MVP group disputes proposed mining revenue sharing scheme

Posted at 12/05/12 8:17 AM

MANILA, Philippines - The group headed by business magnate Manuel V. Pangilinan is opposing the government’s proposed mining revenue sharing measures, claiming these were unfair and would put mining firms in jeopardy.

The Mining Industry Coordinating Council had proposed to either base the revenue sharing to a percentage of gross margin or to a percentage of gross revenue, where the income tax paid is deducted after computing the government share.

Pangilinan chairs Philex Mining Corp., which voluntarily suspended operations at its Padcal mine in Benguet on Aug. 1 due to a tailings spillage.

The revenue sharing is one of the most contentious issues in the implementing rules and regulations of President Aquino’s executive order on mining.

Under the EO, the moratorium on mining applications will only be lifted if a new revenue sharing scheme is put in place.

Pangilinan said using revenue to compute government’s share is “a shutdown point for any company” as firms would need to shoulder higher taxes notwithstanding weak global metal prices.

“Mining companies here have no influence at all on minerals traded outside the country. We produce so little of the gold or nickel or copper output in the world. If metal prices go up, the government should ride with the earnings of the mining companies. But if prices go down, which is beyond, our control, we can’t pay taxes when the company is losing money. It doesn't make sense to me,” Pangilinan said.

Instead of gross margin or gross revenue, the government and mining firms should just share 50-50 on earnings before tax,” he noted.

“I think that is more fair. You allow the investor to recover the cost of investment and capital first. It’s a well-accepted practice globally. Your resources are owned by the government. That should be fairly shared between the investor and the government. That’s our position,” Pangilinan said.

MICC's goal is to come up with a scheme which adopts a single fiscal regime and a simple formula in determining the sharing arrangement between the government and the mining industry.

The Department of Trade and Industry, a member of the MICC, said the new scheme will strive to strike a balance between raising government revenue and keeping a fiscal regime that is competitive with other developing countries.

The arrangement will include a PEZA (Philippine Economic Zone Authority)-type arrangement, which processes and facilitates all mining industry requirements through a one-stop shop in new areas designated as mining zones.

The new scheme will also include regular computations for production volumes and pricing as well as quicker payouts to local government units for their shares since these will be remitted directly to their respective treasury offices.

The government’s share will be earmarked for the national government and local government units.
The DTI also assured that indigenous peoples will continue to receive royalties if the mining area is located in an ancestral land or domain.