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Mining Taxation in the
ASEAN
Mining Conference 2015
Sponsored by the Chamber of Mines of the
Philippines (COMP)
SOLAIRE Resort, Manila, 15 September 2015
Bienvenido Oplas Jr.
President, Minimal Government Thinkers, Inc.
Fellow, South East Asia Network for Development (SEANET)
Income Tax Witholding tax,
non-residents
Value-added
tax, GST
Corporate Personal Dividends Interest
1. Brunei 20 0 0 15 0
2. Singapore 17 20 0 15 7
3. Cambodia 20 20 14 14 10
4. Thailand 20 35 10 15 10
5. Vietnam 22 by 2014
20 by 2016
35 0 5 10
6. Laos 24 24 10 10 10
7. Malaysia 25
24 by 2016
26
25 by 2015
0 15 6
8. Indonesia 25 30 20 20 10
9. Philippines 30 32 30 30 12
10. Myanmar 25, company
35, branch
20, empl income
30, other income
35, foreigners
0 15 5, services
3-100, goods
I. Intro: Tax rates in the ASEAN
Source: http://alasoplascpas.com/publication-update.php
Source: World Bank, Doing Business, 2010 and 2015 Reports
Year Sing Brun Mal Thai Cam Myan Phil Laos Indo Viet
Rank: out of
183 countries
2010 5 22 24 88 58 135 113 126 147
out of 189 2015 5 30 32 62 90 116 127 129 160 173
Payments 2010 5 15 12 23 39 47 34 51 32
(no./year) 2015 5 27 13 22 40 31 36 35 65 32
Time 2010 84 144 145 264 173 195 362 266 1,050
(Hours/yr) 2015 82 93 133 264 173 154.5 193 362 253.5 872
Total tax
rate
2010 27.8 30.3 34.2 37.2 22.7 49.4 33.7 37.6 40.1
(% of profit) 2015 18.4 15.8 39.2 26.9 21.0 47.7 42.5 25.8 31.4 40.8
Out of 10 countries in the ASEAN, PH has the 2nd most bureaucratic, most complicated
tax system in 2010, next only to socialist Vietnam.
Things improved by 2015, moved to 4th most bureaucratic in paying taxes.
Paying Taxes in ASEAN Countries, Indicators
Source: PWC, Paying Taxes, 2009, 2012, 2015 Reports
2009 2012 2015 Report
(% of Profit) Total tax
rate
Total tax
rate
Total tax
rate
Profit tax Labor tax Other
taxes
Brunei 37.4 16.8 15.8 7.9 7.9 0.0
Singapore 27.9 27.1 18.4 2.2 15.1 1.1
Cambodia 22.6 22.5 21.0 19.5 0.5 1.0
Laos 33.7 33.3 25.8 16.5 5.6 3.7
Thailand 37.8 37.5 26.9 19.9 4.3 2.7
Indonesia 37.3 34.5 31.4 16.7 11.3 3.4
Malaysia 34.5 34.0 39.2 21.7 16.4 1.1
Vietnam 40.1 40.1 40.8 17.0 23.7 0.1
Philippines 50.8 46.5 42.5 20.5 8.0 14.0
Myanmar 47.7 25.4 0.0 22.3
Paying Taxes in the ASEAN: 2009, 2012, 2015 Reports
In 2009 Report, PH was the most tax-hungry government (local +
national) among the ASEAN 10, wanting to confiscate half of private
enterprises’ earnings.
In 2012 Report, PH government appetite to confiscate the fruits of
private enterprises’ hardship declined to 46%; in 2015 Report, further
declined to 42%. An improvement but still higher than socialist
Vietnam’s and Laos’.
Tax wise, the PH is NOT an attractive place to do business in the
ASEAN. High and multiple taxes, complicated and bureaucratic
procedures.
Neighboring countries except Myanmar offer less complicated, lower
taxes. Tax competition among ASEAN member countries is
happening, they are cutting their tax burden, except in Malaysia.
Source: PWC, Corporate income taxes, mining royalties and other mining taxes: A summary of rates and
rules in selected countries, June 2012,
Australia China India Indonesia Kazakhstan Philippines Top rate, Corp. income tax (CIT)
30% 25% 32.4% (local), 42.05% (for.)
25% 25.2% 30% nat’l, + 2% mun., 3% cities
Tax, Ore assets Life of mine
Over valid pd. mining license
25.0% 0% n/a varies
Tax, Buildings 2.5% 5% 5%, 10%, 100%
5% max 10% depends
Restrictions on use of tax losses
Yes 5 years 8 years 5 years 10 years 3/5 years
VAT charged on exports
No No No No No Yes
Ave time for VAT refund
< 1 year < 3 months < 1 year > 1 year < 6 months > 1 year
WHT Dividends 30% 10% 0% 20% 15% 15%, 30% WHT Interest 10% 10% 21% 20% 15% 20% WHT Royalties 30% 10% 10.5% 20% 15% 30% WHT Service fees
5% varies 42% 20% 20% 30%
Other payments na License fees License fees, Deadrent assess
License fees, Deadrent land, bldg tax
Deadrent Deadrent, occupation fees, mine waste & tailing fees, community tax, filing fees,…
Mining taxation, selected Asian economies
II. Quickie quiz:
“The purpose of government is to expand
government.”
True or False?
Case 1: Permits and signatures to build one base-load
power plant in the Philippines.
Case 2: Taxes, fees, permits to operate a big mining
company in the Philippines.
1. Permits to build a base-load power plant (among the nearly 200…)
(source: presentation by Romy Bernardo, EPDP Forum, July 2015, Makati)
Result Low power supply and demand, expensive electricity.
Source: ADB, Key Indicators for Asia
and the Pacific 2014.
Electric power consumption, kWh
per capita
City Residential tariff
Generation cost
Grid charges
Sydney 40 12.5 19.3
Tokyo 38 28.7 6.7
Manila 35 19.5 8.2
Auckland 33 11.7 11.9
Singapore 28 21.2 4.8
Seoul 22 16.4 2.2
Bangkok 17 13.4 2.3
Hong Kong 16 12.8 3.1
Jakarta 14 10.6 1.4
Hanoi 12 7.8 2.5
Shanghai 12 7.0 2.9
Kuala Lumpur 12 7.9 1.9
Taipei 12 8.1 2.6
Beijing 10 5.8 2.3
1990 2011
Taiwan 4,159 10,486 (‘13)
S. Korea 2,373 10,162
Japan 6,486 7,848
Hong Kong 4,178 5,949
China 511 3,298
Brunei 4,355 8,507
Singapore 4,983 8,404
Malaysia 1,146 4,246
Thailand 709 2,316
Viet Nam 98 1,073
Indonesia 165 680
Philippines 361 647
Cambodia 13 (‘95) 164
Myanmar 43 110
Laos 64 103 (‘97)
Electricity prices, January 2013, in
Singapore $ cents/kWh, except percent
Source: The Lantau Group (TLG), Global
Benchmark Study of Residential Electricity
Tariffs, May 2013.
National taxes * Corporate income tax (CIT) * Personal income tax of personnel & officers * Value added tax (VAT) * Withholding tax (WHTs) on dividends, WHT on interest, WHT on royalties, on service fees * Excise tax on minerals and imported goods * Customs duties * Capital Gains tax * Documentary stamp tax * Improperly accumulated earnings tax (IAET) * Wharfage fees * Royalty for Indigenous People (IPs) * Royalty in mineral reservation * Vehicle registration tax * Special allowance under the Mining Act * Various documents/permits required by MGB,…
Local taxes & fees * Local business tax * Real property tax (basic and SEF) * Registration fees * Occupation fees * Community tax * Mining operations tax * Environmental fees * Local wharfage fees * Regulatory/Administrative fees * Extraction fees on mineral lands * Rental fees * Mine waste and tailing fees * Mayor’s permit fee * Barangay permit * Fire department permit, sanitation permit * Provincial permit, other local taxes and fees
Mandatory Expenditures * Annual Env’l Protection & Enhancement Prog. (EPEP) * Social development and management prog. (SDMP) * Community development program * Environmental work program (EWP) * Safety and health program * Special allowance to claim owners & surface right holders
Environmental funds * Rehabilitation cash fund * Mine monitoring trust fund * Mine waste and tailings fees reserve fund * Final mine rehab. & decommissioning fund * Environmental trust fund * Mine rehabilitation fund (MRF) * Others
2. Mining taxes (and royalties, fees, contributions, mandatory expenditures…)
2009 2010 2011 2012 2013 2014 2015Q1
Gross Production Value (P Bill.) 106.1 145.3 164.2 145.0 157.1 138.6 23.72
Large-scale metallic mining 42.8 69.1 88.5 97.1 98.2 137.6 23.69
Small scale gold mining 36.8 42.9 34.6 2.3 1.1 1.0 0.03
Non-metallic mining 26.5 33.3 41.1 45.6 57.8 nya nya
Taxes, Fees, Royalties (P Bill.) 12.70 13.36 22.39 19.44 22.83 24.64 0.376
Collections by DENR-MGB 0.40 0.80 1.18 1.65 1.517 3.14 0.33
Excise Tax collections by BIR 0.72 1.31 6.99 2.21 2.49 nya nya
Taxes collected by NGAs 10.58 10.198 12.896 13.87 17.23 19.54 nya
Collections by LGUs 1.00 1.07 1.34 1.72 1.49 1.96 0.04
Mining investment fr. Revitalization
Prog. under EO 270 ($ Million)
719.5 1,053 1,197 921.7 1,453.3 693.1 nya
Gross Value Added, Mining (P Bill) 65.8 88.2 96.9 79.5 77.8 84.2 22.4
B Mining GVA share to GDP (%) 0.8 1.0 1.0 0.7 0.7 0.8 0.7
Exports of Mineral Prods. ($ Mill.) 1,470 1,929 2,840 2,337 3,412 4,013 792
Mineral X / Total X (%) 3.9 3.8 6.0 4.5 6.3 6.5 5.6
Exports of Non-Metallic ($ Mill.) 156 162 177 145 204 244 70
Non Metallic X / Total X (%) 0.4 0.3 0.4 0.3 0.4 0.4 0.5
Employment in Mining & Quarry. (000) 169 197 211 250 250 235 2310
Mining Empl. / Total Empl. (%) 0.5 0.5 0.6 0.7 0.7 0.6 0.6
Result Plateau in mining output, Philippines
Source: Mines and Geosciences Bureau (MGB), DENR,
http://www.mgb.gov.ph/Files/Statistics/MineralIndustryStatistics.pdf
III. 3 Pitfalls of high taxation philosophy
• Deadweight loss arises because of monopolistic pricing incl. govt taxation,
externalities, price controls.
• At higher tax, people will either produce less even if a product is publicly
needed, or they underdeclare output and pay lower taxes.
• Example: if taxes (CIT + VAT + royalties + LGUs’ fees + …) are equiv. to 6% of
gross mining revenues, mining output is 12 M tons.
• Raising the tax to 10% will result in that shaded area. Supposedly higher govt.
revenues but lower output to society as players willing to supply only 8 M tons.
And govt. will collect less. And there are fewer jobs…
(a) Deadweight loss
(b) the higher the tax rate, the lower the tax revenues/collection
Arthur Laffer (and JM Keynes) illustrated this…
As tax rates approach 100%, private enterprises will either stop working, or they work but
understate output; tax assessors/collectors allow it in exch. for personal and financial gains.
(c) Non-recognition of “multiplier effect” of mineral raw materials.
Contribution of mining in PH economy looks small. Just 1% of GDP,
only 0.6% of total employment, mineral exports just 5% of total exports.
Taxes, fees, only P20+ billion out of around P1.5 trillion tax collections
or just 1% of total tax collections.
Because mining’s multiplier effect is not counted. Almost all industrial
(manufacturing, construction) and services (transportation, telecom, IT,
etc.) activities use mining products. No mineral products means almost
no industrial production, very little services sectors. (Public transpo will
be horses & carabaos, not cars, buses or trains)
Analogy: GVA of poultry and pork/meat is small, maybe around 2% of
GDP. But without chicken and pork, there will be little or no activities in
many other sectors -- restaurants, litson manok/liempo stalls, chicken
cubes/fillet, other manufactured and processed food.
• Government as “owner of the minerals” will get 10% of a miner’s gross revenues
or 55% of “adjusted net mining revenues” (ANMR: gross rev. less production and
other deductible costs but not to exceed 10% of direct mining, milling and
processing costs), whichever is higher; and 60% of any windfall profit (in case the
“ANMR margin” -- ANMR divided by gross revenue -- exceeds 50%, the
government gets 55% of that threshold of 50% of gross revenue plus 60% of the
excess).
• Government’s share will be in lieu of CIT, royalty to indigenous communities,
duties on imported specialized capital mining equipment, mayor’s business
permits, other fees and charges imposed by host LGUs.
• But mining companies will still have to pay other levies: VAT, capital gains tax,
stock transaction tax, documentary stamp tax, withholding tax on passive income,
donor’s tax, environmental fee, real property tax, SEC fee,…
IV. Still, some sectors demand, “Higher taxes please.” MICC’s HB 5367
* DoF Fiscal Policy Division
Director Elsa P. Agustin told the
committee that the rates under HB
5367 would hike the government’s
total take in mining to 71%,
substantially higher than its
current take from the existing
Philippine Mining Act of 1995.
* Under present law, government
gets 50% share in profits of
foreign miners under Financial or
Technical Assistance Agreements
(FTAAs) and a 2% excise tax on
actual market value of output
under Mineral Production Sharing
Agreements (MPSAs) with local
companies, plus other taxes.
* Ms. Agustin said that the state gets an AETR of 62% under
FTAAs with foreign firms and 47% under MPSAs with local
companies.
Anti-big
mining
groups lobby,
“Higher taxes
please.”
34.5%
40.8%
52.6%
54.7%
58.3%
58.8%
79.3%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%
Papua New Guinea
Chile
South Africa
Peru
Canada
Australia
MICC Tax Structure
Source: Halcon, Nelia, COMP’s EVP. “The MICC Proposed Fiscal Regime for Mining: An
Assessment”, July 2014
Computed Average Effective Tax Rate (AETR *), Selected Countries
* AETR is the ratio of the Net Present Value (NPV) of total tax collections over the
projected life of the mine to the NPV of the total project pre-tax net cash flows (discount
rate of 10%).
Model copper mine: comparative effective tax rates (ETR)
EITI, 2009. Advancing the EITI in the Mining Sector: A consultation with stakeholders
https://eiti.org/files/MINING%20Compressed.pdf
ETR = all
payments to
governments /
value of gross
or pre-tax
profits
1. The Philippines has higher tax rates, more types of taxes, royalties,
fees, mandatory programs compared to its neighbors in East Asia.
2. More taxes, fees and permits mean lower output, higher prices. More
deadweight loss, lower revenues in the Laffer curve.
3. “The purpose of government is to expand government” is somehow
true, especially in power generation and mining sectors.
4. Existing mining taxes in the PH mainly driven by envy and/or
opportunism, both by local and national governments.
5. AETR of 79% as proposed in current congressional bills will further
worsen the tax environment to a legalized extortionary system.
6. “Higher taxes” for whatever reason is opportunism, drive away the
legal, responsible companies that want to remain honest, or force
them to become corrupt just to stay in business.
7. Any tax hike proposal should be compensated with streamlining and
abolition of other taxes and fees elsewhere.
8. People benefit from mining, directly or indirectly, even if taxes are
just 10% or zero. Fear of “environmental destruction” can be
addressed by more safety measures.
VI. Concluding Notes
http://blogs.duanemorris.com/vietn
am/2015/07/24/mining-in-vietnam-
and-the-message-isbetter-
transparency-on-fee-and-tax-
management-by-authorities/
• Payment for mining rights: Under Decree No. 203/2013/ND-CP, mining
companies have to make a payment between 1-5% of the original value of
the original ore to get mineral exploitation rights before receiving licenses.
• Royalty tariff on minerals: natural resources tax for gold, silver, alumina and
bauxite, tin, lead and zinc was not increased but was subject to 10% royalty
tariff. Ministry of Finance proposes increasing tax on exploitation of natural
resources for almost minerals at 15-50% from 1 January 2016.
• Corporate income tax for mining enterprises: Decree No. 122/ND-CP
reduced Corporate Income Tax for all companies to 25% except for mining of
precious and rare natural resources, currently at 50%. Rate will be reduced
to 40%, more than 70% of the mine areas located in difficult social-economic
areas.
Annex 1: Vietnam
http://www.pwc.com/id/en/publications/assets
/Mining-Investment-and-Taxation-Guide-
2012.pdf
Annex 2: Indonesia
Source: ADB, Mineral Resources Taxation Reform in the People’s Republic of
China: Restructuring Incentive Mechanisms for Green Development, November
2013, http://www.adb.org/sites/default/files/project-document/80114/45157-001-tacr-
04.pdf
Annex 3: China
Annex 4: Keep mined out pits as additional revenue source
Climate changes from warming-cooling- warming-cooling, inatural cycle.
Global cooling means more rains, more flooding. Need to harvest excess water
Source: Dr. Roy Spencer, UAH
From excess, destructive water to impounded, reserved water
(photos from the web)
Mined out pits need not be covered with soil and planted with trees.
Mining firms can keep them as new lakes, (a) use for tourism, fishery and
water sports, (b) sell water for irrigation, (c) other uses.
Additional revenues to compensate for heavy taxation.
Thank you.
Questions and comments,
email: [email protected]
Blogs: http://funwithgovernment.blogspot.com/,
https://seanet2.wordpress.com/
