MICC to put ‘clearer’ mining fiscal regime in place

By on July 31, 2017

In line with President Duterte’s directive to review mining rules and regulations, the inter-agency Mining Industry Coordinating Council (MICC) will put in place a “clearer” fiscal regime that will give incentives to responsible mining activities while penalizing law offenders.

The President’s pronouncement during his State of the Nation Address last week that the government would “tax to death” the mining industry essentially meant that miners must follow the law, Finance Secretary Carlos G. Dominguez III, who co-chairs the MICC, said.

“If you have a contract with the government and that contract is subject to the mining law, which says that after you do an open pit mine you have to rehabilitate the area, you have to do it. That is easily what [the President] is saying—you follow the law, and if you do not follow the law you will be penalized,” Dominguez explained.

Mining law offenders will be slapped financial penalties or closure of operations, Dominguez warned, although he maintained that they would all go through due process.

In this regard, Dominguez said the MICC met last Tuesday, during which they committed to fast-track the first-of-a-kind mining industry review being undertaken by the interagency body as mandated under the law.

As far as the fiscal regime is concerned, Dominguez said they would look into the previous proposal of the Department of Finance under the Aquino administration to retain taxes and royalties as well as impose a 10-percent surcharge.

However, Dominguez noted that “the prices of commodities are also very volatile so we don’t want to be in a situation like what happened [during former President] Marcos’ time [when] they put a tax on copper concentrate exports.”

“When I became [environment secretary of former President Cory Aquino], that was a problem—most of the mines closed because of that taxation measure. When they put that fixed tax, the industry just died. So how many people were unemployed, how many people did not have money to rehabilitate the mines. So you have to think about all these things. But you don’t want to do things that will make things worse rather than better,” Dominguez said.

As for mining revenue-sharing, Finance Undersecretary Bayani Agabin said the MICC agreed that the priority was the protection of the environment, “but we have to balance that with [gains for] the investors that want to put their money because it will take some capital.”

Agabin said the MICC already approved the terms of reference for the multistakeholder review, with the procurement of experts who would undertake it to be started as soon as budget issues have been resolved.

Also, the MICC has several technical working groups that will undertake the review of the fiscal regime, Agabin added, noting that mining taxes were part of the Duterte administration’s comprehensive tax reform program (CTRP) comprised of up to five packages.

Based on earlier drafts of the CTRP, reforms in mining taxation will be lumped together in the final package with those on carbon tax, “fatty” food tax as well as casino and lottery tax.

At the same time, Environment Secretary Roy Cimatu has issued a memorandum to strictly impose penalties on erring mining companies.

Cimatu said he wanted irresponsible mining to be penalized immediately along with the quick rehabilitation of the damaged areas and compensation to the affected individuals.

The order came after President Duterte warned in his Sona that the government would punish irresponsible miners.

Moreover, the environment chief wanted mining companies to integrate biodiversity conservation in their operations as part of their compliance.

“Mining companies should seek not merely to minimize and mitigate but, where possible, to enhance the biodiversity in areas where they operate,” he said.

For the secretary, the mining sector will greatly benefit in posing a positive image to the public to “amplify their efforts” in reducing biodiversity loss.

Director Mundita Lim of the DENR’s Biodiversity Management Bureau (BMB) said they welcomed the President’s directive to adopt more responsible measures in their operations.

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