TITLE:
Revenue Sharing in Mining: Insights from the Philippine Case
AUTHORS:
Ronald U. Mendoza, Tristan A. Canare
KEYWORDS:
Mining; Revenue Sharing; Royalty; Natural Resources
JOURNAL NAME:
Modern Economy,
Vol.4 No.8,
August
9,
2013
ABSTRACT: Most mining operations in developing countries are defacto
public-private partnerships, as the state typically owns the resources and
partners with a company or consortium in extraction. Revenue sharing is a
critically important element of such partnerships, and it is the starting point
for any meaningful analysis of over-all costs and benefits from mining. As a
contribution to the policy discussions on this topic, this paper tries to
clarify issues in properly evaluating public sector revenues from mining, using
data on the Philippines as a case. The main objective here is to illustrate the
main differences between macro-level and micro (firm-) level data, and explain
why such differences exist. We find evidence that macro-level revenue sharing
indicators in the Philippines fail to capture a high degree of heterogeneity in
micro- (firm-) level revenue sharing outcomes. For instance, using a sample of
large-scale metallic mines, we find that this group’s payment to the government
(as a share of revenue) is much higher than the industry average and is roughly
comparable to some foreign comparator firms. Clarifying and explaining these
discrepancies could help determine broader net benefits from extractive industries,
and thus establish whether and to what extent mining operations provide enough
net gains to the country. Our analysis suggests that industry-level analysis of
mining revenue sharing is inadequate in determining fairness and comparability
to international standards. More complete simulation of tax revenues is
necessary in accurately analyzing revenue sharing and in designing
revenue-sharing policies.