Some macroeconomic and taxation data on large-scale mining, debunking also certain myths about the sector.

1. Beyond GDP: Total
Contribution of Mining
StandFIRM Leadership Workshop
Tiara Oriental Hotel, Makati City
April 01, 2017
Bienvenido Oplas Jr.
President, Minimal Government Thinkers
Columnist, BusinessWorld
Fellow, SEANET, Stratbase-ADRi

2. 1. Mining provides small contribution
to GDP, only P70 B/year in GVA.
2. Mining tax payments are small,
only P3B/year.
3. Employment share of mining small
only around 100,000 workers.

3. National taxes
* Corporate income tax (CIT)
* Personal income tax of personnel & officers
* Value added tax (VAT)
* Withholding tax (WHTs) on dividends, WHT on
interest, WHT on royalties, on service fees
* Excise tax on minerals and imported goods
* Customs duties
* Capital Gains tax
* Documentary stamp tax
* Improperly accumulated earnings tax (IAET)
* Wharfage fees
* Royalty for Indigenous People (IPs)
* Royalty in mineral reservation
* Vehicle registration tax
* Special allowance under the Mining Act
* Various documents/permits required by MGB,…
Local taxes & fees
* Local business tax
* Real property tax (basic and SEF)
* Registration fees
* Occupation fees
* Community tax
* Mining operations tax
* Environmental fees
* Local wharfage fees
* Regulatory/Administrative fees
* Extraction fees on mineral lands
* Rental fees
* Mine waste and tailing fees
* Mayor’s permit fee
* Barangay permit
* Fire department permit, sanitation permit
* Provincial permit, other local taxes and fees
Mandatory Expenditures
* Annual Env’l Protection & Enhancement Prog. (EPEP)
* Social development and management prog. (SDMP)
* Community development program
* Environmental work program (EWP)
* Safety and health program
* Special allowance to claim owners & surface right
holders
Environmental funds
* Rehabilitation cash fund
* Mine monitoring trust fund
* Mine waste and tailings fees reserve fund
* Final mine rehab. & decommissioning fund
* Environmental trust fund
* Mine rehabilitation fund (MRF)
* Others
4. Mining results in environmental damage while yielding minimum benefits.
Wrong. See different taxes, royalties, regulatory fees, mandatory contributions to society

4. 5. Open pit mining is very destructive and must be banned anywhere.
Wrong. It looks destructive only in mining stage, after the minerals are mined out, the area is
rehabilitated. Another option – keep open pits open, do not cover with soil and plant trees.
Keep them as new lakes: tourism, water sports, fishery, irrigation, hydro power, other uses.

5. Source: Dr. Roy Spencer, UAH
Climate change means warming-
cooling-warming-cooling cycle. After
global warming, we prepare for cooling.

6. “Multiplier effect” of mineral raw materials.
 Contribution of mining in PH economy looks small, less than 1% of
GDP, only 0.5% of total employment, mineral exports just 5% of total
exports.
 Because mining’s multiplier effect is not counted. Almost all industrial
(manufacturing, construction) and services (transportation, telecom, IT,
etc.) activities use mining products. No mineral products means almost
no industrial production, very little services sectors. (Public transpo will
be horses & carabaos, not cars, buses or trains)
 Analogy: GVA of poultry and pork/meat is small, maybe around 1% of
GDP. But without chicken and pork, there will be little or no activities in
many other sectors -- restaurants, litson manok/liempo stalls, chicken
cubes/fillet, other manufactured and processed food.

7. 1. Large-scale mining covers a
huge area of the Philippines.
Wrong. Only 2.3% of TLA
covered by mining permits, of
which only 0.27% actively mined.
2. Mining can stop in PH but
continue in other countries.
Wrong. Mining is either good or
bad; if bad then mining should
stop worldwide. If good abroad
then good practices should be
adopted here.
3 DENR Sec's closure of
mining firms follows rule of
law.
Wrong. Sec. Lopez disregarded
procedures, even recommends.
of her technical staff. Rep.
Josephine Sato: “We are the
legislature; if you’re not happy
with the law tell us we will review
and revise if necessary but you
can’t legislate on your own...”

8. 4. Large mining is the most erosion-inducing activity in
the country.
Wrong. Very often, it is deforestation or conversion of forest
land into pasture land, agri land, comm’l land, or simply
regular cutting of trees in public forest land.
Top right photos are mountains in Aguilar-Bugallon-
Labrador, Pangasinan, then a mountain behind the NGCP
station in Labrador, Pangasinan.
Below right photos: sugarcane farm in Negros; a river in
our barrio in Cadiz City, Negros Occ. Was a wide river but
siltation from eroded soil of sugarcane farms narrowed the
river to only 1/3 to ½ of its width some 30 years ago.
Below, Pasig River draining into Manila Bay. Photo
grabbed from JB Baylon.

9. 5. More mining areas result in more poverty.
Generally wrong. Top 25 poorest provinces in Philippines 
http://www.neda.gov.ph/wp-content/uploads/2013/09/CHAPTER-10.pdf
Of these, only 5 host big mining companies (at least 4,000
has): Zambo del Norte (2 firms), Surigao del Norte (5 firms),
Surigao del Sur (3 firms), Mindoro Occ. and Or. (2 firms).
These 21 provinces host big mining companies (at least
4,000 hectares) not in the Top 25 poorest: Zambo del Sur
(Siennalyn Gold, TVI, 168 Ferum, Vilor), Sultan Kudarat
(GRCO Isulan), Agusan del Norte (Agata), Davao Or.
(Hallmark, Austral-Asia Link, Dabawenyo Minerals, Sinophil,
Oro East), Dinagat Islands (East Coast), Compostela Valley
(Napnapan), Sarangani (Hard Rock).
Capiz and Iloilo (Teresa Marble, Parvis Gold,), Samar
(Alumina, Bauxite), Leyte (Explosive Consult., Fastem
Constr., Strong Built), Palawan (C. Palawan, Palawan Star,
Pyramid Hill, Narra Nickel).
Quezon and Camarines Sur (VIL Mines), Benguet (Philex),
Zambales (Mina Tierra, Eramen), Cagayan (Peniel, JVDC,
T&T, J&M), Nueva Vizcaya and Quirino (Oceana Gold),
Ilocos Sur and Pangasinan (Altamina Exploration).

10. 6. Open pit mines are destructive and not done in
developed countries.
Wrong. 5 biggest and deepest open mines in the world
1. Bingham Canyon, Utah, USA -- roughly 4 kms wide and
over 1.2 kms deep. 
2. Mir Diamond mind, E.Siberia, Russia – 1.2 kms. diameter
and reaching depths of 525 meters.
3. Kalgoorlie Super Pit, Australia -- roughly 3.8 kms long, 1.5
kms. wide and approx. 600 meters deep.
4. Kimberly Diamond Mine, S. Africa -- perimeter 1.6 kms.,
200 meters deep.
5. Diavik Diamond Mine, Canada.
Notice that big communities develop around a big mining pit.
The pit came first, the communities follow, not the other way
around.

11. Some reports, Feb-August 2015

12. Feb-March 2017

14. Source: PWC, Corporate income taxes, mining royalties and other mining taxes: A summary of rates and
rules in selected countries, June 2012,
Australia China India Indonesia Kazakhstan Philippines
Top rate, Corp.
income tax (CIT)
30% 25% 32.4% (local),
42.05% (for.)
25% 25.2% 30% nat’l,
+ 2% mun., 3% cities
Tax, Ore assets Life of
mine
Over valid
pd. mining
license
25.0% 0% n/a varies
Tax, Buildings 2.5% 5% 5%, 10%,
100%
5% max 10% depends
Restrictions on
use of tax losses
Yes 5 years 8 years 5 years 10 years 3/5 years
VAT charged on
exports
No No No No No Yes
Ave time for VAT
refund
< 1 year < 3 months < 1 year > 1 year < 6 months > 1 year
WHT Dividends 30% 10% 0% 20% 15% 15%, 30%
WHT Interest 10% 10% 21% 20% 15% 20%
WHT Royalties 30% 10% 10.5% 20% 15% 30%
WHT Service
fees
5% varies 42% 20% 20% 30%
Other payments na License fees License fees,
Deadrent
assess
License
fees,
Deadrent
land, bldg
tax
Deadrent Deadrent, occupation
fees, mine waste &
tailing fees,
community tax, filing
fees,…
Mining taxation, selected Asian economies

15. Pitfalls of high taxation philosophy
• Deadweight loss arises because of monopolistic pricing incl. govt taxation,
externalities, price controls.
• At higher tax, people will either produce less even if a product is publicly
needed, or they underdeclare output and pay lower taxes.
• Example: if taxes (CIT + VAT + royalties + LGUs’ fees + …) are equiv. to 6% of
gross mining revenues, mining output is 12 M tons.
• Raising the tax to 10% will result in that shaded area. Supposedly higher govt.
revenues but lower output to society as players willing to supply only 8 M tons.
And govt. will collect less. And there are fewer jobs…
(a) Deadweight loss

16. (b) the higher the tax rate, the lower the tax revenues/collection
Arthur Laffer (and JM Keynes) illustrated this…
As tax rates approach 100%, private enterprises will either stop working, or they work but
understate output; tax assessors/collectors allow it in exch. for personal and financial gains.

17. Model copper mine: comparative effective tax rates (ETR)
EITI, 2009. Advancing the EITI in the Mining Sector: A consultation with stakeholders
https://eiti.org/files/MINING%20Compressed.pdf
ETR = all
payments to
governments /
value of gross
or pre-tax
profits

18. http://ph-eiti.org/
Mining Taxes 2014: EITI data P10.88 B, MGB data P32.75 B…

19. 1. Aside from various taxes, fees, royalties,
mandatory funds for big mining firms, overall
tax burden in PH among highest in E. Asia.
2. Endless debate in mining fueled by
endless myths like mining lands are huge,
mining taxes are small.
3. More taxes and permits mean lower
output, more deadweight loss, lower
revenues in the Laffer curve.
4. Beyond GDP, contribution of big mining is
large – direct and indirect employment; taxes,
fees, royalties, mandatory funds.
5. Issues until 2015 were on higher mining
tax. By 2016-17, moved to mining closure,
bigger uncertainties.
6. 
Concluding Notes