MICC Studying Options for Mining Revenue Sharing

The Mining Industry Coordinating Council announced that it is studying two options for a new revenue sharing arrangement between the government and the mining industry.  The basic goal of the MICC is to design a scheme which adopts a single fiscal regime (from the present two) and a simple formula in determining the sharing arrangement that eliminates issues on valuation of outputs and costs of production.  Moreover, the country wants to use a scheme which supports its entry into the Extractive Industries Transparency Initiative (EITI), the internationally-accepted practice which 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 will strive to strike a balance between raising government revenue and keeping a fiscal regime that is 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 (an excise tax), FTAA (a percentage of net mining revenue), and the petroleum fiscal regime for oil and gas exploration, the MICC narrowed down the options to a percentage of Gross Margin or to a percentage of Gross Revenue, where the Income Tax paid is deducted after computing the government share.  In both cases, the government would 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. The indigenous people’s will continue to receive royalties if the mining area is located in an ancestral land or domain. Features of the new tax revenue scheme will also include regular computations for production volumes and pricing as well as quicker payouts to local government units for their shares since these will be remitted directly to their respective treasury offices. 

Part of the government share will be earmarked for an Environmental Fund which shall be utilized for government environmental programs. The Environmental Fund is not intended to cover the expenses for mine rehabilitation and decommissioning, and other necessary environmental

expenses imposed on mining firms to comply with environmental obligations as mandated by the 1995 Philippine Mining Act.

The MICC also announced that it would undertake consultations with the mining industry, civil society, and the business community before finalizing the new fiscal regime for the industry.

The MICC is a joint committee of the Economic Development Cluster and the Climate Change Cluster under the chairmanship of Finance Secretary Cesar Purisima and Environment and Natural Resources Secretary Ramon Paje.  It is tasked through Executive Order 79 to draw up the new policy and draft legislation for mining.

by Guillermo M. Luz