Cagayan black sand miners win P94 million tax case at COA

MANILA, Philippines – Thirteen (13) mining companies win a P94.8 million tax case at the level of the Commission on Audit (COA) for tax deficiencies in their black sand mining operations in Cagayan.

The COA proper issued a decision on June 11, a copy of which was released to media on Tuesday, August 13, lifting the notice of charge imposed on the companies by local auditors in Tuguegarao City.

The lifting of the notice of charge is mainly rooted on the fact that COA proper said it is the BIR, and not its auditors, that could impose deficiencies and collect the amount. 

COA's decision does not preclude the Bureau of Internal Revenue (BIR) from making its own tax assessment.

What's the case? Local auditors of BIR regional offices in Cagayan found that from 2011 to 2013, there were 13 black sand miners which did not pay due taxes worth the collective amount of P94.8 million.

"The Officer in Charge-Audit Team Leader and the Supervising Auditor (SA), BIR, issued Audit Observation Memorandum (AOM) No. 2014-03-(2013) dated February 28, 2014, on the deficiency in the collection of excise taxes for the years 2011 to 2013 by Regional District Office No. 13 from companies engaged in the extraction of magnetite iron sand ore (black sand) and other mineral resources, in the amount of P97,883,577.57," said the COA decision.

Further computations were made, including a supposed understatement of Huaxia Mining for its sand and gravel fee, that brought the tax deficiency to P104,071,974.91.

"Only P16,896,992.68 was collected by the BIR. Thus, there is a deficiency of P94,801,948.73. Despite this deficiency, the BIR issued Excise Tax Clearance Certificates (ETCC) to the mining companies," according to the COA decision.

Auditors imposed the notice of charge against the 13 companies and BIR officers. The BIR officers appealed, with their arguments mainly about the limited functions of auditors when it comes to making assessments.

The COA upheld the officers' arguments, saying: "No final tax assessment was issued yet by the BIR against the respective mining companies that could be a basis for audit and issuance of a Notice of Charge (NC)."

COA added: "The issuance of the NC was premature considering that the auditors failed to consider the assessment period and assessment procedure of the BIR."

The 13 companies/individuals are as follows:

What is black sand mining? Black sand is an additive in concrete and steel production, as well as for the manufacture of jewelry and cosmetics.

Black sand mining in itself is not illegal because there is no law that expressly prohibits it. The limits on black sand mining are pursuant to the general limits in the Mining Act that bans mining near reservoirs and protective areas.

"Studies made by environmental groups in areas with black sand mining activities show that black sand mining operations contribute greatly to the depletion of fishery resources, erosion of land and severe flooding," said Senator Leila De Lima in her Senate Bill No. 960 that proposed to entirely prohibit black sand mining.

The bill adds: "It is even predicted that areas mined for magnetite or black sand could sink and be underwater within 30 to 70 years as rapid subsidence will highly expose said areas to flooding and seasonal typhoon."

The bill mentioned Cagayan as suffering the effects of black sand mining.

The COA case indicated widespread black sand mining operations in Cagayan at least for those years. –

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email or tweet @lianbuan.