Mining sector stripped of ITH

The Board of Investments (BOI) has removed the income tax holiday to mining projects saying this industry is lucrative enough to continue enjoying government tax perks.

BOI executive director Lucita P. Reyes told reporters in an interview that the BOI decision came after the government's issuance of Executive Order 79, which outlines the government's new mining policy including an overhaul in the industry's fiscal regime.

Reyes also noted that mining is considered a lucrative economic activity and therefore does not need government incentives. It is also an activity that is deemed destructive to the environment.

Mining projects, however, may still be registered with the BOI and are still entitled to a mere one percent duty on their imported capital equipment.

The BOI, the country's premier investment promotion agency, has the power to decide on incentives to projects even if the grant of incentives to certain industries has been provided for under special laws. Special laws that grant incentives to certain industries like the Mining Act of 1995 are listed under the mandatory list in the Investment Priorities Plan (IPP), which is administered by the BOI. Enterprises registered with the BOI are entitled to a maximum of eight years of ITH.

A report by the International Monetary Fund has also recommended that the Philippines overhaul its fiscal regime for big projects, particularly those open to foreign investors including a repeal of the incentives provided by the Board of Investments and the Mining Act of 1995.

The BOI is still formulating the 2013 IPP, which is said to be just a simple carry over of the 2012 IPP with 13 preferred economic activities.

Meantime, the cement industry has asked the BOI to re-list the cement sector, which had been delisted from the IPP for the past five years.

Ernesto M. Ordoñez, president of the Cement Manufacturers Association of the Philippines (CeMAP), has raised this during the IPP public hearing. Ordonez has proposed that new, modernization and expansion cement projects should be included in this year's IPP.

Any move by an industry or a company to include his industry in the IPP for incentive purposes is indicative of a planned investment. It was surmised then that cement players are contemplating of pouring in new investments or expanding their existing operations.

This would be contradicting his earlier claims that the industry has only a capacity utilization of 60 percent because of the poor cement demand in the country.

In January this year, however, Ordoñez reported that total cement sales increased by 17.5 percent in 2012 as demand hit 18.4 million metric ton from 15.6 million MT in 2011 on back of huge infrastructure projects of the government and the strong business confidence.

Ordoñez said that sales have recovered as the economy becomes bullish.

Ordoñez explained said this is the first time that infrastructure budget is at its highest and there is strong business confidence in the domestic economy.

''The industry has recovered from a slump in 2005 with only 11.1 MMT demand. Demand, however, continued to improve reaching 15.5 MMT in 2010.

Demand for this year is also expected to be significantly higher because of the election year and the huge infrastructure budget, he said.

The private sector projects account for 70 percent of sales and the government with 30 percent.

''We expect to significantly increase this year because of the very strong base,'' he said.

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