Philippines miners see red on higher taxes

05-Mar-2012 Intellasia | Reuters | 7:01 AM Print This Post

The Philippines will release this month a new mining policy that would raise tax revenues and overhaul rules but which miners said on Friday will drive away investors in the largely untapped $1 trillion resource base.

The government wants to raise revenues from mining, which has attracted foreign investments but has yet to fully take off due to policy bottlenecks, to fund upgrades of its decrepit infrastructure and build more schools.

Record high prices and the unsatiable thirst for minerals of countries such as China have given it confidence higher taxes would not deter potential investors.

“There’s no need for additional taxes, what we’re looking for is consistent policy,” said Mark Williams, general manager of Sagittarius Mines Inc, the local unit of Xstrata Plc which is developing the $5.9 billion Tampakan copper-gold project in the south, the Philippines biggest mine project.

“If we make it (taxes) even higher, we won’t get the investors, we won’t get the miners. You look at the Philippines and Indonesia, already we are paying a much higher excise tax than them,” Peter Wallace, chair of Wallace Business Forum which advises mining firms, said at a three-hour spirited debate among pro- and anti-mining advocates in a packed hotel ballroom in Manila’s Makati financial district.

Philippine Finance minister Cesar Purisima has said current mining laws, including income tax holidays for start-up projects, have not created a win-win situation for the government, with Manila collecting just a little over 2 billion pesos ($47 million) in mining taxes last year, less than 0.2 percent of its total revenue.

Manila said it was studying tax policies of big resource countries like Australia as it finalises a draft executive order (EO) detailing its development agenda for the sector, including harmonising conflicting local and national mining rules.

The EO is expected to be released this month. But the president of the industry group Chamber of Mines of the Philippines said any tax-related policy would have to go through legislation and cannot be imposed immediately.


Higher taxes would appease anti-mining groups which say local communities have not benefitted from mine revenues, and have been left with denuded mountains and silted rivers.

Manila also wants to start auctioning all new mining contracts, instead of the previous first-come-first-served practice, to extract more revenue from mining projects. Miners say investors will think more than twice before bidding since not all exploration projects lead to commercial operations.

Instead of raising tax rates on heavily monitored big miners, the industry group Chamber of Mines of the Philippines said the government should strictly enforce tax laws and ensure small-scale and non-metallic mining firms pay the correct taxes and are regulated properly.

Global miner Xstrata is awaiting the draft executive policy as it seeks clarity on its Tampakan project in southern Philippines now under threat from a local ban on open-pit mining and the government’s refusal to grant an environment clearance for the mine construction.

“We’re confident the government will not ban open pit mining,” Sagittarius’ Williams said.

The project, believed to be Southeast Asia’s biggest undeveloped copper-gold reserve, is closely watched by foreign and local investors seeking to explore for minerals in the country which last year ranked as the biggest nickel producer globally after Russia.


Category: Philippines, ResourceAsia

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