Miners prod NG on LGUs’ tax share

By Jesse Edep

Researcher

http://www.businessmirror.com.ph/05302007/headlines01.html

AS the national government signaled its determination to make mining a prime growth driver by offering investors the extraction rights to 65 abandoned sites, an industry group prodded it to give the local government units (LGUs) hosting mining operations their rightful share of taxes. “Is the right amount of share being given to the local governments? Is it reaching them? Are there delays? There are questions on corruption that have to be answered,” Chamber of Mines of the Philippines (CMP) President Philip Romualdez said on Tuesday at a forum on financial transparency in the mining industry. The chamber estimates that the mining companies in the Philippines may invest as much as $10 billion between 2004 and 2012. “The industry is moving so fast. More new projects are moving forward,” Romualdez said. The chamber forecast last year investment of $6.5 billion in the six years to 2010. Overseas companies are targeting the Philippines to feed surging global demand for metals, including copper and nickel, Romualdez said, adding that the country competes with mineral-rich neighbor Indonesia to win investment flows in mining. An audit partner of the CMP had discovered cases where the share of certain LGUs in excise taxes were short, even though the mining company concerned had paid the right amount of taxes to the national government. This prompted the CMP to push for transparency, noting that shortfalls in remittances to LGUs could aggravate concerns in some sectors about whether a cost-benefit analysis justifies hosting an extractive, high-impact economic activity as mining. Specifically, the chamber is pushing implementation of the Extractive Industries Transparency Initiative (EITI) which provides a mechanism to equally serve the interests of the government, industry and civil society as the mining industry is revitalized. Part of the initiative’s thrust is to ensure that the right share of taxes reaches the local government units hosting mining sites so that the communities they serve can benefit from such funds. In 2005 the Philippines adopted the United Kingdom’s EITI—which mandates the development of a reporting template and audit plan in agreement with the mining company in an area, the local government unit and the national government. For instance, RS Bernaldo & Associate, the partner of CMP in its transparency initiative, found out that the 2004 share of the excise tax of the Philex Mining Corp. remitted by the national government to the LGU was short of 6 percent of the excise tax, money that could have been used for the local economy. In 2004 Philex Mining Corp. passed on to the government 76.8 million worth of excise tax. As mandated by law, 40 percent of the entire excise tax was distributed by the national government to the LGU. This should be 30.7 million, but the LGU only received 28.8 million. “If the government is receiving a hundred million a year, the question I want to know is how the government is utilizing the money,” Romualdez said. “As far as mining is concerned, we are very happy to be the catalyst for sustainable development. What we need is a catalyst for growth.” Mining activities will provide revenues to the local community, which will be used to invest in livelihood projects or infrastructure-related activities beneficial to the local economy so they will germinate and be nurtured, Romualdez stressed. He said: “This is about bringing issues to the surface that will help the people understand the impact of mining and the benefit it could give to the community.” Mining companies, he added, cannot “continue to be in the dark,” paying taxes to the national government without any assurance that the local government or communities are getting their just share. Philex Mining Corp.’s corporate environment and community relations manager Victor Ma. A. Francisco said the delay in payment or the under-remittance of the LGU’s share of taxes deprives those concerned of funds vitally needed for development. “It’s is unfair for us and to the people in the locality; [the money] should have been used for the development of their education and health, among many others,” he said. Earlier, Mines and Geosciences Bureau director Horacio Ramos said the government may jointly develop with investors, or sell the mining rights of more than 65 abandoned mines. Environment and Natural Resources Secretary Angelo Reyes transferred to Philippine Mining Development Corp., the corporate arm of the Department of Environment and Natural Resources, the mining rights to more than 65 abandoned mines with a combined land area of 68,625 hectares. Overseas companies, including Anglo American Plc., the world’s secondlargest mining company, are partnering with local miners in exploring in the Philippines, which the government estimates may have $1 trillion in mineral wealth. The companies plan to benefit from global demand for raw materials driven by China. Philippine mining development “may be able to generate revenue by bidding out these cancelled mining rights,” Ramos said in a phone interview in Manila Tuesday. “The government can also opt to develop these projects with the private sector” through state-run Natural Resources and Mining Development Corp. --With Bloomberg