Modern Economy, 2013, 4, 520-534
http://dx.doi.org/10.4236/me.2013.48056 Published Online August 2013 (http://www.scirp.org/journal/me)
Revenue Sharing in Mining: Insights from
the Philippine Case*
Ronald U. Mendoza, Tristan A. Canare
Policy Center, Asian Institute of Management, Makati City, Philippines
Received May 15, 2013; revised June 15, 2013; accepted July 15, 2013
Copyright © 2013 Ronald U. Mendoza, Tristan A. Canare. This is an open access article distributed under the Creative Commons
Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is
properly cited.
ABSTRACT
Most mining operations in developing countries are defacto public-private partnerships, as the state typically owns the
resources and partner s with a company or con sortium in extr action. 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 th is topic, this paper tries to clarify issues in properly evaluating public sec-
tor revenues from mining, using data on the Philippines as a case. The main obj ective here is to illustrate the main dif-
ferences 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 inade-
quate in determinin g fairness and comparability to internatio nal standard s. More complete simulation of tax revenues is
necessary in accurately analyzing revenue sharing and in designing revenue-sharing policies.
Keywords: Mining; Revenue Sharing; Royalty; Natural Resources
1. Introduction
In most cases, mining operations are defacto public- pri-
vate partnerships because the state usually owns the
minerals while the company does the extraction. Reve-
nue sharing is thus a critical component of this partner-
ship and is the starting point of cost-benefit analysis for
mining. Like other mining countries, the Philippines lev-
ies taxes, royalties and other fees to mining firms operat-
ing within its borders. Using macro-level and firm-level
data, we did a first pass analysis of mining revenue shar-
ing regime in the Philippines.
Government data show that, on the average over the
last four years, roughly 10% of revenues from the entire
mining industry were paid to the government. This figure,
however, should be interpreted with caution as there is
much heterogeneity in the cost and revenue structure
across different types of mines. For instance, using a
sample of two large-scale metallic mines with publicly-
available financial statements, we found that this grou p’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. This im-
plies that tax payments (as a share of revenue) are widely
different across firms. Although there are miners that pay
taxes (as a share of revenue) that are similar to interna-
tional comparators, some firms must be pulling down the
figures to the current industry average.
There ar e several rea sons for wide discrepancies in tax
payment across firms. These firms operate in different
contexts and on different minerals. Mines are also at va-
rying stages in their life cycle. Mining companies also
differ in their economic scope (i.e. large scale versus
small scale), with possible implications on their techno-
*This paper was presented at the 2012 Philippine Economic Society
Annual Meeting—Session on “How Should the Philippines Reform Its
Mining Tax Law?” The authors also benefited from comments during a
p
resentation at the Asian Institute of Manage
m
ent (AIM) Policy Center.
Any remaining errors of commission or omission in this article are the
responsibility of the authors. The views and analysis expressed herein
do not necessarily reflect the policies of the Asian Institute of Manage-
ment.
C
opyright © 2013 SciRes. ME

R. U. MENDOZA, T. A. CANARE 521
logy that affect costs of operations. In addition, govern-
ance issues—and possible tax evasion—especially for
the less regulated small scale mining sector could also be
rampant, with direct consequences on over-all revenue
figures. Financial conditions also affect tax payments—
firms with negative profit pay smaller taxes.
All these suggest that industry -level analysis of mining
revenue sharing is inadequa te in determining fairne ss and
comparability to international standards. More complete
simulation of tax revenues across different types of
mines is necessary in accurately analyzing revenue sha-
ring and in designing revenue-sharing policies.
As a contribution to the policy discussions on this
topic, this paper tries to clarify issues in properly evalu-
ating public sector revenues from mining with a focus on
the Philippines. The main objective here is to illustrate
the main differences between macro-level and micro
(firm-) level data. At the national level, data on govern-
ment revenue from mining is an aggregation of all min-
ing firms and therefore cannot take into account hetero-
geneity at the firm level. Hence, we turn to an analysis of
firm-level data, by analyzing financial statements of se-
lected mining companies with publicly available finan-
cial information. This offers a potential way forward to
analyze from the bottom-up the industries’ contributions
to government revenues, as this financial information is
widely available as part of documents submitted annually
to the Securities and Exchange Commission (SEC).
Nevertheless, many financial statements are not disag
gregated enough for this kind of analysis, therefore limi-
ting our sample of mining firms. In addition, there are
limitations in using finan cial statements as our main data
source, as these documents do not indicate all the details
needed . Hence the ana lysis here should b e conside red an
initial comparison, using data sources with fairly similar
information and applying the same methodology to cal-
culate the revenue share of government. Finally, we con-
sider that the financial statements are truthful and do not
reflect issues such as under-reporting of output value and
over-reporting of expenses, which are a possible practice
in areas with weaker corporate governance and regula-
tory oversig ht .
In the next sections, we analyze the components of
public sector revenues from mining, followed by an ana-
lysis of the actual data on public sector revenues turning
to macro-level indicators as well as firm-level data. A
final section outlines some of the main findings as well
as directions for future research.
2. Components of Government Share on
Mining Revenue
2.1. Government Receipts from Mining
The Philippine public sector obtains its share of mining
revenues through taxes, fees and royalties both at the
local and at the national levels. Table 1 summarizes the
various payments mining firms have to remit to the gov-
ernment, as well as the specific government agency re-
ceiving it. Each of these items is briefly described here.
Table 1. Taxes, royalties and fees in the Philippine mining industry.
Item Rate Collecting Agency
Royalty 5% (for sites within mining reservation ar eas) MGB
Excise Tax 2% of Sales BIR
Corporate Income Tax 30% of Taxable Income BIR
Additional Government Share
(for mines under FTAA) 0.5*NMR - BGS (paid only if BGS is less than 50% of NMR) MGB
Mining Fees and Charges MGB
Customs Duties (for impor ted inputs) BOC
VAT BIR
Withholding Taxes BIR
Business Tax Maximum 2% of Sales Local Government Unit (LGU)
Real Property Tax LGU
Registration Fee LGU
Occupation Fee LGU
S
ources: [1] and [2].

R. U. MENDOZA, T. A. CANARE
522
 Royalty and Excise Tax. Mining firms pay a fixed
share of their revenues to the government in the form
of royalty and excise tax. Royalty rate is 5% of gross
revenue for mines within mineral reservation areas
(MRAs). Excise tax is 2% and paid by all firms re-
gardless of their mines’ location. Royalties are col-
lected by the Mines and Geosciences Bureau (MGB)
while excise taxes are collected by the Bureau of In-
ternal Revenue (BIR). Mining royalties, as differenti-
ated from taxes, comprise the payments made by
mining firms for using natural resources that, by vir-
tue of law, are owned by the state [3]. The MGB is
proposing to have all mines declared as mineral res-
ervation areas, and this is welcomed by interest
groups. In contrast, this was met with disapproval by
mining firms citing that this will make the Philippine
mining sector less competitive.
 Corporate Income Tax. Mining firms are subject to
Corporate Income Tax (CIT) at the regular rate of
30% of total taxable income. The CIT is collected by
BIR.
 Other Taxes and Fees to the National Government.
These taxes include Value Added Tax (VAT) and
Customs duties paid on imported inputs, withholding
taxes (WHT), the waste and tailings fee, and other
fees charged by MGB. VAT and WHT are collected
by BIR and Customs duties by the Bureau of Customs
(BOC).
 Local Government Taxes and Fees. These are taxes
and fees paid to the local governments with jurisdic-
tion over the mine. These include business tax, real
property tax, registration fee and occupation fee. The
occupation fee on extraction is PhP50.00 per hectare
or fraction thereof per year and is shared by the prov-
ince (30%) and city/municipality (7 0%).
 Additional Government Share. This is app licable only
to mines under the Financial or Technical Assistance
Agreement (FTAA) scheme1. After the mine’s reco-
very period, the firm is required to pay an Additional
Government Share (AGS). The AGS is computed as
follows: first, the Basic Government Share (BGS)—
the sum of all taxes, fees and royalties paid by the
firm to the national and local governments—is calcu-
lated. Then, the Net Mining Revenue (NMR) is com-
puted. NMR is gross revenue from mining less oper-
ating expenses, interest expenses, mine development
expenses, and royalty to land owners. If BGS is less
than 50% of the NMR, the difference is paid to the
government as the AGS. Therefore, for mining firms
under FTAA, the total receipts of the government are
50% of the NMR.
 Mining Funds. Aside from the taxes, royalties and
fees discussed above, mining firms are also required
by law to maintain a Contingent Liability and Reha-
bilitation Fund (CLRF) in a government depository
bank. Although CLRF does not accrue directly to the
government, the public stands to benefit from these
funds as these will be used in case of damages
brought by the mines and to rehabilitate the site after
minerals have been fully extracted. The CLRF has
three components—the Mine Rehabilitation Fund
(MRF), the Mine Waste and Tailings Reserve Fund
(MWTRF) and the Final Mine Rehabilitation and
Decommissioning Fund (FMRDF). The MRF is used
for rehabilitation of areas affected by mining opera-
tions. MWTRF is the fund generated by the accumu-
lation of the mine wastes and tailings fee, and
FMRDF is used to rehabilitate the mine areas after it
has been decomm i ssi oned [4 ].
 Incentives. Some of the various taxes, fees and royal-
ties due to the government are offset by the incentives
offered to mining firms. The incentives for mining
firms are outlined in the Mining Act of 1995. These
include Income Tax Carry Forward of net operating
loss, Income Tax Accelerated Depreciation, and in-
centives for pollution control devices.
2.2. Mining Revenue Allocation Scheme
The different taxes and fees (as well as exemptions) are
channeled through various agencies in government with
different implications on the amount of resources under
the remit of each agency or level of government. Figure
1 shows a graphic illustration of how mining revenues
are shared across the public sector. Gross mining revenue
refers to the gross value of sales generated through mi-
ning activities. From this base amount, royalties, excise
tax and local government business tax are computed.
Corporate Income Tax is computed using total taxable
income as base, which is computed by deducting reve-
nues with expenses and other deductible items. For mines
under Financial or Technical Assistance Agreement
(FTAA) scheme, the government also gets an Additional
Government Share (AGS), which is the difference be-
tween 50% of the NMR and basic government share. It
has been noted by some analysts that the government
would like to pursue more FTAA arrangements, instead
of MPSA arrangements which are claimed to yield less
government revenues. The supposed higher government
share of mining revenues inFTAA is due to the AGS,
1There are two mining contract schemes for private miners. One is the
Mineral Production Sharing Agreement (MPSA) and the other is the
Financial or Technical Assistance Agreement (FTAA ). Local mines are
usually under MPSAs, while the FTAA is intended for large-scale
mining investment of foreign firms. The following are the primary
differences between MPSA and FTAA. MPSA requires 60% - 40%
Filipino-foreign ownership; FTAA allows up to 100% foreign owner-
ship. Required capitalization of firms under MPSA is PhP2.5 million;
for firms under FTAA, USD4 million. Mining rights under MPSA is
limited to extraction of minerals; mining rights under FTAA include
exploration, development and extraction [5-7].

R. U. MENDOZA, T. A. CANARE 523
Figure 1. Philippine Mining Revenue Allocation Scheme. Notes: Illustration draws on information reported in [1,2,4]. a) Net
Mining Revenue = Gross Sales − Operating Expenses − Interest Expenses − Development Expenses − Royalty to Land Own-
ers; b) Basic Government Share = Sum of all taxes, royalties and fees paid to the national and local governments; c) VAT and
Customs Duties on imported goods and services; d) S et by LGUs; e) PhP75 or PhP100 per hectare per annum, PhP5 per hec-
tare per annum for exploration.
which is absent in MPSA. AGS is essen tially used to tax
resource rent, but it is not progressive, unlike the instru-
ments used by other governments to tax excess profit [1].
However, pursuing more FTAAs is easier said than
done, and this is highlighted by the disproportionately
large amount of MPSAs compared to FTAAs. There are
currently 339 existing MPSAs as opposed to only six
FTAAs. Analysts cite various reasons why mining firms
choose MPSA over FTAA. One is amount of capitaliza-
tion—firms who want to apply for an FTAA are required
USD4 million capitalization compared to PhP2.5 million
for MPSA. Another is the longer application process for
FTAA. FTAA requires the approval of the President of
the Philippines while MPSA is approved only by the
DENR Secretary. FTAA is generally intended for foreign
firms as this allows up to 100% foreign ownership of the
investing company.
Aside from royalty, income tax, excise tax and busi-
ness tax, the government also receives other fees and
taxes not based on income or revenue. These are VAT
and duties on imported inputs, withholding taxes, fees
imposed by the MGB, and local government fees and
taxes. Strictly speaking, therefore, these items cannot be
considered as government share in mining revenues.
Nevertheless, these are still payments made by mining
firms to the government, and these parts of the over-all
payments to government are not unique to mining active-
ties.
3. An Analysis of Data on Government
Mining Revenues
In order to provide a clearer picture of the government
share from mining, this section contains an analysis using
both macro- (industry-level) and micro- (firm-level) data.
One important caveat in the analysis of industry-level
data is that it fails to take into account the heterogeneity
among individual firms. Hence, we also turn to firm-
level data, by analyzing financial statements of selected
domestic mining companies with publicly available fi-
nancial information. This offers a potential way forward
to analyze from the bottom-up the industries’ contribu-
tions to government revenues, as this financial informa-
tion are widely available as part of documents submitted
annually to the Securities and Exchange Commission
(SEC). Most large companies also post their financial
statements in their website. However, some financial
statements are not disaggregated enough for this kind of
analysis. Analyzing financial statements in order to cal-
culate the tax payment as a share of total mining revenue

R. U. MENDOZA, T. A. CANARE
524
of the firm would also face some limitations, as these
documents do not indicate all the details needed. Never-
theless, the analysis here presents a first pass estimate of
the revenue share of government. We implement this
standard approach using financial statements of Philip-
pine mining companies and selected foreign comparators
in order to arrive at some initial comparison.
3.1. Macro Level Data
Table 2 shows the amount of government revenues de-
rived from mining against the sum of all government re-
venues. The share of mining revenue in total govern-
ment receipts averaged 0.87% from 2007 to 2010, al-
though figures for the latter two years are much higher
than the previous two. The share of mining in total go-
vernment revenue is significantly less th an the industry’s
share in total Philippin e GDP, as high lighted in Figure 2.
Reference [8] pointed out that this is an indicatio n of low
revenue contribution from mining, and attributed it to the
large share of small-scale mines (which pay small
amount of tax) in total production, old mines nearing the
end of operations, and new mines that are still enjoying
tax perks.
Further, Table 3 shows the amounts disbursed by
mining firms to the government, both at the national and
local levels, disaggregated into the main tax instrument
(or fee) categories. Table 4 presents the share of each
category in the total.
Data shows that Taxes Collected by National Gov-
ernment Agencies, mostly composed of income taxes,
account for the largest share of disbursements made by
mining firms to the government. A far second in 2010
was Excise Taxes Collected by BIR, with 9.72% share,
followed closely by Taxes and Fees Collected by LGUs
with 8.01%. Fees, Charges and Royalties Collected by
DENR-MGB come in last at 5.88%, although the latter
three items’ rankings frequently interchange in the last
four years.
Table 2. Government revenues, total and received from mining, (in Billions PhP), 2007 to 2010.
2007 2008 2009 2010 Average (07 to 10)
National Government Revenue (A) 1137 1203 1123 1208 1168
Total LGU Revenue from Local Sources (B) 79 90 92 98 90
Total Revenue (A + B) 1216 1292 1215 1306 1258
Total Revenue from Mining (National and Local) 10.4 7.7 12.4 13.4 11.0
Share of Mining Revenue to Total 0.9% 0.6% 1.0% 1.0% 0.9%
Source: Data from DOF and MGB; authors’ computations. Note: Figures may not add up due to round ing.
Table 3. Components of mining firms’ payments to the government, (in Billions PhP), 2007 to 2010.
2007 2008 2009 2010
Fees, Charges and Royalties Collected by DENR-MGB/LGUs 0.77 0.56 0.40 0.80
Excise Tax Collected by BIR 0.94 0.66 0.72 1.30
Taxes Collected by National Government Agencies 8.37 5.95 10.27 10.20
Taxes and Fees Collected by LGUs 0.36 0.52 0.99 1.07
Total 10.45 7.69 12.38 13.37
Source: Data from MGB. Note: Figures may not add up due to rounding.
Table 4. Components of mining firms’ payments to the government, (% Shares), 2007 to 2010.
2007 2008 2009 2010
Fees, Charges and Royalties Collected by DENR-MGB/LGUs7.4% 7.3% 3.2% 6.0%
Excise Tax Collected by BIR 9.0% 8.6% 5.8% 9.7%
Taxes Collected by National Government Agencies 80.1% 77.3% 82.9% 76.2%
Taxes and Fees Collected by LGUs 3.4% 6.8% 8.0% 8.0%
Total 100% 100% 100% 100%
Source: Authors’ computations based on data from MGB. Note: Figures may not add up due to rounding.

R. U. MENDOZA, T. A. CANARE 525
Figure 2. Share of mining in total national revenue and
GDP, 2007 to 2010. Source: Data from NSCB, MGB and
DOF; authors’ computations.
A rather direct way of looking at the actual share of
the government in mining revenues is to directly com-
pare the total revenues earned by all mining firms with
the total amount of taxes, royalties and fees they paid. As
shown in Table 5, an average share of roughly around
10% of all mining revenues goes to the government. A
casual comparison might indicate that this is lower than
the 15.3% calculated by the professional services firm
PricewaterhouseCoopers (PWC) in a study of 22 mining
firms from 20 countries in 2008 [9]. It must be noted,
though, that the number of firms surveyed relative to the
number of countries covered is small. The study there-
fore is not meant to be representative of each country
included. Figure 3 shows a comparative illustration of
the share of governments in mining revenue across coun-
try groups included in the PWC survey.
3.2. Firm Level Data
The aggregate tax indicators only paint a partial picture
of the government share. These macro-level indicators do
not capture the heterogeneity in tax and fees payments
across mining companies which have varying mining
lifecycle points at any one point in time. For instance, a
newer mine may be paying less in the beginning due to
tax incentives in the early stages of mining operations.
An older mine could be paying the peak of its tax pay-
ments already, due to extraction schedule.
A detailed financial statement with fully disaggregated
Figure 3. Government share in mining revenues, Selected
Mining Firms and Regions, 2008. Source: Survey data from
[9].
data on revenues, taxes, fees and royalties is necessary in
order to complete the firm-level snapshot. Corporations
registered with the SEC are required to submit financial
statements annually, and they often post these in their
websites if the company has one. However, one impor-
tant caveat is that there is no required disaggregation of
data on revenues and expenses. Consequently, there are
firms that do not have more detailed financial statements
that allow us to distinguish between different types of
taxes and fees, as well as on where revenues were deri-
ved from3.
Nevertheless, the financial statements of two4 Philip-
pine mining firms were sufficiently detailed for our
analysis. The financial statements of these corporations
have enough disaggregation to reasonably isolate taxes,
fees and royalties from other payments and expenses.
Their source of revenue is also limited mainly to mining
activities, i.e. any o ther so ur ces accoun t for a minor sh are
of revenues.
The mining companies analyzed were Nickel Asia
Corporation and Philex Mining Corporation. These are
large-scale mining firms with asset size of PhP26.4 bil-
lion and PhP3 2.5 billion, respectively, in 2011.
Nickel Asia is the largest miner of nickel in the coun-
try today. The corporation was formally registered with
the Securities and Exchange Commission in 2008 but its
subsidiaries have been operating mines for several deca-
3Some mining firms have sizeable revenue sources other than mining
activities. Although some firms report their revenues disaggregated by
revenue source, the same is not true for taxes, fees and royalties. It
would thus be difficult to distinguish which part of the costs, fees and
taxes are attributable to mining and which part are attributable to the
other revenue sources.
4We actually found three firms suitable for revenue-sharing analysis.
However, the third firm—Apex Mining Corporation–posted negative
income in the years of analysis [10]. It is thus giving outlying figures
on taxes and revenue sharing. Nevertheless, we will use this case later
as an example of heterogeneity of firm-le vel data.
2The 15.3% share includes “taxes borne” and “taxes collected” com-
bined. “Taxes borne” are taxes borne out of the company’s own costs,
revenues and income. For example, property taxes are borne out of the
company’s own properties and income taxes are borne out of the com-
p
any’s own income. “Taxes collected” are those that the company
collects on behalf of the government and then remits it to the latter.
Example is employee income tax withheld from the employees’ payroll.
The 15.3% government share in revenues is comprised of 10.8% taxes
b
orne and 4.5% taxes collected.

R. U. MENDOZA, T. A. CANARE
526
des now. Its subsidiaries with current mining operations
inc lud e (a rea and start of year of operation in parenthesis)
Hinatuan Mining Corporation (Surigao del Norte, 1980),
Cagdianao Mining Corporation (Dinagat Island, 1999),
Taganito Mining Corporation (Surigao del Norte, 1987)
and Rio Tuba Nickel Mining Corporation (Palawan,
1975). Three of N ickel Asia’s four mines are nearing the
end of their expected lives. Rio Tuba, Cagdianao and Hi-
natuan have expected mine lives of 28, 6 and 9 years,
respectively5. These sites are therefore operating well
beyond their expected lives. Taganito is the only one
operating within its expected life of 29 years. All o f these
four mines are under MPSA.
Philex Mining Corporation was incorporated in 1955
and has since operated the Padcal Mine in Benguet. It
produces copper, gold and silver. It also extracts petro-
leum and coal, although these account for only a small
portion of sales. Padcal Mine is under MPSA and is ex-
pected to operate until 2020. From the start of operations
until 2011, the mine produced 359.3 million tons of ore
containing 2.1 billion pounds of copper, 5.6 million
ounces of gold and 6.1 million ounces of silver6.
To begin with firm-level revenue sharing analysis, the
amounts of the different types of disbursements (i.e.
taxes, royalties and fees) made by the two mining firms
to the government are presented. These are then com-
pared to the firms’ revenues and the share of each type of
disbursement in the total is calculated.
The summary of payments made by the mining firms
to the government is presented in Table 6, and the per-
centage shares for each type of payment are shown in
Figure 4. It can be seen from the bar graph that income
tax is the most dominant form of payment to the gov-
ernment for Philex and Nickel Asia. Royalties and excise
tax account for the second largest share of the pie, fol-
lowed by other taxes and licenses.
Next, Table 7 shows the actual amounts paid by
thetwo sample firms to the government in comparison to
their revenues. It also gives the amount of disbursements
to the government expressed as percent of total firm
revenues. The firm-level revenue sharing (the percent
share of government in total revenues) is close between
Nickel Asia (18.8%) and Philex (20.0%). Recall that the
taxes and fees expressed as a share of total industry
revenue indicated earlier in Table 5 points to an indus-
try-wide average figure of about 10%. These firm-spe-
cific figures drive home the point that macro-level indi-
cators fail to reflect a considerable amount of variation
across firms. The PWC survey found a 15.3% average
government share in mining revenues in its sample of 22
large-scale mining companies in 20 countries. For our
sample of two Philippine firms, the average share of
Figure 4. Share of each payment type in total disburse-
ments to the government. Note: 2010 and 2011 average.
Source: Authors’ computations based on firms’ financial
statements.
Table 5. Government share in mining revenues, 2007 to
2010, in Billions PhP and percentage share.
20072008 2009 2010
Average
(07 to 10)
Mining Gross
Production Value102 87 106 145 110
Amount Paid to
the Government10.4 7.7 12.4 13.4 11.0
Percent Share of
Government 10.2%8.8% 11.7% 9.2% 10.0%
Source: Data from MGB; authors’ computations. Note: Mining Gross Pro-
duction Value and Amount Paid to the Government are rounded, thus direct
division may not give the Percent Share of Government shown.
Table 6. Disbursements to the government by type of pay-
ment, in PhP, average figures for 2010 and 2011.
Nickel Asiaa Philex Mining
Income Tax 1,315,951,000 2,035,112,500
Royaltiesb and
Excise Tax 629,735,000 783,382,500
Taxes and Licenses26,761,500 134,408,500
Total 1,972,447,500 2,952,903,500
Source: Authors’ computations based on firms’ financial statements. Notes:
a Based on information shared by Nickel Asia on its 2010 taxes, the royalties
it paid to the government were only PhP233, 522,000 out of the PhP361,
722,000 indicated in the income statement. The rest were paid to claim
holders and indigenous people. Also, for taxes and licenses, the amount was
PhP65,351,000 (instead of PhP21,125,000 indicated in the income state-
ment). The d ifference was due to the wharfage fees col lected by the Phili p-
pine Ports Authority. These items cannot be extracted from the financial
statements. If these will be incorporated in the computations, total payments
of the company to the government in 2010 would amount to PhP1,408,
087,000 (instead of PhP1,492,061,000 if these information are not taken into
account). This would not significantly change our calculations, although we
note this down here to recognize the caveats of our analysis. b Includes
royalties paid to private enterprises.
5Based on information from Nickel Asia website and 2010 and 2011
Annual Reports [11], [12] and [13].
6Based on information from Philex Mining website and 2011 Annual
Report [14].

R. U. MENDOZA, T. A. CANARE 527
Table 7. Revenue sharing between mining firms and go-
vernment, average figures for 2010 and 2011.
Nickel Asia Philex Mining
Firm Revenue 10,515,372,000 14,764,192,500
Amount Paid to the Government 1,972,447 ,500 2,952,903 ,500
Government Share in Revenues 18.76%a 20.00%
Source: Authors’ computations based on firms’ financial statements. Notes:
a This will become 18.59% if adjustments in Footnote a of Table 6 will be
taken into accou nt.
government in mining revenues is 19.4% and thus is
somewhat comparable—even higher—to those in the
PWC surv ey.
A variety of factors could help explain the heteroge-
neity in tax payments across firms. These firms operate
in different contexts, on different minerals, which sug-
gest that the price dynamics for these different minerals,
and thus tax payments, may also differ widely. Extract-
ing different types of minerals and operating different
types of mines entail different cost structures. Mining
firms in the Philippines are also engaged at different
stages of the mining lifecycle7. For instance, the explora-
tion stage typically does not yield any profit, and govern-
ments usually allow loss carry forward at this stage. The
development phase also yields high cost for the firm as
this entails construction of the necessary infrastructure
and purchase of equipment. It is in the utilization phase
where mining firms are most profitable [15]. Mining
firms that are still in the exploration and development
phases may have therefore dragged down the average
government share in mining revenues in the macro-level
data.
Mining companies or operators could also differ
widely in their economic scope (i.e. small scale vs. large
scale mining operations), with possible implications on
their technology use and other factor inputs which also
affect costs of operations and net revenue calculations.
Large-scale mines are more efficient than small-scale
ones due to economies of scale and more modern equip-
ment. Thus, large scale mines are able to produce more at
similar costs. Inadequate technical knowledge in mining
operations, as well as inadequacy of access to financial
and consultancy services, lead small-scale miners to in-
efficiency [16]. Inefficiencies lead to lower revenue and
profit, which in turn lead to lower tax payments.
In addition, governance issues—and possible tax eva-
sion—especially for the less regulated small scale mining
sector could also be rampant, with direct consequences
on over-all revenue figures. The Chamber of Mines of
the Philippines has recently urged the government to
regulate and collect taxes from small-scale miners. The
organization asserts that there are many loopholes in the
regulation of small-scale miners and that many of them
do not pay taxes8.
Another source of heterogeneity in revenue-sharing
across firms is the financial condition of companies.
Companies experiencing negative income do not pay as
much taxes compared to those who are profitable. Be-
cause income tax is the biggest component of payments
to the government, a negative income will significantly
drive down the government share. This is best exem-
plified by the example of Apex Mining. As we noted in a
footnote earlier, Apex Mining’s financial statements are
viable for a reasonable revenue-sharing analysis. How-
ever, it was dropped from our analysis due to its outlying
low tax figures (as share of revenue) compared to Nickel
Asia and Philex9. Inspecting this firm’s financial state-
ment will reveal that, in contrast to the two other firms, it
posted losses10 in the subject years. This sharply drove
down its income tax. And since the income tax is the
largest source of government share in mining revenue (at
least for firms with positive profit), this pulled down the
amount of disbursements to the government as share of
mining reve n u e s.
A casual scrutiny of the macro and firm-level data will
show some similarities and differences between revenue
sharing trends at the national and at the firm levels. The
most glaring similarity is the large share of income tax to
the total disbursements of Philex and Nickel Asia, and
the large share of income tax to the total amount received
by the government from the mining industry as a whole.
The main difference lies in the share of government to
total mining revenues. The average of the two firms is
19.4%, which is higher than the overall average for the
entire mining industry of about 10.0% from 2007 to
2010.
3.3. Firm Level Analysis of Foreign Mining
Firms
To complement the firm-level analysis of mining benefit
8The Chamber of Mines was quoted in a newspaper article [17] .
9Apex Mining’s taxes as share of revenue is 7.4%. If this will be in-
cluded among the sample firms for micro-level analysis, the average
taxes as share of revenue will drop from 19.4% to 15.4% –still higher
than industry-level figure.
10Apex reported a PhP50 million profit for the first quarter of 2012, a
reversal of the PhP50 million loss for the same period the previous year
and losses for 2010 The company attributed this to higher gold prices
and “streamlining of company operations”. Further exploration and
development of the Maco mine in recent years also increased its gold
p
otential by 90% from 588,000 troy ounces in 2009 to 1.118 million
troy ounces [18,19].
7The life cycle of a mine is composed of four stages: exploration, de-
velopment, utilization/commercial operation, and decommissioning and
rehabilitation. Exploration involves the search for mineral deposits.
Development is the construction of mine and other necessary infra-
structure for mining operations. Utilization/commercial operation refers
to the actual extraction of minerals. Decommissioning is the closure o
f
the mine after the site’s mineral supplies have been fully extracted,
while rehabilitation is the restoration of the site and cleanup of mine
wastes.

R. U. MENDOZA, T. A. CANARE
528
sharing among local firms, we undertake a similar analy-
sis of foreign mining firms to compare their revenue
sharing behavior with those of Philippine mining compa-
nies. Five firms with headquarters in established mining
countries and operating in various continents are in-
cluded to serve as comparators. These are Barrick Gold
Corporation, the Rio Tinto Group, Eurasian Natural Re-
sources Corporation (ENRC), Norilsk Nickel and PT
Vale Indonesia Tbk (formerly PT International Nickel
Indonesia Tbk). All in all, these comparator firms have
operations in at least 25 countries and produce at least 20
mine products.
Similar to the analysis of local mining companies, we
had to rely on publicly available financial statements of
foreign firms, which are available in company websites.
A similar caveat holds in that financial statements shou ld
be disaggregated enough to be used for a reasonable
analysis. Analyzing foreign financial statements can also
be more difficult than analyzing local ones because the
former follows the generally accepted accounting prince-
ples (GAAP) of their home countries. Reporting of ex-
pense and revenue items thus are different11.
Barrick is the world’s largest gold producer in terms of
production, reserves and market capitalization. The com-
pany’s headquarters is in Canada, but it operates 26
mines in Canada, United States, Australia, Peru, Argen-
tina, Chile, Zambia, Saudi Arabia, Dominican Republic,
Papua New Guinea, Pakistan and Tanzania. Although
gold is its primary extracted mineral, it also produces
copper. The company was founded in 1983 and has an
asset size of USD48.9 billion as of 2011. The company’s
gold production for the same year was 7.7 million ounces,
of which 44% were from North America, 25% from
Australia and the Pacific, 24% from South America and
7% from Africa. As of 2011, it has proven and probable
gold reserves of 139.9 million ounces. Barrick is also in
the exploration phase of several potential mine sites
across the globe12.
Rio Tinto is another large mining firm with operations
all over the world. Although its headquarters is lo cated in
the United Kingdom, bulk of its operations is located
abroad. It operates mines in Australia, Brazil, Guinea,
Chile, Indonesia, United States, South Africa, Canada,
Zimbabwe and Namibia. It mines five major product
groups—aluminum, copper and gold, diamonds, iron ore,
and coal and uranium. Iron ore contributes the largest
revenue among these product groups with 49.6% share
followed by aluminum with 20.2%, copp er and gold with
12.7%, coal and uranium with 12.2% and diamond with
5.3%. Rio Tinto was founded in 1873 and has an asset
size of USD119.5 billion. Rio Tin to is also exp loring and
developing several other mine sites in its countries of
operation13.
ENRC has its head office in London but the corpora-
tion traces its roots in Kazakhstan, where the first invest-
tors bought mining assets from the Kazakh government
during its privatization program in the 1990s. Since then,
the company expanded its operatio ns to several countries
to include Russia, China, Brazil, Mali, Democratic Re-
public of Congo, Zambia, Zimbabwe, Mozambique and
South Africa. Its mine products are iron ore, chromium,
manganese, silicon and aluminum. As of 2011, it has an
asset size of USD15.5 billion and employs 70,000 peo-
ple14.
On the other hand, Norilsk Nickel is the world’s larg-
est producer of its two major products—nickel and palla-
dium. Its secondary products are platinum and copper
and it also produces co balt, rhodiu m, silver, gold, irid ium,
ruthenium, selenium, tellurium and sulfur. The com-
pany’s headquarters are located in Moscow, Russia but
operations are also located in Australia, Botswana,
Finland and South Africa. The company started operating
in 1939 and has grown to an asset size of USD18.9 bil-
lion in 2011. In the same year, its production of nickel
stood at 295,000 tons for 18% share of world total. Pal-
ladium production was 2.8 million ounces or 41% of
world total15.
Established in 1968 and a 58% owned subsidiary of
Vale Canada, Vale Indonesia operates 190,510 hectares
of nickel mine in the island of Sulawesi. In 2011, it pro-
duced 66,9 00 metric tons of nickel in matte and has 72 .1
million metric tons of proven reserves and 37.3 million
metric tons of probable reserves of nickel ore. As of 2011,
it has an asset size of USD2 .2 billion. Mining operations
are projected to cease in 203516.
Unlike the four other comparator companies, Vale In-
donesia operates solely in one country17. It is also the
most similar with Philippine mining companies in terms
of its operational scheme. The company is limited to ex-
tracting nickel ore and processing these into nickel matte.
This product is then exported abroad for refining and
further processing. This is unlike most large multina-
tional mining firms that sometimes do refining and
smelting of some of their ore extracts.
Aside from having publicly available financial state-
ments that are disaggregated enough for a reasonable
13Based on information from the Rio Tinto Website and 2011 Annual
Report [21].
14Based on information from the ENRC Website and 2011 Annual
Report [22].
15Based on information from Norilsk Nickel’s Website and 2011 An-
nual Report [23].
16Based on information from Vale Indonesia 2011 Annual Report [24].
17Although its parent company, Vale, operates all over the world.
11For instance, some foreign firms report revenues as net of sales taxes.
Some also subsume sales tax in royalties in their financial statements
(because they are both indexed on revenue). Nevertheless, we chose
firms that we can reasona
b
ly isolate the tax items in their financial
statements.
12Based on information from the Barrick Gold Website and 2011 An-
nual Re
p
ort
[
20
]
.

R. U. MENDOZA, T. A. CANARE
529
revenue sharing analysis, these five firms have particular
attributes that make them good comparators. Barrick
Gold, Rio Tinto, ENRC and Norilsk Nickel are multina-
tional corporations that operate mines in different coun-
tries at different stages of the mining life cycle. They also
extract different types of minerals. Their tax figures thus
level out differences in revenue sharing arising from dif-
ferences in minerals extracted, stages in mine life cycle,
and revenue sharing policies in the hos t countries. On the
other hand, Vale Indonesia is a good comparator because
it operates in a country with a similar economic and
socio-political condition as the Philippines. Its structure
is also similar to many mines in the Philippines—partly
or majority owned by foreigners and production process
is limited to extraction and initial processing of ores be-
fore being exported for refining, smelting and further
processing.
Taxes paid by Rio Tinto are 128 times higher than the
taxes paid by Philex Mining, and about 288 times that of
Nickel Asia. Taxes paid by Barrick Gold, ENRC and
Norilsk Nickel are also much larger than those of the two
Philippine firms being studied. Indeed, Barrick Gold, Rio
Tinto, ENRC and Norilsk Nickel are all included in the
world’s 100 largest mining firms based on market value
[27]. The taxes paid by Vale Indonesia—the only South
East Asian firm in the comparator group—are also larger
than the taxes paid by the Philippine firms being studied,
but only by a relatively smaller degree.
Scaling tax payments by company revenues provides a
more meaningful comparison. Table 8 presents the
amount of taxes paid by the foreign firms scaled by their
revenues. Taxes as share of company revenue for Barrick
Gold, Rio Tinto, ENRC, Norilsk Nickel and Vale Indo-
nesia of 17.9%, 13.6%, 16.8%, 17.1% and 13.3%, re-
spectively—for an average of 15.7%—do not seem far
from the 19.4% average of Nickel Asia and Philex Min-
ing. Moreover, these figures are also very close to the
15.3% average government share found by the PWC
survey mentioned above.
The next point of comparison is on the share of each
payment type to total disbursements to the government.
The summary of payments made by the firms to the go-
vernments where they operate are shown in Table 9, and
the percent share of each payment type for each firm is
shown in Figure 5.
Similar to local firms, income tax is the largest com-
ponent of payments to government of the five foreign
companies. Income tax accounts for an average 68.7% of
all disbursements to governments. This is comparable to
the share of income tax in total tax payments of the two
Philippine firms in the sample at 67.8%. The share of
revenue-based taxes (royalties and excise tax) is, how-
ever, larger for the Philippine firms at 29.2% against
16.4% for the foreign comparators.
Two things may be observed from the revenue sharing
analysis of the domestic mining firms and the comparator
foreign companies. First, the share of taxes in total reve-
nue is comparable between the foreign and the Philippine
firms analyzed in this study. As shown in Figure 6, the
share for the Philippine firms in the sample is even
higher by 3.7 percentage points. However, this must be
interpreted with caution. As discussed earlier, the Indus-
try-wide average in the Ph ilippines is lower than this, an d
the share of the mining industry in total government
revenues is less than its share in total GDP. From 2007 to
2010, the average annual share of mining in total gov-
ernment revenue is less than half its share in total GDP
(0.87% against 1.93%). This is a possible sign that the
government is not getting enough from the mining indus-
try as a whole [8]. Second, taxes indexed to income make
up the bulk of payments to the government for both
Philippine and foreign mining firms—and the share of
income tax to total tax payments is comparable between
Table 8. Revenue sharing between mining firms and government, 2010 and 2011 average, in millions USD.
Barrick Gold Rio Tintoa ENRC Norilsk Nickel Vale Indonesia
Firm Revenue 12,697 65,234 7155 13,449 1259
Amount Paid to the Government 2270 8844 1202 2299 167
Government Share in Revenues 17.9% 13.6% 16.8% 17.1% 13.3%
Source: Authors’ computations based on firms’ financial statements. Note: a Rio T into publishes a separate report on taxes paid [25] [26].
Table 9. Disbursements to governments by type of payment, 2010 and 2011 average, in millions USD.
Barrick Gold Rio Tinto ENRC Norilsk Nickel Vale Indonesia
Income Tax 1642 5523 775 1504 131
Royalties and Sales Taxa 346 2006 380 171b 9
Other Taxes 283 1316 48 624 27
Total 2270 8844 1202 2299 167
Source: Authors’ computations based on firms’ financial statements. Notes: a Royalties may include royalties paid to private enterprises. This item may include
ther taxes subsumed under or reported with sales tax and royalties. b “Ta x Directly Attributable to Cost of Goods Sold ” in Norilsk Nickel’s fina ncial statem ent. o

R. U. MENDOZA, T. A. CANARE
530
Figure 5. Share of each payment type in total disbursements
to governments, 2010 and 2011 average. Source: Authors’
computations based on firms’ financial statements.
the two groups. The difference lies in the share of reve-
nue-based taxes (royalties and sales tax). The share of
this tax component for the sample Philippine firms is
29%, and 16% for the foreign comparators. This is illus-
trated in Figure 7.
The data on income-based and revenue-based taxes is
emphasized here because of the differences in implica-
tions of charging income-based and revenue-based taxes.
Presumably, a tax arrangement that is tied to company
income also ensures that the government gains during
natural resource booms18. One question is whether the
Philippines would like to explore slightly higher taxes on
mining that would be indexed on income, yet be applied
over and above th e corporate income tax, when ther e are
supernormal profits. The present corporate income tax
rate in the country is 30%—near the levels of other Asian
economies such as Thailand (30%)19, Malaysia (25%),
Indonesia (25%), Viet Nam (25%), China (25%) and
India (30%)20.
The literature suggests that there are several advan-
tages of using taxes tied to income over taxes tied to
revenue. Royalties imposed on revenue introduce ineffi-
ciencies and affect the firm’s production decision be-
cause these increase the marginal cost of production. In
contrast, a tax on profit is more efficient because it does
not affect the optimal level of output. Indexing of taxes
also affect the sharing of risk between firm and govern-
ment. Tax on income tends to distribute risk between the
Figure 6. Revenue sharing between mining firms and gov-
ernment. Note: Average for 2010 and 2011. Source: Au-
thors’ computations based on firms’ financial statements.
Figure 7. Share of each payment type in total disburse-
ments to Government. Note: Average for 2010 and 2011.
Source: Authors’ computations based on firms’ financial
statements.
mining firms and the government while tax on revenue
shifts risk to the former [15,28].
A tax on profit also better captures mining rent com-
pared to royalties, notably when there are price booms.
And while many countries use royalty to get hold of
early revenue flows, it is often offset by lower income
tax rates. Some countries also use variable income tax
rates on mining firms. Tax rates could be higher in years
when profitability is high and lower in years when prof-
itability is low [1]. This is, however, an administrative
challenge. Another disadvantage of a revenue-based tax
is its regressive effect on the tax regime. With high roy-
alties, the average effective tax rate is higher for less
profitable firms and lower for more profitable mines [8].
18If tax is tied to revenue, collections will also increase during natural
resource price booms, but only if the miner’s selling price follows the
world price. Some mining firms and the buyers of their mineral prod-
ucts engage in hedging—the price of future transactions is already
specified in the contract. Thus, even if market price increases by a large
amount, revenue and therefore taxes do not.
19Temporarily reduced to 23% for 2012 and 20% for 2013 and 2014.
20Based on data from PricewaterhouseCoopers Worldwide Tax Sum-
maries database [29].
On the other hand, the advantage of a revenue-based
tax is it assures the government of some share in mining
revenue even during years when mines post losses, aside
from guaranteed government share in early revenue
flows as mentioned earlier.

R. U. MENDOZA, T. A. CANARE 531
From the preceding analysis of available data, it is
clear that macro-level revenue indicators should be inter-
preted with care. Much heterogeneity in firm-level
information is averaged-away by merely looking at the
industry-level indicators. Indeed, our preliminary calcu-
lations suggest that some firms’ tax revenues are much
higher than these industry averages indicate. It must be
emphasized that data on Figure 2 (share of mining in
government revenue and GDP) and Table 5 (government
share in mining revenue) are for the entire mining
industry, while the two Philippine firms and five foreign
firms in the sample are large-scale metallic mines. Pre-
sumably, some types of mining—small scale and/or
non-metallic—are pulling the figures down21.
3.4. An Analysis of Net Revenue Sharing
Another way of analyzing mining benefit sharing is by
looking at net revenue rather than gross revenue. Using
this method controls for differences in cost structures
arising from differences in type of mine, age of mine and
type of mineral extracted, among other factors. Net
revenues—gross revenues less costs—measure the actual
returns that the firm and the economy receive from min-
ing. For the purpose of this study, the terms net revenue
and net benefit will be used interchangeably and will
refer to the mining firms’ profit before income tax.
Figure 8 shows taxes and other payments to the gover-
nment as share of both gross and net benefits for the two
Philippine mining firms and the five foreign mining
firms in the sample. The Philippine mining firms’ avera-
ge taxes as a share of net benefits stood at 40.22%—
almost equal to that of the foreign firms’ average of
40.37%. Hence, expressing the indicator in terms of net
revenues does not really change the gist of our earlier
analysis.
4. Summary, Recommendations and
Directions for Future Policy Research
Drawing on the analysis herein, there are at least three
main messages for policymakers here. First, we find
signs that the mining industry as a whole may not be
contributing enough to government revenue. Possible
reasons for this include the large share of small-scale
mining to total production and the presence of mines that
only recently commenced and may still be enjoying tax
perks. This highlights the need to examine whether these
tax incentives are still needed and to what extent small
scale mines can contribute their fair share in tax pay-
ments. A word of caution, though, for policy makers is
that increasing taxes, particularly for those who are al-
ready at par with international standards, may bring in
some tradeoffs. The usual argument of unattractiveness
to investors is one, but there can be other less obvious
Figure 8. Taxes as share of gross and net revenue. Note:
Average for 2010 and 2011. Source: Authors’ computations
based on firms’ financial statements.
consequences. Because taxes are higher, the mining firms
may be incentivized to drive down their cost as low as
possible. This might result in disincentives to invest in
technologies that are cleaner but are often more expen-
sive. Policymakers need to consider that an increase in
taxes collected may just be offset by additional cleanup
or mitigation expenses. This does not necessarily mean
that taxes should not be increased—it just implies that
any planned increase in taxes should be studied carefully,
with costs and benefits being weighed. Analysis should
also be mineral-specific and mine-type-specific as these
groups have heterogeneous technologies and cost struc-
tures.
Second, analysts and researchers should be careful in
interpreting macro-level data on revenue sharing due to
heterogeneity of firm-level data. The scale of the mine,
its stage in the mining cycle, and even governance and
implementation of laws can affect the sharing of revenue
between mining firms and the government. Nevertheless,
based on the preliminary evidence we have here, at least
two of the Philippine mines actually stack-up well on tax
payments , when juxtap osed against the available interna-
tional comparators. More disag gregated, yet still compre-
hensive, information is necessary to provide a fuller and
fair picture of the revenue sharing across the public and
the private sectors. A complete simulation of tax pay-
ments for the entire mine life across different minerals
and different mine types is essential in determining if we
really are at par with other established mining countries
in terms of taxing mining firms. Simulation will also
guide policy-makers in gauging the fairness of revenue-
sharing regime.
Future research on revenue sharing could be usefully
expanded in at least two more directions. First, this paper
has examined benefits using government revenues as a
21This is confirmed by our discussions with industry officials.

R. U. MENDOZA, T. A. CANARE
532
Table 10. Selected sovereign wealth funds from the extractives industry.
Country Fund Name Date
Est. Assets ($Bn) Fund Type Modes of Distr i bution Impact on Social Development & Children Transparency Scorea Source of Revenue
Botswana Pula Fund 1994 6.9 Savings
The fund is part of the foreign
exchange reserves. Its goal is to
preserve a portion of the income
for future generations.
Investment rule
recognizes investments
in human capital as
part of “sustainable
investment/spending”
6 diamonds and
minerals
Brunei Brunei Investment
Agency 1983 30 Savings Earnings produced from the oil
industry are utilized to build up
foreign reserves.
The fund helps to finance
free education and health
care provided by the
government
1 oil
Chile
Social &
Economic
Stabilization
Fund
1985 21.8
Stabilization
Savings
The aim of the Pension Reserve
Fund is to address an expected
future government pension liability
shortfall. As a Savings Fund, it
enables a transfer of wealth from
one generation to the next for the
purpose of future sustainability.
In 2009, 14.5% growth
in public spending
despite fiscal revenues
falling by 23%; Direct
transfer to low income
families of around $80
each during the crisis.
10 copper
Kiribati
Revenue
Equalization
Reserve
Fund
1956 0.4 Stabilization
The fund is part of the government’s
assets and contained more than U.S.
$500 million in 2009. 1 phosphates
Mauritania
National
Fund for
Hydrocarbon
Reserves
2006 0.3
Stabilization
Savings
The fund plays the role of a
macroeconomic stabilization for
country. It has goal of accumulating
savings for future generations .
1 oil & gas
Mongolia Mongolia Human
Health Fund 2013 30
Stabilization
SW Fund will come on line in 2013;
Direct transfer cash/non-cash
securities to 2.7 million citizens plus
central budget allocations for health
and education
Special monthly direct
cash transfers to all
citizens
n/a
EITI Copper and
gold
Papua
New
Guinea
PNG
Mineral
Resources
Stabilization
Fund
1974-1999 Stabilization
The MRSF was designed as a fiscal
tool to support macro-economic
management of the national
economy. The current government
plans to create a new SWF
Special youth and
children support grants
to local governments &
communities
n/a Minerals ,
oil/natural gas
Qatar Qatar Investment
Authority 2005 85
The fund devoted to diversification
using money from its energy sector to
invest in non-energy related sectors.
The QIA controls around $75 billion
in assets.
5 oil
Timor
Leste
Timor-Leste
Petroleum
Fund 2005 8.3
Stabilization
Savings
The Fund is integrated into the State
Budget. By law, annual draw downs
cannot exceed the Estimated
Sustainable Income. The fund has
built-in requirements for
transparency and accountability.
Currently funding
overseas graduate
education for 160
students; Central
budget support for
health and education
1
EITI Oil and
natural gas
Texas Permanent
School Fund 1895 The fund is used exclusively for the benefit of Texas public schools Supports primary and secondary schools N/A Oil/gas and
mineral royalty
payments
Nigeria Sovereign
Investment
Fund 2011 1
Savings
stabilization
Funding mechanism for 3 funds:
Future Generation Fund
Infrastructure Fund
Stabilization Fund
Supports human
development and
infrastructure
investments
N/A Oil
revenues
Kuwait Investment
Authority 1953 296 Savings
Provides a source of reserve funding
for Future Generation Fund 6
State transfers
10% of oil
revenues
annually to
this fund
Bahrain Taskeen Investment
Board 2007 Savings
Funding mechanism to support
investments in job creation Targets creation of 20,000 jobs N/A Oil revenues
Source: [30]. Notes: aLinaburg-Maduell Tra nspar enc y Index.

R. U. MENDOZA, T. A. CANARE 533
possible metric. Yet benefits derived from the public are
not just reflected in tax revenues or mining royalties.
These are also included in aspects such as job creation,
and community-related investments and the corporate
social responsibility (CSR) projects supported by the
firms. The public sector is expected to try to represent the
views of various stakeholders with potentially widely
varying interests and objectives—spanning both national
and local government, civil society, and other groups in
society with a stake in natural resource wealth manage-
ment (including present and future generations). This
difficult aggregation of preferences often involves very
rough and often difficult bargains across different interest
groups. It would be useful to shed light on these different
aspects in a more empirical way.
Second, it is also clearly relevant to go beyond the
concept of benefits, and better reflect net benefits—or
benefits net of costs related to mining—which creates a
much more nuanced understanding of the net impact on
the different stakeholders of this economic activity. Al-
though this paper presented a brief overview of govern-
ment share in mining firms’ profit, net benefit may be
defined in other ways other than profit, and this is worth
studying further in future research in this area. For in-
stance, if neither the mining company nor the govern-
ment agencies (both local and national) provide resources
for mine clean-up and environmental rehabilitation, the
brunt of the environmental damage and its costs to hu-
man development will likely be born e by the community
hosting the mine. Facing such costs, it is unlikely that
they will get a net positive gain fro m mining. This is part
of the reason why it is now considered international best
practice for mining companies to contribute to a fund that
would be dedicated for the future cost of clean-up and
mine site rehabilitation once the mining operations cease
[30]. The Philippines does not fall behind in this resp ect,
as mining companies are required to maintain funds for
future cost of rehabilitation and clean-up. Ho wever, what
the country lacks is a concrete sch eme on how to use and
distribute wealth derived from the mining industry. Ta-
ble 10 shows a summary description of selected sover-
eign wealth funds derived from extractive industries in
selected countries. These funds enable the government to
better manage wealth derived from mining in promoting
human development.
Future research on the broader net gains from extrac-
tive industries should therefore involve a full accounting
of all the benefits and gains—including the cost inci-
dence for aspects like environmental clean-up and pro-
tection—in order to clarify the true net benefits of these
industries for the present and future generations.
REFERENCES
[1] K. Nakayama, S. Caner and P. Mullins, “Philippines:
Technical Assistance Report on Road Map for a Pro-
Growth and Equitable Tax System,” International Mone-
tary Fund, Washington, 2011.
[2] Department of Environment and Natural Resources, “Ad-
ministrative Order 2007-12: Revised Guidelines Estab-
lishing the Fiscal Regime of Financial or Technical As-
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