Mining companies in PH not paying enough taxes: IMF

Posted at 08/09/2012 2:01 PM | Updated as of 08/09/2012 2:01 PM

MANILA, Philippines - Mining companies in the Philippines are not paying enough taxes to the government, according to an International Monetary Fund (IMF) study.

The IMF also pushed for the repeal of incentives and change in rules governing the Philippine mining industry.

The IMF study showed the mining industry's share of GDP in 2009 and 2010, were 1.3% and 1.6% respectively, but total mining taxes as a share of the government's total tax revenues were only 1.04% and 0.98% in 2009 and 2010.

The low contribution was attributed to the fact that "the mining sector comprised mostly of small-scale mines do not pay a lot of tax, older mines that are in their twilight years, and a few new mines that are enjoying tax holidays."

The IMF proposed that the Philippines rationalize the multiple mining regimes into a single fiscal regime, so that a modified version of the financial and technical assistance agreement (FTAA) regime would cover future large mining projects.

At present, there are 3 possible fiscal regimes for large mines: mineral production sharing agreements (MPSA) outside mineral reservations, MPSA within mineral reservations, and FTAAs.

To address the mining industry's low contributions, the IMF recommended that "tax incentives for mining should be repealed, and that all domestic tax rules governing mining should be consolidated in the National Internal Revenue Code." The Mining Act of 1995 mandates that mining activities are always included in the annual Investment Priorities Plan making it qualified for the various fiscal incentives that the Board of Investments offers.

Finance Secretary Cesar V. Purisima backed the IMF's recommendations, saying there is a need to rationalize the fiscal regimes for the mining industry into a single one that will provide a bigger share of revenues to the government and streamline revenue sharing process with local communities.
 
"We are currently studying the IMF report's specific recommendations, and this will serve as an important input as we work with Congress and the various stakeholders in proposing amendments to existing laws defining the fiscal regime on all mining activities, whether large or small-scale. But some of the proposals, like the abolition of fiscal incentives, are already contained in the Fiscal Incentives Rationalization Bill that the Department of Finance is advocating," he said.

Last month, President Benigno Aquino signed Executive Order No. 79 on the new policy for the mining industry. Under the order, the government prohibits mining in protected and tourism areas and suspends the issuance of new mining permits pending the approval of a new revenue sharing scheme.
 
Aquino wants Congerss to revise existing mining laws that will give the government more revenues from mining to offset environmental risks.