GOVT TO REVIEW MINING CONTRACTS
THE Department of Finance (DOF) will review all existing mining contracts which are under the guise of mineral production sharing agreements (MPSAS) that reduces the sovereign’s share of revenues to the industry.
Cesar Purisima, DOF secretary told reporters that as regards the country’s mining sector, its focus is to get its fair share of revenue.
“The 1995 Mining Act allows for a 100 percent foreign ownership under the Financial or Technical Assistance Agreements [FTAAS], but thus far, there are only two FTAAS. The rest use the other contracts, particularly the MPSA. There [MPSA] the sharing is only 2 percent in terms of excise taxes whereas in the FTAA, it is 50/50,” Purisima said.
Purisima added that they believe that some contracts under MPSAS are supposed to be classified as FTAAS, which entitles the government to one half of the total revenues, versus the 2 percent share under the MPSAS.
“We will respect existing contracts, but we will make sure that we at the executive department will exhaust all the administrative remedies to address the irregularities in the mining sector without having to go the legislative branch of the government,” Purisima said.
FTAA can be awarded to a foreign contractor for large- scale exploration, development and utilization of gold, copper, nickel, chromite, lead, zinc and other minerals; provided, however, that the government gets the 50 percent share of the revenues.
MPSA, on the other hand, is an agreement whereby the government only levies 2 percent excise tax, provided, however, that at least 60 percent of the capital is owned by Filipino citizens.
“Only about P2 billion in excise taxes collected in mining although such figure still needs to be verified, clearly, not enough,” Purisima said.
“The background of the FTAA is it is akin to a service contract like the one used in Malampaya [Natural Gas Project]. That is the type of contract the government wants to do. If you take a look at Malampaya, Shell [ Philippines Exploration B.V] is making money, but the government is also making money. That’s the type of contract that we would like to see in the mining industry, after all they are getting our mineral reserves.”
He said that the Aquino administration would want to see more FTAAS rather than MPSAS, especially since the companies that explore the country’s mineral reserves are foreign companies.
“There will also be MPSAS, but the preference is FTAAS,” the Finance chief added.
“Some in the MPSAS would merely introduce layering on the ownership to make it appear that it is Filipino- owned or that only 40 percent is foreign- owned, and therefore entitling them to the 2 percent excise tax rather than remit 50 percent of the revenues to the government under FTAAS,” Purisima said.