Gov’t eyes share in gross revenue, net profit of miners

By: Riza T. Olchondra, December 21st, 2012 12:50 AM

The Mining Industry Coordinating Council (MICC), an inter-agency body spearheading the implementation of the government’s mining policy reforms, is considering endorsing a revenue-sharing scheme wherein the government would get a share in the gross revenue as well as in the net income of mining firms, Environment Secretary Ramon Paje told reporters.

“The option of getting a fixed percentage of the topline or revenue and also a percentage of the net income is something we are inclined to take. But we are still studying what the percentage should be. There is also the oil and gas scheme, which is something like 60-40. The DTI [Department of Trade and Industry] is leading the study,” Paje said.

The chosen revenue sharing scheme would later need to be legislated for implementation, Paje said. When mining reforms get implemented with a revenue sharing scheme, Paje said the government was hoping that mining could contribute 4 to 5 percent of gross domestic product (GDP) from the present 1 percent.

There are two ways the government gets its share from mining. One is under a mineral production sharing agreement, or MPSA (basically an excise tax), and another through the Financial or Technical Assistance Agreement, or FTAA (a percentage of net mining revenue).

The DTI said the MICC was aiming to design a scheme that would adopt a single fiscal regime from the present two and a simple formula in determining the sharing arrangement that would eliminate issues on valuation of outputs and costs of production.

The Chamber of Mines of the Philippines and individual miners have either declined or not responded to requests for comment as of press time. “We have yet to see the tax options being considered by the MICC and we will consult our members before commenting on these options,” the industry group said.

The country wants to use a scheme that supports its entry into the Extractive Industries Transparency Initiative (EITI), the internationally accepted practice that makes the payment and collection of all mining-related fees and taxes paid by mining companies to national and local government units more transparent through standardized disclosures.

The new scheme, the DTI said, would strive to strike a balance between raising government revenue and keeping a fiscal regime that would be competitive with other developing countries. The arrangement will include a Peza-type arrangement, which processes and facilitates all mining industry requirements through a one-stop shop in new areas designated as mining zones.

From a range of options for computing government share, which included the current systems of MPSA and FTAA, and the petroleum fiscal regime for oil and gas exploration, the MICC narrowed down the options to a percentage of gross margin or gross revenue.

In both cases, the government will use international benchmarks for metals prices available on the London Metals Exchange as well as for internationally accepted cost for mineral ore production.

The government’s share will be earmarked for the national government and local government units.

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