) * Direct Employment in Mining & Quarrying, 2012 = 258,000 • Taxes, Fees & Royalties from Mining, 2011 = P17.36 Billion B. Philippine Mining Production, 2011 * Gross Mineral Production = P 163.2 Billion; Of which: (a) Large-scale mines = P88 Billion; (b) Small-scale mines and non-metallic mines = P75.2 Billion.
  14. 14. Table 1. Breakdown of Tax Payment in 2010 source: Dr. Artemio Disini, presentation at the Philippine Economic Society (PES) Conference, November 27, 2012, PICC, Manila.
  15. 15. The above table shows that: * Actual contribution of large scale metallic mining (LSMM) to taxes not just 9 but 13 percent of gross value production, as small scale gold mining (SSGM) sub-sector does not pay any national tax, only small local taxes and fees. * After deducting production cost, 60 percent for metallic and 50 percent for non-metallic, total taxes, fees and royalties paid to the government of P11.9 billion in 2010 comprised 43 percent of LSMM’s net revenue. * Government share of nearly P12 billion in 2010 alone, constituting nearly one-half of LSMMs’ net revenue is big. It is hard to find other sectors that are taxed this much. * The statement that large scale mining is “not taxed enough” is not valid. The phrase “not taxed enough” applies to small scale mining.
  16. 16. How About Tax Collections from SSM? S. Cotabato and Benguet
  17. 17. Data source: Alternative Forum for Research in Mindanao (AFRIM), 2012. A Background on Small Scale Mining in Benguet and South Cotabato and their Impact on the Economy, the Environment and the Community • S. Cotabato provincial collection from sand and gravel + small scale mining only P6.6 M in 2010 and P9.7 M in 2011 are indeed small. They target to collect P30 million in 2012. • Benguet collection even smaller, only P8,000 in 2009 and P22,000+ in 2010. Of the 69 SSM operators, only 8 are registered and only 5 have payment records. • With the case of these two mineral-rich provinces’ collection from SSM, a move to limit if not stop LSMM production in certain areas and allow only SSM will be a fiscal disaster for many LGUs themselves, aside from labor dislocation, environmental damage.
  18. 18. Mining Regulation: Mandatory CSR and SDMP Source: JB Baylon, presentation at DLSU Mining Forum, January 2013
  19. 19. Source: Roberto Mayorga, Chile Ambassador to the Philippines. Presentation at Mining Conference, Manila, September 14, 2011. Compare the foreign investments and mining taxation policies in Chile. PH taxation way far out, more complicated, more extortionary.
  20. 20. Positive results in Chile look like this – up to $67 B of new investments by 2017. PH projected mining investments of only $12.3 B by 2017. And the single biggest proj, Tampakan mine, is in big uncertainty as an LGU closed it.
  21. 21. High-Potential Potential High Tax Base: Of the country’s total land area of 30 million hectares… Of which only 2% currently covered by LSMM contracts/permits About 30% or 9 million hectares are considered high mining potential With estimated inventory of: * 8.03 Billion tons of COPPER; * 480.26 Million tons of IRON; * 4.91 Billion tons of GOLD; * 39.66 Million tons of CHROMITE; * 0.81 Billion tons of NICKEL; * 433.88 Million tons of ALUMINUM. Worth some $1 trillion! Source: Ronnie Recidoro, COMP
  22. 22. Table 2. Projections for New Mining Projects 2011* 2012 2013 2014 2015 2016 2017 2018 Investments (Million $) 730 1,369 2,072 3,352 4,045 2,892 812 Revenues (Million $) 3,768 3,768 4,878 5,167 7,959 10,675 13,114 14,036 Taxes** (Million $) 400 400 555 596 987 1,367 1,707 1,837 Total investments (2011 to 2018): $15 billion Total Annual Revenue: $3.8b in 2011, ramps up to $14b in 2018 Taxes Collected: $400m in 2011, increases to $1.8B in 2018 Mining share in GDP: 1.7% in 2011, increases to 5-6% in 2018 *Based on MGB Sep 2012 Figures **Estimated figures is without ITH source: Dr. Artemio Disini, presentation at the Philippine Economic Society (PES) Conference, November 27, 2012, PICC; basic data from MGB Sept 2012
  23. 23. Anti-mining Claims: (1) “From 2000 to 2009, ave. contribution of mining only 0.91 % of GDP, 2.5 % of total investments, and only 0.38 % of total employment.” Table 3. Philippine GDP by industrial origin at constant prices, % distribution Source: computed from NSCB table 1, http://www.nscb.gov.ph/beyondthenumbers/2013/04122013_jrga_agri.asp#tab1 True that share of raw mining production /GDP ratio is small. BUT without those mineral products, (a) NO industrial production , no construction, electricity, cars/tricycles production. And (b) NO or little services production: No malls and buildings, no retail/wholesale/banking; no cell phones & computers, no telecomms, internet; no shipping and trucking, transport of goods and services via horses, cows, carabaos, bicycles, rickshaw.
  24. 24. (2) “Better develop agriculture than mining.” Should be no conflict between the two. But labor productivity and income per worker in LSMM larger than those in agriculture in general. Thus, the sector already provides social and economic services to the poor more than in agriculture in general Table 4. Some comparison between Agriculture and Mining Source: Alonzo, Emmanuel, Issues Affecting the Mining Industry, Senate STSR Taxbits, July-August 2012.
  25. 25. • Mining is a useful and productive economic activity. People benefit from it even if taxes are zero. From spoon and fork, nails and hammer, cellphones and laptops, cars and airplanes, engines and buildings, they all came from mining. • “Everything that humanity needs that cannot be grown, must be mined.” – Ed Coronel • “No to mining whatsoever” is a non-option. “Tax mining as prohibitively as possible” is next to non-option, will drive the legal, large and responsible mining companies and leave the country’s mineral resources to the guerilla type small-scale mining enterprises that are hardly taxed and regulated. IV. Concluding Notes
  26. 26. • The statement that large scale mining is “not taxed enough” is not valid. The phrase applies to small scale mining. • Raising mining tax up to 10% of gross revenues appears to be anti-investment. Should it be considered in a new law, other taxes and fees in mining should be abolished . • Chile’s simple and low mining taxation policies should be considered by Philippine legislators. Where there are more mining investments, there are more jobs created, more community developments implemented, and more tax revenues collected due to wider tax base. • Existing mining rights should be respected, allow older contracts to proceed and renew under the terms and conditions under the Mining Act of 1995, unless it is revised.
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