Photos, graphs, charts and tables about Philippine mining taxation policies, with comparison with Chile's policies.

1. Mining Taxation and Regulations
Bienvenido “Nonoy” Oplas Jr.
Presentation at the Rotary Club of Taguig Fort Bonifacio
Metro Club, Rockwell, Makati City
15 July 2013

2. Outline
I. Mining Images
II. Some Taxation Theory
III. Mining Tax Policy, PH vs. Chile
IV. Conclusions

3. I. Mining Images (wanton deforestation, soil erosion…)

4. Mining Images (Protests, rallies)

5. Mine tailings, well-enclosed. When fresh, they looked like thick
reddish blood of a monster or giant animals. When they dry, they
become huge blocks of hardened red soil. @Rio Tuba.

6. Urban tailings (left, Manila
Bay, mouth of Pasig River)
Vs.
Mine tailings -- none (lower
left, Rio Tuba, S. Palawan)
The key are several rows of these
structures below (encaged charcoal +
rocks).
* Disclosure: this writer has visited Rio
Tuba Nickel Corp.

7. Mining Image (@Rio Tuba, S. Palawan) Not shown by activists
MAY 2008
Developmental stages of a rehabilitated totally mined-out area at GP-4
SEPT 2008
SEPT 2009
OCT.2011

8. 2008
2011
Another mined out area rehabilitated, @Rio Tuba
2009

9. II. Some Tax Theory
Deadweight loss of higher tax rate
* Deadweight loss arises bec. of monopolistic pricing incl. govt taxation, externalities,
price controls. Higher tax, people will produce less even if a product is publicly needed.
* Assume that corporate income tax + excise tax + royalty tax + other taxes is equiv. to
6% gross mining revenues. Mining output at this rate is 12 million tons.
* Raising the tax to 10% will result in that shaded area, higher revenues for govt but
lower mining output to society. Existing players willing to supply only 8 million tons.

10. Arthur Laffer (and JM Keynes): the higher the tax rate, the lower
the tax revenue/collection
At tax rates approaching 100%, private enterprises will either stop working, or they work
but understate output and bribe tax assessors/collectors

11. B. LOCAL TAXES/FEES
• Business tax
• Real property tax
• Registration fees
• Occupation fees
• Community tax
• Other local taxes
C. OTHER PAYMENTS
• Special allowance as defined by
the Mining Act
• Royalties to indigenous cultural
communities
III. Mining Taxation
MPSA/FTAA
Other benefits: SDMP & CSR
A. NATIONAL TAXES / FEES
* Corporate Income tax
* Excise tax
* Value-added tax
* Royalties (for those in mineral
reservations)
* Capital Gains tax
* Tax on interest payment to
foreign loan
* Tax on foreign stockholders
dividends
* Documentary stamp tax
* Vehicle registration tax

12. The difference between the cumulative present value of net
mining revenue and cumulative present value of total govt
share to achieve a 50%-50% sharing
Net Mining Revenue = Gross Output – Deductible Expenses
Gross Output = actual market value of minerals or mineral
products from its mining area as defined by the National
Internal Revenue Code
Deductible Expenses = Allowable expenditures incurred by the
Contractor directly, reasonably and necessarily related to the
mining operations as defined in Section 3 of DAO 99-56
PLUS: Additional Government Share
(Net Mining Revenue-Based)

13. A. Mining Contribution to PH Economy
* Share to GDP, 2011 = P99.2 Billion (1.0% of GDP)
* Mineral Exports, 2011 = US$ 2.66 Billion (5.6% of Total
Exports)
* Direct Employment in Mining & Quarrying, 2012 = 258,000
• Taxes, Fees & Royalties from Mining, 2011 = P17.36 Billion
B. Philippine Mining Production, 2011
* Gross Mineral Production = P 163.2 Billion;
Of which: (a) Large-scale mines = P88 Billion;
(b) Small-scale mines and non-metallic mines = P75.2 Billion.

14. Table 1. Breakdown of Tax Payment in 2010
source: Dr. Artemio Disini, presentation at the Philippine Economic Society
(PES) Conference, November 27, 2012, PICC, Manila.

15. The above table shows that:
* Actual contribution of large scale metallic mining (LSMM) to taxes not just
9 but 13 percent of gross value production, as small scale gold mining
(SSGM) sub-sector does not pay any national tax, only small local taxes and
fees.
* After deducting production cost, 60 percent for metallic and 50 percent
for non-metallic, total taxes, fees and royalties paid to the government of
P11.9 billion in 2010 comprised 43 percent of LSMM’s net revenue.
* Government share of nearly P12 billion in 2010 alone, constituting nearly
one-half of LSMMs’ net revenue is big. It is hard to find other sectors that
are taxed this much.
* The statement that large scale mining is “not taxed enough” is not valid.
The phrase “not taxed enough” applies to small scale mining.

16. How About Tax Collections from SSM? S. Cotabato and Benguet

17. Data source: Alternative Forum for Research in Mindanao (AFRIM), 2012. A
Background on Small Scale Mining in Benguet and South Cotabato and their Impact
on the Economy, the Environment and the Community
• S. Cotabato provincial collection from sand and gravel + small scale
mining only P6.6 M in 2010 and P9.7 M in 2011 are indeed small.
They target to collect P30 million in 2012.
• Benguet collection even smaller, only P8,000 in 2009 and P22,000+
in 2010. Of the 69 SSM operators, only 8 are registered and only 5
have payment records.
• With the case of these two mineral-rich provinces’ collection from
SSM, a move to limit if not stop LSMM production in certain areas
and allow only SSM will be a fiscal disaster for many LGUs
themselves, aside from labor dislocation, environmental damage.

18. Mining Regulation: Mandatory CSR and SDMP
Source: JB Baylon, presentation at DLSU Mining Forum, January 2013

19. Source: Roberto Mayorga, Chile
Ambassador to the Philippines.
Presentation at Mining
Conference, Manila, September
14, 2011.
Compare the foreign
investments and mining
taxation policies in Chile.
PH taxation way far out,
more complicated, more
extortionary.

20. Positive results in Chile look like
this – up to $67 B of new
investments by 2017.
PH projected mining investments
of only $12.3 B by 2017. And the
single biggest proj, Tampakan
mine, is in big uncertainty as an
LGU closed it.

21. High-Potential
Potential High Tax Base: Of the country’s total land area
of 30 million hectares…
Of which only 2% currently
covered by LSMM
contracts/permits
About 30% or 9 million
hectares are considered high
mining potential
With estimated inventory of:
* 8.03 Billion tons of COPPER; * 480.26 Million tons of IRON;
* 4.91 Billion tons of GOLD; * 39.66 Million tons of CHROMITE;
* 0.81 Billion tons of NICKEL; * 433.88 Million tons of ALUMINUM.
Worth some $1 trillion!
Source: Ronnie
Recidoro, COMP

22. Table 2. Projections for New Mining Projects
2011* 2012 2013 2014 2015 2016 2017 2018
Investments
(Million $)
730 1,369 2,072 3,352 4,045 2,892 812
Revenues
(Million $)
3,768 3,768 4,878 5,167 7,959 10,675 13,114 14,036
Taxes**
(Million $)
400 400 555 596 987 1,367 1,707 1,837
Total investments (2011 to 2018): $15 billion
Total Annual Revenue: $3.8b in 2011, ramps up to $14b in 2018
Taxes Collected: $400m in 2011, increases to $1.8B in 2018
Mining share in GDP: 1.7% in 2011, increases to 5-6% in 2018
*Based on MGB Sep 2012 Figures
**Estimated figures is without ITH
source: Dr. Artemio Disini, presentation at the Philippine Economic Society (PES)
Conference, November 27, 2012, PICC; basic data from MGB Sept 2012

23. Anti-mining Claims:
(1) “From 2000 to 2009, ave. contribution of mining only 0.91 % of GDP, 2.5 % of
total investments, and only 0.38 % of total employment.”
Table 3. Philippine GDP by industrial origin at constant prices, % distribution
Source: computed from NSCB table 1,
http://www.nscb.gov.ph/beyondthenumbers/2013/04122013_jrga_agri.asp#tab1
True that share of raw mining production /GDP ratio is small.
BUT without those mineral products, (a) NO industrial production , no
construction, electricity, cars/tricycles production. And (b) NO or little services
production: No malls and buildings, no retail/wholesale/banking; no cell phones &
computers, no telecomms, internet; no shipping and trucking, transport of goods
and services via horses, cows, carabaos, bicycles, rickshaw.

24. (2) “Better develop agriculture than mining.”
Should be no conflict between the two. But labor productivity and
income per worker in LSMM larger than those in agriculture in general.
Thus, the sector already provides social and economic services to the
poor more than in agriculture in general
Table 4. Some comparison between Agriculture and Mining
Source: Alonzo, Emmanuel, Issues Affecting the Mining Industry, Senate STSR Taxbits,
July-August 2012.

25. • Mining is a useful and productive economic activity. People
benefit from it even if taxes are zero. From spoon and fork,
nails and hammer, cellphones and laptops, cars and
airplanes, engines and buildings, they all came from mining.
• “Everything that humanity needs that cannot be grown, must
be mined.” – Ed Coronel
• “No to mining whatsoever” is a non-option. “Tax mining as
prohibitively as possible” is next to non-option, will drive the
legal, large and responsible mining companies and leave the
country’s mineral resources to the guerilla type small-scale
mining enterprises that are hardly taxed and regulated.
IV. Concluding Notes

26. • The statement that large scale mining is “not taxed enough”
is not valid. The phrase applies to small scale mining.
• Raising mining tax up to 10% of gross revenues appears to be
anti-investment. Should it be considered in a new law, other
taxes and fees in mining should be abolished .
• Chile’s simple and low mining taxation policies should be
considered by Philippine legislators. Where there are more
mining investments, there are more jobs created, more
community developments implemented, and more tax
revenues collected due to wider tax base.
• Existing mining rights should be respected, allow older
contracts to proceed and renew under the terms and
conditions under the Mining Act of 1995, unless it is revised.