In the mid-2000s, the Philippine government began an aggressive push to develop the country’s mining sector.The government sees the country’s abundant mineral wealth, still largely buried underground, as potentially driving economic growth and sustaining it at a high level.
The government has provided a number of fiscal incentives, including income tax holidays, in order to attract investors into the sector. Research from Action for Economic Reforms conducted in 2009 estimates that in 2004 foregone revenues as a result of these tax breaks ranged from US$66.8 million to US$244.2 million, which is 80 to 300 per cent of actual tax collections for the same year. If the highest estimate is used, foregone revenues from mining in 2004 would have amounted to 5.68 per cent of the national deficit.This is despite evidence that the determining factors for mining investors are the quality of minerals in the Philippines and their current prices, not the tax breaks, suggesting that the investments would have come anyway. 41
The share of the total tax take going to local government has also been steadily declining. It is difficult to know the reasons for the decline, but one possible explanation is that the mining companies have been withholding payments to local government units as mining’s fortune has waned. For instance, the Marinduque Council for Environmental Concerns reports that Marcopper owes the provincial government more than US$20 million of unpaid real property taxes. Mining companies in ancestral domain lands also have a patchy record in the payment of royalties to indigenous peoples.