AboveGround
by: Atty. Francis Joseph G. Ballesteros
TAXING TO CERTAIN DEATH
“Things as certain as Death and
Taxes, can be more firmly believ’d.”
—Daniel Defoe, The Political History of the Devil, 1726
In a Reuters ASEAN Summit held a month ago, Finance
Secretary Cesar V. Purisima said that he would “push”
mining companies to give bigger shares of their
proceeds to government. He also said that government
should be getting one-half of the gross revenues from
mining. The industry, of course, has always maintained
that taxes now are high enough and that any increase
made on the current fiscal regime would definitely spell
the death of responsible mining in this country.
The Secretary’s statements were merely iterations of
what the Mining Industry Coordinating Council (MICC)
and its other key officials had been harping all along.
From the time of its inception under Executive Order No.
79 (EO 79), MICC had gone to great lengths to declare
that government must get its fair and, thus, allegedly
larger share in mining revenues under a new mining
fiscal regime. It contended that direct government
revenue from mining was only 2% of total output and
that there was a need to bring this up to as much as
10%.
These statements from MICC and from one of its
chairmen were telling. Firstly, their statements imply that
what government was getting as its share from the
mining industry, on behalf of the State as the owner
of the mineral resources, was not a “fair share.” This, in
spite of the fact that around 43% of a large-scale mining
project’s net proceeds under a Mineral Production
Sharing Agreement (MPSA) goes to government as its
share. Accordingly, government believes that it should
get half or 50% of the net proceeds. This proposal is not
only unrealistic, but will also definitely kill the project or
the company that undertakes the project if allowed to
be implemented.
Secondly, and in relation to the call for a new
mining tax regime, their statements imply further that the
prevailing mining policy needed to be changed, either
because of gaps or flaws, or that the policy itself was
not attuned to the needs of the current times. This was
the very reason such an issuance as EO 79 was
enacted in 2012: to otherwise institute reforms in an
industry that was, again allegedly, not contributing
much to the country’s economic growth. The industry
had the potential to be a driver of economic
development, but it was not there yet, and the key
factor to this was, according to government, the current
policy framework.
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But EO 79 was itself problematic. In an effort to please
both the pro and anti-mining sectors, government had
crafted an issuance that eventually neither side wanted
and that government itself was hard-pressed to
implement fully.
A 2013 survey conducted on mining companies by
The Fraser Institute based in Canada showed that the
Philippines was third from the bottom (110th out of 112)
in Policy Perception Index, yet sixth in terms of “raw”
geological potential under best practices. This means
that our country is geologically attractive for mining
investments (we still have vast, untapped mineral
resources), yet is unattractive when it comes to policy.
Part of that unattractiveness was due to the
uncertainty regarding the implementation and
formulation of current regulation, including uncertainties
over the legal and tax systems.
It has long been the position of the industry and of
large-scale, responsible mining companies like Philex
that the current mining law, Republic Act No. 7942
(RA 7942)or the Philippine Mining Act of 1995, is still a
good law and that it be allowed to be implemented
fully before any talk of change to the law or policy
should happen. When the law was enacted in 1995, its
constitutionality was immediately questioned before the
Supreme Court such that it was only in 2005 or ten years
later, when the highest court eventually declared its
validity, that its implementation was allowed. It has only
been nine years since then. The implementation of the
law has yet to reach its full potency and potential.
The fiscal regime under RA 7942 is still sound and
attuned to the current best practices of large-scale,
responsible mining companies. It is a system that
considers both the welfare of the State, as the owner of
the minerals, and of the mining contractor as the one
who has to do the dirty work for and in behalf of the
State. It is a system that works.
To drastically change the revenue-sharing
arrangement under the current mining law would work
as a noose around the industry’s neck, slowly but surely
squeezing the life out of its already moribund state. Just
the thought of it is already taxing in itself.
Vol. 2 • Issue 1 • 2014
Minelife 2014 Final Copy2.indd 4
5/8/14 9:46 AM