Revenue Sharing in Mining: Insights from the Philippine Case

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 f in d 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 .