Mining, oil tax collection in 2012 short by P2.87B – study

MANILA, Philippines – Revenue collections made by government from extractive firms in 2012 fell short by P2.87 billion ($64.45 million)*, according to a report by a transparency body.

The figures, which were presented by the Philippine Extractive Industries Initiative (PH-EITI) Wednesday, December 10, were out of an 18-month period ending in 2012.

PH-EITI is the local counterpart of Extractive Industries Transparency Initiative, a global coalition of governments, companies, and civil society that advocates transparency in the flow of revenues from natural resources.

According to the report, the 36 large-scale mining and oil and gas firms included in the survey paid a combined amount of P53.66 billion ($1.20 billion), but government agencies declared to have collected only P50.79 billion ($1.14 billion).

Agencies surveyed included the Bureau of Internal Revenue (BIR); Bureau of Customs (BOC); Philippine Ports Authority (PPA); Mines and Geosciences Bureau (MGB); Department of Energy (DOE); National Commission on Indigenous Peoples (NCIP); and local government units (LGUs).

The BIR was the agency with a wide discrepancy at P2.73 billion ($61.08 million). Consolidated data from companies indicate they paid P21.75 billion ($487.23 million), but the agency only declared it received P19.02 billion ($426.15 million) from them.

Following the BIR is the NCIP, which declared to have collected P34.02 million ($761,829.61), yet companies said they transferred P364.829 million ($8.17 million) to the agency.

Why the discrepancy?

Pocholo Domondon, assurance director at PricewaterhouseCoopers (PwC), said there are certain factors considered to understand why the disparity stretched to billions.

PwC was one of the companies which independently compiled data for the key findings of the first PH-EITI report.

The amount declared by government agencies and firms vary due to differences in accounting frameworks, explained Domondon.

“Government would not declare anything unless [it] actually received the funds from the company,” said Domondon.

In contrast, private companies declared cash flow using an approval basis. So irrespective of whether cash was disbursed or not, the payments are included in their template, Domondon said.

The PH-EITI team, comprised of more than 80 people responsible for gathering data from government agencies, encountered difficulty within the 18-month duration of their study.

Among the difficulties was securing waivers from companies to allow BIR to disclose their tax information, said Marie Gay Alessandra Ordenes, PH-EITI national coordinator.

Thus, one of the recommendations of PH-EITI is to amend the National Internal Revenue Code of 1997.

Section 270 of the Code bars the BIR from disclosing tax information of any taxpayer unless requesting parties secure a written consent from the entity it wants to investigate.

“So if the company says no to us, then we cannot see how much they’ve actually paid to [the] government,” Ordenes told Rappler.

Despite the study’s limitation in assessing the discrepancy between the collections declared by government agencies against the payments transferred by the extractive firms, Domondon said, “It should not be used as an excuse moving forward because they know for a fact that this exercise will be recurring.”

PH-EITI is set to present its full maiden report before end-2014.

The extractive industry involved materials, such as oil and coal, obtained from under the ground in drilling, mining, and quarrying.

The country’s extractive industry lags behind other production sectors in the economy. Mining and quarrying’s growth, for instance, declined by 2.7% in the 2^nd quarter of last year. – Rappler.com

(*$1=P44.63)

Iron ore mining pit image from Shutterstock