Mining companies oppose COA call for more royalties

MANILA, Philippines — The country’s biggest group of mining companies has opposed the recommendation of the Commission of Audit (COA) and the Department of Finance (DOF) to impose royalties on mining projects outside mineral reservations areas (MRAs).

The Chamber of Mines of the Philippines (COMP) issued the statement to the Inquirer on Friday after the COA reiterated its proposal to amend the country’s mining and tax laws.

According to the state auditing agency, the government has lost over P55 billion in “supposed taxes” over the past decade as those laws do not cover mining operations outside MRAs.

“Imposing additional royalties on Philippine mining projects outside [MRAs] such as that being proposed will stunt the industry’s growth and will only provide additional revenues in the near term, which we believe is shortsighted,” said Rocky Dimaculangan, COMP vice president for communications.

“It will make the Philippine mining industry uncompetitive and will deter investors from coming in, thus preventing foreign capital influx and other socioeconomic benefits, such as development of the countryside where minerals are abundant, and employment for people in rural areas,” he added.

Royalties are currently charged only for mining operations within MRAs since the government itself spends considerable amount of funds to explore these areas. Because of this, COMP believes that royalties should not be imposed in areas outside MRAs.

Dimaculangan said the government could “take a long hard look” at small-scale miners instead.

Report on MGB

“The portion of the small-scale mining sector in the country that is unregulated produces far more gold than the legitimate large-scale mining industry—yet this sector does not pay taxes and, for the most part, its output is not captured, which could otherwise form part of the country’s international reserves,” he added.

In its 2019 report on the Mines and Geosciences Bureau (MGB), an agency attached to the Department of Environment and Natural Resources, the COA said as much as P13.229 billion in possible government earnings were lost from 2018 to 2019, and up to P55.402 billion in the last decade.

These amounts could have been collected had the National Internal Revenue Code (NIRC) been amended, said the agency, which also pushed for royalty collection outside MRAs in its 2017 report on the MGB.

“The opportunity losses and/or forgone revenues from nonimposition of royalty fee to mining companies operating outside the MRAs will continue to surge until the bill seeking … the amendment of Section 151 of the NIRC will be passed into law,” the COA said.

“The supposed taxes that could have been collected had the bill been passed and signed into law can be used by the government to finance its priority programs and projects, especially in this time of financial crisis due to the pandemic,” it added.

There are several bills pending in the Senate to amend the NIRC.

DOF proposal

Under Republic Act No. 7942, or the 1995 Philippine Mining Act, mining companies are required to pay royalty taxes for operating in MRAs. The tax should not be less than 5 percent of the market value of the gross output of minerals or mineral products extracted from MRAs, exclusive of other taxes.

The DOF has appealed to the Senate to pass its original proposal of a uniform royalty rate of 5 percent for all mining operations.

State auditors have found the DOF proposal—which is applicable to all operations in and outside MRAs—to be “more advantageous to the government.”

They recommended that the MGB “support the stand of the DOF” and “make representations with the Senate to help in the early passage of the bill into law so that taxes can be collected when imposed for the benefit of our country and the people, when necessary.”

There are over 10 government-declared MRAs nationwide.

The state-owned Philippine Mining Development Corp. handles two MRAs in the Caraga region: the Diwalwal gold mine in Compostela Valley and the Dinagat Chromite-Nickel mining project.