First of three parts
IN recent decades, there have been several efforts to change the policy governing mining in the Philippines. The current proposal is to create a new fiscal regime for all large-scale mining operations. Estimates show that, if enacted, the new fiscal regime could yield P38 billion annually. The most relevant features of the current plan, which has been approved at the committee level of the House of Representatives (HOR), ensures additional revenue streams from mining activities by declaring all mining areas as mineral reservation area (or 5 percent royalty payment to the national government) and imposing a 10 percent tax on the market value of mineral exports. The proposals that were originally drafted by the Department of Finance (DOF) would increase the effective tax rate on mining from the existing 38 percent to 51 percent.
The resurgence of interest in mining comes after the issuance of Executive Order (EO) 130, which effectively lifts the moratorium on new mining applications that has been in effect since 2012 through an earlier EO 79 by President Benigno Aquino III. EO 79 was created to promote sustainable economic development and social growth at both national and local levels, and spelled out agenda points that ensure adherence to improved environmental standards and increased revenues through a new legislation that rationalizes revenue sharing schemes.
The revenues received by the national and local government come from tax and non-tax payments of mining companies to various government agencies. Among the taxes collected from mining, the excise tax accrues to local government units (LGUs) hosting the extractive activity. Excise tax, also known as national wealth, is an additional revenue to the internal revenue allotment that LGUs are entitled to receive regularly from the national government. Since the enactment of the Philippine Mining Act in 1995, excise tax on all locally extracted mineral products has been pegged at 2 percent of the market value of the gross output. In 2018, excise tax on all locally extracted minerals only (metallic and non-metallic) increased to 4 percent by virtue of the implementation of the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Excise tax on minerals are not differentiated from the excise tax on other manufactured domestic goods and from abroad.
Section 294 of the Local Government Code (LGC) specifies that the utilization of the LGU’s share from mining (also known as national wealth share) shall be appropriated by the local legislative to fund local development and livelihood projects.
The gross collection of revenues from mining is generally distributed to the national government (60 percent) and the LGUs (40 percent). The 40 percent share of the LGUs is further allocated to the province (20 percent), component city/municipality (45 percent), and barangay (35 percent). The revenue share of the national government depends on the production of the aggregated mining industry, and the LGU share depends on the performance of the mining company in a particular locality.
At the height of the pandemic, the mining sector increased its payment of taxes, fees, and royalties to various collecting agencies to P42.34 billion in 2021 from P31.28 billion in 2020. Of these, the Mines and Geosciences Bureau (MGB) and Department of Environment and Natural Resources (DENR) collected P3.21 billion in 2021, higher than the previous year’s level of P2.17 billion. Excise tax collected by the Bureau of Internal Revenue (BIR) increased to P7.87 billion in 2021 from P5.9 billion the previous year. Other taxes received by the national agencies in 2021 amounted P27.34 billion, an increase from the P19.77 billion collected in 2020.
The LGUs’ collection of local taxes, fees and charges in 2021 has increased to P3.91 billion from the previous year’s collection of P3.43 billion. The accompanying table shows the breakdown of collection from mining.
Production value (PV) refers to the gross output of mineral extracted during the reporting period as defined in Chapter 1, Section 5(ar) of the DENR Administrative Order 2010-21 of the Philippine Mining Act of 1995 (under the term “Gross Output”). The production value of mining has seen an increase from the 2020 level at P195.3 billion to P223.5 billion in 2021 and to P247.2 billion in 2022. The MGB report also shows that total employment in mining in 2022 was 205,642, an increase from 185,534 employed in 2021.
Ms. Perpevina C. Tio is a graduate student at the Department of Economics of Ateneo de Manila University.