The Market Monitor Minding the Nation's Business
By Riza Lozada
The government and the mining industry were encouraged to adopt international standards in revenue-sharing on mining operations to avoid the prevalence of disputes among players in the local mining industry.
The International Monetary Fund (IMF) and various foreign trade chambers, as well as the British Embassy, have proposed the adoption of the Extractive Industry Transparency Initiative (EITI), which is the international standard being used mainly for host communities of mining and petroleum projects to determine their share from taxes on exploitation of natural resources.
The Joint Foreign Chambers of Commerce has been encouraging mining companies to adopt EITI to make the country fully compliant with international mining rules.
The country, however, had subscribed to the standard since May 2013, but has not issued any implementing rules for it.The foreign chambers believed EITI, which is the global transparency standard for improving governance of natural resources, would ease operations of businesses in the mining and petroleum industries to make them vibrant sectors.Transparency in the sharing of revenues from taxes on natural resources has been a persistent issue in the country.
The IMF came out with a study concluding that the host communities were not getting their sufficient share of revenues from mining operations in their localities. The IMF has challenged the government to be more transparent in the manner of distributing revenues from tax collections.
In the 2015 budget, local government units (LGUs) received an appropriation of P3 billion representing shares from the collection of taxes on national wealth.
The LGUs’ share increased to P5.293 billion under the National Expenditure Program for 2016.The LGUs were entitled to mining shares based on the provision of RA 7160, or the Local Government Code.The IMF and the British Embassy previously reported inconsistencies in the distribution of LGUs’ share on tax revenues from national wealth.In its study presented to Finance Secretary Cesar Purisima, the IMF noted “the delay and insufficient shares LGUs were getting from the national wealth tax revenues.”
Such deficiencies were attributed to the inclusion in the General Appropriation Act (GAA) of these funds, which Congress passes annually, and the arbitrary yearly legislated amount appropriated may be less than the just shares of LGUs.
The IMF also noted that the long process of certification from the Department of Budget and Management (DBM) also caused delays before it could be finally released to LGUs’ treasury departments.
The British Embassy, which has been providing institutional and financial support to a multisectoral group called Bantay Kita, which espouses EITI in mining, noted discrepancies between government collection and the mining companies’ declared payments.
In 2014 it recognized the discrepancy reaching at least P58.2 million. The share from national wealth is a component of the GAA item called Allocation of Local Government Units (Algu), which included shares from specific taxes with a combined total for this year of P24.5 billion.
The LGUs’ concern on sharing of mining revenues was echoed in a report of the British Embassy.
“The extractive industries throughout the world are looked upon with concern and, at times, outright hostility. We have shown that adoption of the EITI principles and processes result in the protection of the environment, appropriate returns to investors and revenues for the government, which, in turn, can be reinvested in the community,” it said.
“People cannot live without essential minerals and hydrocarbons. What they can insist on is that extraction is undertaken responsibly. Our cooperation with Bantay Kita is a contribution toward reversing the legacy of poor practice in the Philippines, which has stifled development,” British Ambassador Asif Ahmad said.