Inconsistent policies on mining sector hit
The country’s mining companies have urged the government to address the inconsistencies in the rules governing the industry, as its growth has been stymied by policies that constantly change halfway through.
“To give an example, a few months ago, there was a multinational company that came to the Philippines because we were able to lift the moratorium (on new mining deals) and the open pit ban so they are now coming back little by little, looking at opportunities,” said Gerard Brimo, vice chair of Chamber of Mines of the Philippines (COMP), who declined to disclose the name of the interested company.
“But here comes the news that our mining taxes will go up. They looked at that and said what the heck is this, the Philippines is going to change the policies again,” said Brimo during the Pilipinas Conference 2022.
Effective taxes
Brimo, who is also chair of listed Nickel Asia Corp., is referring to the proposal approved by the House ways and means committee to raise the country’s effective tax rate on mining to 51 percent from 38 percent, impose a royalty tax of 5 percent on the market value of gross output of large-scale mining operations; a minimum government share of 60 percent of net mining revenues, and a 10-percent export tax on the market value of mineral ore exports.
The COMP said earlier that the proposed measure would again put into question the stability of policies governing the mining industry and delay the revitalization of the industry, which the Marcos administration had said would play a major role in the country’s economic recovery.
To stand any chance of reaching its full income potential, Brimo said it was imperative for an industry as capital-intensive as mining to attract large and responsible multinational mining companies with deep pockets and technical expertise.
Untapped sector
He said the sector would continue to underperform, however, if there are inconsistencies in policies.
“That’s what we want to avoid, we want to have stable policies to be able to attract good investments,” Brimo said.
The COMP earlier stressed that without a stable policy regime, foreign investors “will simply look elsewhere.”
“We are not the only country blessed with mineral resources. If further tax increases are unavoidable, the tax structure should not be onerous as to stop investments from coming in. This will sustain existing mines and encourage quality investments in the hugely untapped Philippine minerals sector, ultimately expanding considerably the tax base and providing far larger tax revenues to government,” the COMP said.
Brimo noted that the expansion of the mining industry had been “essentially in limbo” even with the lifting of the moratorium on new mining permits that had been place for nine years. “We were also able to overturn the ban on open pit mining, which is used all over the world, but that was a big problem for so many years,” he added.
Mining companies have long said that with stable policies, the country would be able to generate significant revenues that can be plowed back into public projects, especially now that metal prices are elevated. INQ
