May 18 (Bloomberg) -- The Philippines, which may have $1 trillion in mineral wealth, might unify the overall tax rate for some new mine projects by doubling the sum paid by less- profitable ventures, according to a draft order.
The companies will pay 50 percent of revenue after expenses irrespective of their so-called rate of return, according to a copy of a draft order obtained by Bloomberg. Previously, those with a rate of return less than 20 percent paid 25 percent of revenue after expenses, while those above 20 percent paid 50 percent of revenue. The order would remove the lower rate.
The Southeast Asian nation, rich in copper and nickel, wants to balance its bid to attract $6.7 billion in investment in 24 priority mines by 2010, with ensuring that it benefits from the income generated by the developments. The changes will apply to new mines with no restrictions on overseas ownership.
``The government wanted to simplify the fiscal regime, and to ensure that there's no abuse of the system,'' Peter Wallace, director of the Australia-New Zealand Chamber of Commerce in the
The government's 50 percent share is to include existing corporate taxes and fees imposed on mining companies, as well as the export tariffs on minerals. If these add up to less than 50 percent, the balance will need to be paid.
`Equitable Sharing'
There will be ``a more equitable sharing of benefits,'' Environment and Natural Resources Secretary Angelo Reyes said late yesterday. ``The contractor gets a reasonable return on its investments, while the government gets its reasonable share from the utilization of the country's mineral resources.''
The government will collect its share of mining revenue only after the company running a mine has recovered the expenses incurred in starting operations, Reyes said. Net mining revenue is defined in the order as gross output less deductible expenses.
``The review of the administrative order has been finished,'' Reyes said at a conference, without giving details of when it would be enacted. The draft order ``is now in its polishing stage,'' he said.
A so-called rate of return is one measure of a company's profitability: it may be calculated by dividing stockholders' equity into net income.
``They have to talk to the mining companies here, and find out the direct impact on investment before making a decision,'' on the planned tax-regime change, said Wallace, the director of the Australia-New Zealand Chamber of Commerce.
The draft order, if implemented, applies to companies covered by so-called Financial and Technical Assistance Agreements, which do not have restrictions on overseas ownership. Mine projects that do have limits of overseas ownership, and are typically covered by so-called Mineral Production Sharing Agreements, are not affected by the planned change.
To contact the reporter for this story: Luzi Ann Javier in
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