REUTERS SUMMIT-Philippine finmin says govt must get more revenue from mining

Mon Mar 24, 2014 4:56am EDT

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* Purisima open to 'win-win' formula

* Miners oppose additional tax burden

* Taxes in 2013 only 2 pct of output

MANILA, March 24 (Reuters) - The Philippine finance minister said he will push mining companies to pay bigger shares of their revenue to the government even though the industry maintains that taxes are already too high and higher ones could kill the business.

Taxation of Philippine miners is a thorny issue that has delayed development of the country's vast mineral resources. President Benigno Aquino, seeking to raise revenue from mining, has met stiff resistance.

Philippine Finance Secretary Cesar Purisima told the Reuters ASEAN Summit on Monday that the government should be getting one-half of gross revenue from mining.

Last year, according to a government agency, direct state revenue from mining was worth only 2 percent of total output, though miners also pay corporate income tax of 32 percent and other fees to different agencies.

"Where I start is 50-50," Purisima told the summit, held at the Reuters office in Manila. "The return of the government must be two-fold -- as owner of the mineral, and two, as a taxing authority."

Still, Purisima said it is the Philippine Congress that will decide the revenue-sharing formula, taking into account the industry's position.

Within the next year, he said, the government is committed to getting tax legislation passed that features "a fair sharing where both the one who took risk, the mining company, and the one who owns the assets, are fairly rewarded."

Current mining laws, including income tax holidays for start-up projects, have not created a win-win situation for the government and industry, Purisima said.

Government statistics show mining has been declining as a source of revenue. Taxes, fees and royalties from mining in the first nine months of last year came to 1.55 billion pesos ($34.2 million), only about 8 percent of the 18.8 billion pesos collected in all of 2012, according to the Mines and Geosciences Bureau (MGB).

With nine million hectares of highly mineralised areas, the Philippines is believed to have some of the world's biggest reserves of nickel, gold, and copper.

VAST UNTAPPED WEALTH?

Last year, the government valued the Southeast Asian country's untapped mineral deposits at about $850 billion. But investments and mineral production have slowed in the last three years as inconsistent policies and tax uncertainty have deterred investors.

Mining investments between January and September last year totalled $787 million, according to MGB. That compared with $807.7 million for all of 2012 and $1.15 billion in 2011.

Miners say their risks are greater than elsewhere, and investments in infrastructure such as power and roads are costlier in less developed countries such as the Philippines. Given higher costs, they expect a higher rate of return from investing.

Anti-mining groups, including the Roman Catholic Church leadership in the Philippines, say local communities have not benefitted from mining revenue and have been left with denuded mountains and silted rivers.

"We don't want a situation where we'll end up with holes in the midst of communities and once the rich minerals are gone and prices are down, they leave and the people will have nothing there," Purisima said.

"That's why we'd like to do it in the manner they do it in Canada and more advanced countries, where there is really a plan at the beginning on how to restore the environment they have," he said. (Reporting by Rosemarie Francisco and Erik dela Cruz; Editing by Richard Borsuk)

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