[miningmx.com] — BIG business groups have criticised a Philippine government plan to raise revenue by imposing new taxes on mining companies and reviewing their contracts, saying the changes would scare off investors.
The government aims to spend more on infrastructure and social services to boost long-term growth and wants to increase mining taxes and review fiscal incentives for miners to ramp up revenue.
But business groups, including the Chamber of Mines of the Philippines (CMP), said the proposed changes, in a draft executive order awaiting President Benigno Aquino’s signature, would send the wrong signal to investors.
“Any review of existing contracts will be viewed negatively as it will appear as an attempt to change rules in mid-stream – definitely a disincentive to prospective investors,” said Rocky Dimaculangan, vice president for communications for the Chamber of Mines.
The group was seeking consultation with Aquino, he said.
Mining is a potential growth sector for the Southeast Asian country that has mineral reserves estimated at $1 trillion. Foreign investors are interested in pursuing ventures, but policy bottlenecks are hampering them.
“There needs to be constancy of policy. The situation where companies are encouraged to invest at one time, only to have them see the rules change at a later time, should stop,” Dimaculangan said in a statement.
The CMP, which represents large-scale miners, issued its statement after a separate organisation of foreign business groups described the draft mining rules as “profoundly disturbing”.
“(The draft) creates great uncertainty for established and potential investors into the Philippines,” the Joint Foreign Chambers said in a Feb. 9 letter to Aquino.
“UNJUSTIFIED”
Dimaculangan said the proposed increase in excise tax on minerals and an additional “super profit tax” on the mining industry could not be justified.
“Our own research shows that other mining-intensive countries such as Chile, Australia, Indonesia and Vietnam, had lower or comparable tax rates than those currently imposed by the Philippine government,” he said.
Instead of raising tax rates on heavily monitored big miners, he said the government must strictly enforce tax laws and ensure small-scale and non-metallic mining firms were paying the correct taxes.
The group also questioned plans to widen areas closed to mining and to conduct public bidding for new mining contracts.
Dimaculangan said most mining countries use the “first-come, first-serve” policy in awarding exploration contracts because unexplored areas may not be attractive to bidders.
The proposed changes come five months after Aquino said he wanted an increase in royalties on mining as he ordered a review of mining policy to harmonise national and provincial rules.
“We are confident that the president will take a close hard look at the mining industry and pursue what is best for the country and our people,” Dimaculangan said.
Presidential spokesman Edwin Lacierda said the concerns of all stakeholders – the mining companies, the environment as well as the government – would be taken into account.
