Taxes can kill

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‘It is feared that the additional taxes on mining will only push small-scale miners further
underground (no pun intended)…’

THERE are proposals now pending in the House of Representatives to impose a new regime of taxes on the mining industry.

Just a few years back, under the TRAIN 1 law, the long-standing tax regime for mining was changed, with excise taxes doubled from 2% to 4%. At that time the overall tax structure of the industry was already quite expensive, much higher than the 38% effective tax rate that some people cite, a figure actually dating back to the year 2000.

That the Philippine mining industry is not yet taxed at the level of, say, Australia, has always been cited as a reason why there is basis to raise local rate further — which may be logical only if other considerations such as logistics, fuel and power costs in the Philippines were comparable to those in Australia, yes?

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The penchant for members of Congress to raise taxes on whatever they could levy a tax on is understandable — the national government does need a heck of a lot of cash to make up for the huge deficit it is now laboring under, thanks to the negative impact of the two-year-old COVID pandemic added onto geopolitical issues around the globe that have conspired to bring the global economy (not just the Philippines, mind you) to a near-standstill.

But I wonder whether mining has become the latest “flavor of the month” because it is politically far less risky to hit miners than, say, to tax every Filipino for every cup of rice he consumes (rice consumption is one of the biggest causes of diabetes in this country, I believe) or maybe tax him for every breath he takes. Mining labors under the burden of tarnished image anyway, thanks to years of unrelenting anti-mining propaganda from a variety of interests, ranging from left-of-center NGOs to the Catholic Church, the same church that built part of its enormous wealth on the back of mining in the colonies of European nations, not to mention the fact that the Lord and Savior accomplished His mission on earth on a cross where he was nailed – nailed! – a product, no doubt, of mining!

Oops, I hear thunder in the distance!

Years back, it was tobacco, and the idea was let’s tax tobacco so people will smoke less and live a healthier life while raising funds for the government coffers. I am not sure how well that has played out because tobacco farmers are a political lot who know how to exercise their powers and flex their muscles and there’s the argument that you don’t want the tobacco farmers to go hungry, do you?

The result of the tobacco tax (part of a slew of sin taxes) is an increase in the number of smuggled cigarettes, with over P1 billion worth of smuggled cigarettes confiscated from illicit traders in 2021, equal to over P100 million in lost tax revenues. It is feared that the additional taxes on mining will only push small-scale miners further underground (no pun intended), with gold production in the Philippines not decreasing but gold sales to the Central Bank (to which all gold that is mined in the Philippines is supposed to be sold) not matching the numbers.

The new proposals also serve as a wet blanket on new investments, which is ironic given the “re-opening” of the mining industry in the last years of the Duterte Administration, thanks to Executive Order #130.

The right hand giveth, but the left hand taketh away.

The fact is, the PBBM administration is in a bind. The government is in the red. It has debts to pay. It has services to deliver. It has a public that is expecting a better life after two years of a major downturn. And it can only do these, and more, if it has funds.

So, it now has to find a way to bring in much-needed revenue, and the bright boys in Congress have focused their sights on the mining industry. An industry with a wide variety of players, some of whom will definitely go under if the proposed taxes are passed into law.

Indeed, taxes can kill.

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