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Salceda renews call for mining tax regime, trust fund during national confab of mining stakeholders

July 29th, 2021

Salceda renews call for mining tax regime, trust fund during national confab of mining stakeholders; House tax chair says mining industry a potential job creator post-COVID

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) called for the passage of the proposed fiscal regime for the mining industry in his keynote speech during the Extractive Industry Transparency Initiative (PH-EITI) National Conference today.

Salceda emphasized the natural wealth potential of the Philippines, but observed key deficiencies in the country’s extractive industry governance framework, some of which can be resolved by a “coherent tax regime.”

“The country is the fifth most mineral-rich country in the world for gold, nickel, copper, and chromite. It is also home to the largest copper-gold deposit in the world. Estimates suggest that up to 840 billion dollars of untapped mineral wealth is in Philippine soil,” Salceda said.

“This is not to mention the 17.1 billion barrels of oil deposits that China’s Ministry of Geology and Mineral Resources estimates to be in the Spratlys, or the 190 trillion cubic feet of natural gas that the US Energy Information Administration believes to be in the area. These resources, if extracted and managed properly, could make the Philippines one of the richest countries in the world,” Salceda added.

Salceda noted that although the issuance of Executive Order No. 130, amending Section 4 of Executive Order No. 79 s. 2012, lifted the moratorium imposed by the latter on new mining agreements, the Executive Order still has areas for improvement.

“First, neither Congress nor the Department of Finance, the country’s fiscal policymakers and fiscal administrators respectively, are given a specific role in this process by the new EO,” Salceda said.

Salceda also observed that the EO delegates some powers that are not supported by law, including the power of the Department of Environment and Natural Resources (DENR) to negotiate tax agreements with miners.

Salceda also says that it is the DOF that has the experience in financial management, and should therefore negotiate revenue sharing agreements on the government’s behalf.

High potential in mining sector

Salceda however emphasized the high potential of the mining sector post-pandemic.

“As the world shifts towards electric-powered transport, and as the digital economy continues its ascent, the global economy will require more minerals, especially nickel and copper, which we abound in. Nickel prices are once again in 5-year high levels. So is copper and cobalt, elements needed for e-vehicle batteries,” Salceda said.

“Regardless of the grade of minerals we produce, demand is high across the board. It can only mean well for our mining industry’s bottomlines in the medium-term,” Salceda added.

Salceda also emphasized the revenue-generating potential of the industry, if a tax regime is enacted.

“The tax revenues are also crucial for economic recovery. The proposed regime will generate P7.2 billion in incremental revenues on the first year and P37.9 billion over the next 5 years. These are closed-group estimates. They are probably conservative, as more mining agreements are made and as mineral prices continue to boom. So, these revenues will play an important role in helping stabilize our fiscal situation,” Salceda said.

Salceda also added that the industry could create well-paying jobs post-pandemic.

Salceda however stressed the need for a mining trust fund supported by tax revenues from mining, as a “rainy day fund” for when mineral prices are low.

“Of course, that’s [high prices] not forever. Manufacturers will find ways to reduce metallic content when the metals get too expensive. When that happens, prices will inevitably fall. We must be ready. The tax regime is not everything, but it’s a necessary step we cannot skip,” Salceda said.

“I am not against the mining industry itself. Indeed, I have frequently touted it as a potential job creator post-pandemic. The value that we could create with the mineral price boom is too great to miss. But the opportunity would also be a great waste if we are unable to set revenues aside for the future,” the House tax panel chair concluded.

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