THE Department of Finance (DOF) expects the government to earn P37.52 billion in revenues from the passage of its proposed bill on the rationalization of the mining fiscal regime in the country.
Speaking at the House and Ways and Means Committee hearing on Wednesday, Finance Assistant Secretary Valery Joy A. Brion said their proposed measure would reform the mining fiscal regime to achieve simplification, fair share, value-adding and good governance.
“The DOF recognizes that the mining industry has the potential to drive our economic recovery and long-term growth and this is really in support of the administration’s Medium-Term Fiscal Framework,” Brion said.
Under their proposal, the DOF seeks to establish a rationalized and single fiscal regime applicable to all large-scale metallic mines regardless of location to make the country’s mining policy “predictable.”
“This addresses the complexity of the current fiscal regime, which depends on whether the mine is operating within or outside a mineral reservation, and whether it is operated under a mineral production sharing agreement, an MPSA or a financial and technical assistance agreement or what we call the FTAA,” she said.
On top of this, the DOF is also pushing for the imposition of a royalty rate of 5 percent applicable to all large-scale mining operations since only those located in mineral reservation are currently subject to royalty payment.
Brion said this will generate incremental revenue of about P5 billion.
On fair share, the DOF proposes to impose a minimum government share when the basic government share is less than 60 percent of the net mining revenue, pointing out that this is only applicable to FTAAs.
The DOF also wants the government to impose a 10-percent export tax on the gross value of mineral ore “to encourage downstream and value-adding processing and proper valuation of minerals.”
On good governance, Brion said the department also seeks to institutionalize an Extractive Industries Transparency and Accountability mechanism for the full public disclosure of extractive industry information, including tax and revenue data in the extractives value chain, following best practices in the open, accountable, and good governance of mineral resources.
“This will allow public monitoring when information is publicly available. A multi-stakeholder group composed of representatives from government, industry and civil society shall provide oversight on the implementation of these transparency and accountability mechanism,” she said.
Interestingly, the Philippine government in the latter part of the Duterte administration withdrew from a global initiative on extractives transparency, assailing the body’s “unfair” metrics and procedures for assessing the countries’ compliance with its requirements.
In June this year, the DOF said then Finance Secretary Carlos G. Dominguez III formally expressed the country’s decision to pull out from the Extractive Industries Transparency Initiative (EITI), which prescribes a standard for transparency and accountability in the mining, oil, and gas industries. Extractive companies in countries implementing EITI are engaged to publicly disclose data on taxes, royalties, and other payments they make to the government and their host communities.
BIR backs DOF stance
NONETHELESS, the Bureau of Internal Revenue (BIR) backed the DOF’s position on the proposed rationalization of the mining fiscal regime during the committee hearing.
“The inclusions of these amendments in the Tax Code will make it clear the tax treatment of the large-scale mining and also the fiscal regime, your Honor, for efficient task collection and enforcement on the part of the BIR,” BIR Officer-in-Charge Assistant Commissioner for Legal Service Larry M. Barcelo said.
The BIR also reported that the government’s basic share from mining taxes, fees, and royalties, reached P40.1 billion from 2018 to 2021.
The Duterte administration earlier proposed reform on mining taxes under Package 2+ of its Comprehensive Tax Reform Program. The proposed package included the implementation of a single fiscal regime in the mining industry and the imposition of royalty and additional government share on all metallic and non-metallic minerals, small-scale and large-scale mines, whether inside or outside mineral reservations. However, this proposal did not hurdle the legislative mill.