Tax to death

UmePON hearing this from the SONA of the President last Monday, it kind of reminded of that term during the 1980s, “kadiri to death!” An expression usually used when one is paired to someone who’s not really their type. This would mean that they will never fall for that person with utmost “diri” or disgust.

Of course, this is again one of the many hyperboles of our very eloquent President. During his SONA, he said that mining companies would be taxed to death if they continue to exploit our environment. According to the President, mining companies extract mineral resources, export them to other countries for processing, and sold back to us as finished goods at prices twice or thrice the original value of the raw materials.

Let us take the statement and divide it into several phrases to make a proper analysis.

Mining companies exploit the environment. True, they abuse the environment. They subject the environment to a lot of drilling, excavation and movements. They subject people to move from their residences and relocate to safer areas, leaving their land of birth and their ancestors.

On the other hand, output from mining activities around the country comprises 1.2% of our GDP. It is relatively a small number, but the contributions to employment of this sector is great. Mining companies employ more than 30,000 people, benefitting their families and communities.

If they will be taxed to death, death pertaining to closure or stop of operations, it would mean practically death also to the employees, families and communities benefitting from these mining companies, because they fall into poverty. Thus, increase the statistics of people in poverty, a concern that the government would again need to address.

Thus, the term, “responsible mining,” was adapted, and a law was enacted which covers this, the New Mining Act of 1995 (RA 7945). I believe this law is enough to regulate the mines. It is in the implementation and enforcement of the law where the problem is. We can always enact new laws, perfect ones even, which what the President wants, but if the enforcement is the weakest link, then we cannot ever achieve sustainability.

It is not the laws created but the Legislative branch that we lack, but the enforcement and implementation by the Executive branch that is not proper, enough, and effective. It is the turf of the President. So, instead of pushing the two chambers of Congress to create more laws, he should push the people under his bureaucracy to work for what he really would like to happen, just like what he told the police. He wanted them to kill, and that’s what they did.

Next point, output of the mining companies need to be exported to other countries. Why is this so? First and foremost, these countries are ready market for the minerals that we produce. Mostly, these are developed countries that have the capability, meaning physical and technological means to efficiently process these mine ores and transform them into intermediate goods (good that are still going to be processed further to produce another good), like copper wires, which will be used for circuit boards and wires or final goods (goods that is ready to be consumed by consumers) like jewelry.

Why don’t we process these ores ourselves? Simply because we do not have the resources to process them. As a developing country, our technology is not yet that advanced, as well as we also do not have the physical capital to efficiently process them to manufacture intermediate or final goods. We can process them but the cost would be much higher, therefore, the price of the final goods will also be higher. It cannot compete with the prices of those imported from abroad.

Which leads us to the last point: final goods are imported back to our country, according to the President, twice or thrice the price of the raw materials. I believe that the final good would cost more than twice or thrice the price of the raw materials, say around ten times, or even more. The value added in the process in manufacturing is so great that the price of the good is mainly because cost was incurred to produce it and the manufacturer would like to get back the money he spent in producing the good and of course, a little mark up, which is the profit.

If these ore were processed here in the Philippines, the price of the final goods would be much higher, which will make them have a very high selling price, even higher than the imported good. Comparing the price, notwithstanding the quality of the good which we assume the imported good has better quality, a price conscious consumer will choose the cheaper one.

I am really having a very difficult time understanding the logic of the President for singling out the mining industry. And I am reflecting on why he thinks taxation is a solution or will make the companies comply.

Taxes are burdens to both the producer and consumer, and sometimes, the consumer gets more of the tax burden (share of payment in the tax charged on goods). Does the President think that if he taxed the companies, the ordinary people will be saved from the corporate greed? It is greed. These companies will always find ways to make the consumer pay for the higher tax burden, essentially not only deceiving them looking like their savior, but the truth is, the people will pay for the taxes of those goods that are produced by the sanctioned companies.

Taxes are a quick fix, much like killing addicts and pushers is the only solution to the drug problem. Again, these are pronouncements of the President that I think were not really well thought of because I think the President only did it to save face and as a favor to Gina Lopez who was not confirmed as DENR Secretary. This again proves that decisions done because of paying “utang na loob” would have a negative result. Just look at his decision appointing Mocha Uson, etc.