The immediate lifting of Executive Order (EO) 79, which is the moratorium on new mining projects imposed during the time of former President Benigno Aquino 3rd, can help the Philippine economy recover from the pandemic-triggered recession, a Department of Finance (DOF) official said.
An official at the Chamber of Mines of the Philippines (COMP), an organization of some of the country’s largest mining operations, thinks so too, but said the government should forego the conditions of EO 79. These conditions include the ban on the approval of new mineral agreements until a new tax regime in mining is passed because mining firms are already overburdened by taxes.
In an interview, Finance Assistant Secretary Maria Teresa Habitan said that she remained hopeful that a new mining tax will soon be passed despite the lack of progress in both houses of Congress.
DOF is the government agency leading the Duterte Administration’s push for a new fiscal regime on mining.
In 2017, President Rodrigo Duterte has warned mining companies that he will tax them “to death” and even threatened to stop them from exporting minerals amid alleged violations of environmental laws.
“Yes, I think [new mining projects can help our economy recover from the pandemic],” Habitan told Business Bulletin, adding that the government only needs to make sure that mining companies are always compliant of the Extractive Industries Transparency Initiative (EITI), the global standard for the good governance of oil, gas and mineral resources.
She then said that the mining sector must also help push for the passage of the law that will pave the way for a new mining tax.
“The mining sector can also push for approval,” Habitan said noting that “If they prefer the status quo, they can’t have new projects.”
For his part, Rocky Dimaculangan, vice president for corporate communications at COMP, said the mining industry believes “this is the best time to lift policy restrictions that have been preventing the industry from further contributing to the economy.”
“In this time of great economic difficulty as a result of the COVID 19 pandemic, the government needs all the support it can get to fund its social amelioration programs,” Dimaculangan said in a text exchange on Tuesday.
“Mining projects that will be allowed to operate will provide additional government revenues in the form of taxes and fees, royalty fees, and increase in export value, as well as employment opportunities for thousands of Filipinos, especially those in rural areas. Removing policy restrictions besetting the industry will result in a far higher tax take for the government than imposing more taxes on the relatively few that currently operate,” he added.
The discussion on a new fiscal regime in the mining sector has been going on for years. It formally started in 2012 when Aquino issued EO 79.
When the Duterte administration took over, the government wanted to make sure that the Philippines, one of the most highly mineralized countries in the world, would benefit more from the mining sector.
As a start, the Senate decided to include in the package one of Tax Reform for Acceleration and Inclusion (TRAIN) an increase in the excise tax rate for minerals from 2 percent to 4 percent.
Dimaculangan said this should already be enough to be considered a new fiscal regime on mining.
“That is already substantial. [But] if further tax increases are unavoidable, then it should be in accordance with the structure passed by the House Ways and Means Committee, which structure consists of a profits-based royalty and a windfall profits tax, with the rates thereon tied to operating margins. We believe this is an equitable structure,” Dimaculangan said.
He pointed out that a profits-based royalty is the same structure used in other mineral-rich countries such as Canada, Peru, Chile and South Africa and that by adopting this, the structure will help sustain existing mining operations.
“Hopefully [it can] encourage quality investments in the hugely untapped Philippine minerals sector,” he further said.
In another text exchange, Albay Representative Joey Salceda, who has filed House Bill (HB) 5022 or an act establishing a new fiscal regime for the mining industry last year, told Business Bulletin that it’s possible that a new mining tax will be passed this year but added that it’s still up to the priorities of the Duterte administration.
The country’s mineral resources have an estimated value of around $1.4 trillion, but its total contribution to gross domestic product is only 0.85 percent.