MICC to review mining taxation scheme after Duterte’s SONA targets industry

THE MULTI-AGENCY Mining Industry Coordinating Council (MICC) will study the rationalization of taxation for the mining industry, following President Rodrigo R. Duterte’s threat to stop mineral exports and close firms outright for persistent environmental damage.

Speaking to reporters on Friday, Finance department officials said that the MICC, which convened on Tuesday last week, will be reviewing the mining industry’s current fiscal regime, but will seek to reconcile the system with the later elements of the tax reform program.

“I think the essential message to the miners is follow the law. That is why we are reviewing. That will certainly be part of it. Originally it was not part of it. But because the President sent those very strong signals, it will be part. A review of the taxes, or the sharing, or the sharing with the mining company, and very important, the sharing with the local governments. I think those are going to be subject to the review,” Finance Secretary Carlos G. Dominguez III said at the Finance department headquarters in Manila.

Finance Undersecretary Bayani H. Agabin, who is part of the MICC executive committee, said: “It was timely because the President included that in his (State of the Nation Address). So the MICC fully supports the effort of the President to review the mining laws, and also to look at the possibility of increasing upstream industries, and processing in the downstream,” he said.

“And in that regard the MICC has several technical working groups that will undertake the review of the fiscal regime in fact we are looking, this will be part of one of the tax reform package,” added Mr. Agabin.

Asked whether the group will also review the Mining Revenue Sharing Scheme proposed in the previous Congress, Mr. Agabin replied in affirmative, but added that the government will balance environmental protection and attracting foreign investment.

“There are schools of thought when it comes to sharing. Of course the MICC agreed that priority of course is the protection of the environment but we have to balance that with what the investors that want to put their money because it will take some capital,” he said.

House Bill No. 5367, or the Act Establishing the Fiscal Regime and Revenue Sharing Arrangement for Large- Scale Metallic Mining and for Other Purposes, proposes that government as “owner” of the minerals should get 10% of a miner’s gross revenue for each year, or 55% of “adjusted net mining revenue (ANMR),” ANMR being gross revenue less production and other deductible costs but not to exceed 10% of direct mining, milling and processing costs — whichever is higher — and 60% of any windfall profit (in case the “ANMR margin” — ANMR divided by gross revenue — exceeds 50%, the government gets 55% of that threshold of 50% of gross revenue plus 60% of the excess) — on top of the national and local government taxes, as well as other fees.

On the development of downstream mining industries, Mr. Dominguez said that the government should consider whether it will be able to compete with large mineral processing firms across the region. Still, he said that there will still be a possibility of a competitive downstream industry given the weaker peso.

“Probably the second step is looking at encouraging local manufacturers to set up wire pulling companies, to set up companies that will produce tubes. But then when you look at that, you have to look at how competitive are we with the really large downstream copper processing companies in China,” he said.

“I tell you with the weakening peso, that is a very good possibility that the downstream industries will tend to be more competitive,” added Mr. Dominguez.

MICC’s review will come on top of the assessment of the Environment department’s order to shut down more than half of the country’s 41 mines due to alleged violations of environmental rules.

According to Mr. Agabin, the MICC has completed the terms of reference for the multi-stakeholder review, which will allow them to procure the experts. Mr. Agabin said that he hopes the review will start “soon.”

“The initially proposed P50million budget ( for the review) will be taken from the emergency funds of Malacañang but this was not allowed. And so the co- chairs of the MICC, the Department of Finance and the Department of Environment and Natural Resources ( DENR), agreed from their own budget to share first P10 million each to start the review process. So when that paperwork on the budget is finalized and the terms of reference we can start reviewing.”

Despite this, Mr. Agabin said that the review can be started, and that three-month review timetable will remain intact.

“The priority will be the ones that were affected by the previous order of the DENR. We want the experts to not be bypassed that is why it took some time to finalize the terms of reference. We want them to be looking at the same things,” he said.

According to Mr. Agabin, the MICC already has a “short list” for the review panel, but said it wants to look for more candidates. —