Mining group open to retaining tax scheme

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The country’s biggest mining lobby on Wednesday said that it is amenable to a government proposal to retain the existing tax scheme for mining companies and additional royalty, but opposed the removal of fiscal incentives.

Jimbo Gulle, spokesperson of the Chamber of Mines of the Philippines (COMP), said that they welcome the Minerals Industry Coordinating Council’s (MICC) decision to drop the proposed unified tax collection scheme, and retain the existing tax rule for mining companies.

“Mining companies like the idea that mining areas will be declared as mineral economic zones, we like that. Some of the proposals is to integrate all those taxes into one super tax, then to have a set of royalties,” Gulle told reporters during the orientation on the Mining Philippines 2013 Conference and Exhibition.

The spokesperson, however, said that that the abolition of tax incentives granted to mining companies, whether mineral and non-mineral reservation areas, might not work for the entire industry.


“The IMF [International Monetary Fund] study, among other, stated that mining companies will not be competitive without tax holidays,” he said.

Large-scale miners are entitled to register with the Board of Investments for a five-year income tax holiday once they start commercial operations, which includes excise taxes. Firms are also not liable for income taxes during their exploration periods.

According to the Mining Act of 1995, contractors in mineral agreements and financial or technical assistance agreements shall be entitled to the applicable fiscal incentives under Executive Order 226, or the Omnibus Investments Code of 1987.

Incentives provided for by the law includes, income tax holidays, incentives for pollution control devices, tax and duty exemptions on imported capital equipment and spare parts, among others.

The Department of Environment and Natural Resources earlier stressed that while tax incentives are provided for by the law, these remained to be a “privilege” in which the government can deny.

“The question is no longer whether mining companies are willing to pay taxes,” Gulle said, saying that government contractors are just looking for an equitable tax regime that gives the government a bigger share of the minerals.

He said that somehow, current fiscal regime in mining is something the government and mining industry players could work on.

“We are working with the current regime. But the truth is the status quo, we are already paying high taxes. And any business would not want to pay so much taxes,” he said.

He also said that the proposal for a single tax scheme—in which the government takes 10 percent of the gross revenue of mining projects and 50 percent of the profit, be it gross or net—is not competitive.

“It will kill the industry. It is not negotiable for us. What the MGB said is closer to reality,” he said, referring to the MGB’s observation that the unified tax system earlier being considered but was eventually dropped by the MICC as it would result in a lower government share in mining revenues.

The industry group, Gulle said, would push for its own version of a revenue-sharing bill that will be a “win-win” for the government and mining contractors, and will be competitive enough to sustain industry growth.

“[Our version] will be close to what we have now, which is the 2-percent [excise tax], plus 5-percent [royalty], and all the taxes that we pay currently. The government said it will not take lower than 5 percent, so I may be somewhere between 5- and 10-percent [government share],” he said.

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