10% tax for ore exports won’t help mining sector. Here’s why

Imposing a 10% tax on companies exporting ore overseas for processing may discourage investors from putting money into the mining sector instead of promoting business, a businessman said.

In his recent column for the Philippine Daily Inquirer, Peter Wallace expressed opposition to a pending bill in Congress which seeks to impose new taxes on mining firms.

“This would be on top of taxes that are already high, particularly on the FTAA mining permit applicable to foreign mining companies. That would certainly deter investment in the mines we need. I’d normally be much in favour of adding value locally. But then I looked at the details and realized it wouldn’t work,” the naturalized Australian citizen wrote.

For Wallace, the uncertain regulatory environment towards mining is a major turnoff for industry players.

“The history of politics in this country does not give that assuredness. Who knows what the next president six years from now will decide is his/her stance on mining. Making it even less attractive to invest the incentives that would help attract such risky capital have been removed,” he pointed out.

While Wallace supports the relaxation of policies to allow more mining activities to proceed, he said there’s no incentive for companies to set up ore processing plants in the Philippines.

“Take nickel. Indonesia already produces one-third of the world’s supply of ferronickel required to make stainless steel. Its ore reserves are about four times higher than ours, and of higher average ore grade suitable for producing 300 series stainless steel. Ours, mostly, is only suitable for low grade (200 series) stainless and production of various types of ordinary steel,” he added.

Wallace said the enormous cost of putting up processing plants for minerals in the country also deter investors.

“We already have two processing plants for limonite. And, yes, we would like to see more of these plants, but how do we make that happen? They are hugely expensive to build. The Taganito plant cost $1.7 billion. It would need a very large mine nearby, and an assuredness of constant supply for many decades to recoup the investment,” he explained.