MANILA, Philippines – The Commission on Audit (COA) said that the government lost P2.67 billion in revenues for not charging royalties against mining companies in the Caraga region that operated outside Mineral Reservation Areas or MRAs from the years 2012 to 2016.

“The data available showed that the government lost the opportunity of collecting revenues of at least P2,668,810,678.88 for the period covering CY 2012-2016 from the aforesaid five Mining Companies due to non-imposition of royalty against mining companies operating outside the mineral reservation areas,” said state auditors in its 2017 audit report of the Mines and Geosciences Bureau (MGB).

The mining companies in question are Agata Mining Ventures, J.C.G (Greenstone) Resources Corporation, Marcventures Mining & Development Corporation, PHILSAGA Mining Corporation and SR Metal Incorporated which operated in the Caraga region, a top destination for mining companies.

The COA said mining companies which operated within MRAs paid both excise tax and 5% royalty to the government, while those 5 mentioned above that operated outside the MRAs paid only excise tax but not royalties, which cost the government P2.6 billion in revenues.

What the law says

Under Republic Act (RA) 7942 or the Mining Act, mineral resources are owned by the government. 

In the same law, the President can establish a mineral reservation area and if you operate within that area, you have to pay royalty not less than 5% of the market value of the gross input of the mineral or mineral products extracted on top of other taxes.

There’s the grey area: the law did not specify whether royalty should be charged if the operations are outside the MRAs.

But COA said there should be no distinction between a reservation area and a non-reservation area, as both are owned by the government.

“Although the implementing rules and regulations of RA No. 7942 did not include the imposition of royalty against mining companies operating outside the declared MRAs, royalty should have also been imposed against these mining companies as these companies also extract mineral resources owned by the State,” said COA.

For COA, the government should come up with a mechanism to charge royalties against these companies, such as passing a supplemental rule, or declaring those areas as MRA before granting permits to the companies. (READ: Mining in Surigao del Sur: Soil of life, soil of death)

“Collection of royalty from Mining Companies should be the prime consideration of the government for the preservation and restoration of the environment,” said COA.

The COA said the Department of Environment and Natural Resources (DENR) should recommend to President Rodrigo Duterte to authorize the imposition of royalty fee against companies which operate outside MRA.

It also called on the DENR as well as the MGB to propose a law to Congress.

Mining operations in Caraga are at the center of the land struggle of Lumad communities there.

The law provides for a mechanism where the mining company and the community can agree to a royalty payment, which will form part of the community’s trust fund. (READ: Anti-poverty chief calls to stop mining operations in Lumad lands)

Lack of record-keeping

COA also observed that documents such as Ore Transport Permits (OTP) and  Mineral Ores Exportation Permits (MOEP) were not systematically filed, therefore it was difficult to retrieve and account losses.

State auditors also said no specific person is assigned to maintain files of the Mining Management Division. “Though there were files of documents in the Office of the Economist but folders were just scattered anywhere and were not securely kept since there was no specific place or room where those records were filed,” said COA.

Because of the lack of records, the COA cannot account for the total amount of collected royalties from 2012 to 2017. – Rappler.com