Fair mining share eyed Govt wants 50-50 revenue sharing similar to Malampaya gas project

Finance Secretary Cesar Purisima on Wednesday said mining taxation will be revised to follow the 50-50 revenue sharing between the government and the investor in the mold of the service contract governing the Malampaya natural gas project.

“That’s the type of contract that we would like to see in mining,” Purisima told reporters in a news briefing.

Purisima said mining companies were taking advantage of loopholes in the system to avoid payment of the government’s fair share in revenues.

He said the changes in mining taxation would be contained in the executive order to be issued by President Benigno Aquino III soon, which would make sure that the government get its fair share in mining revenues.

“Mining laws and incentives have been taken advantage of,” he said, referring to the Philippine Mining Act of 1995, which governs projects covered by Financial or Technical Assistance Agreement and Mineral Production Sharing Agreement.

Purisima said that while the FTAA allows a 50-50 rule in revenue sharing, mining companies have tried to avoid this by applying for MPSA instead. MPSA imposes only a 2-percent excise tax on minerals.

“We want to see more FTAAs, rather than MPSAs,” he said.

Purisima clarified that the proposed changes would apply only to future projects and would not cover existing contracts.

He also said President Aquino had not seen the draft of the executive order, which is circulating among mining companies.

The Joint Foreign Chambers earlier expressed concern over the proposed mining reforms, based on a draft presidential executive order which proposes a review of all existing incentives and mining contracts.

The draft order reportedly “proposes to review all existing contracts and renegotiate or impose an increased government tax or royalty share, and potentially close out granted contracts completely.”

Purisima denied the claims, saying the proposed changes would cover only future applications.

Industry group Chamber of Mines said large-scale mining companies operating in mineral reservations already pay the government about 60 percent of the company’s gross revenues, regardless of whether it posts a profit or not.

Mark Williams, general manager of Xstrata Plc and Indophil Resources NL’s Tampakan venture in South Cotabato, said the Philippines must honor existing contracts with mining companies.

The local mining law is “a good piece of legislation and it should be maintained and consistently used,” Williams said. “Investors are looking for consistent mining policy.”

The Philippines is considering tightening rules and cutting tax breaks, according to a draft executive order obtained by Bloomberg News.

“The Tampakan project is on the international investor radar screen. It is a barometer to signal and give information to other international investors. With a successful approval phase, we believe this will generate investor confidence in the Philippines, in particular in Southern Mindanao, not only in the mining industry but other industries as well,” said Williams at the sidelines of a mining forum. –Roderick T. dela Cruz with Bloomberg, Othel V. Campos, Manila Standard Today