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Mining industry advocating for a margin-based royalty bill

AngMinero News by AngMinero News
July 11, 2023
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The mining industry is advocating for the imposition of a margin-based royalty and windfall profit tax, as it would allow the government to generate income while mitigating the challenges faced by miners.

In a report by the Business World, the Vice Chairman of the Chamber of Mines of the Philippines, Gerard H. Brimo, revealed that these taxes would enable the government to acquire a larger portion of mining revenues during times of commodity price escalation, while also granting the industry time to recuperate during periods of low prices.

In order to increase government revenue, the Department of Finance (DOF) is urging Congress to provide top priority to a bill that would rationalize the fiscal rules for the mining industry.

Brimo also mentioned that the sector is in favor of House Bill No. 373 which calls for a margin-based royalty on industrial-scale miners operating outside of mineral reservations. Authored by Albay Representative and House Ways and Means Committee Chairman, Jose Maria Clemente S. Salceda, it also suggests a windfall profit tax that is similarly dependent on margins.

By basing the tax on margins, the rate of taxation arises in connection with the increase in operating margins.

Brimo added that margin-based royalties are also seen in other nations like Peru and Chile, which have been successful in luring significant investments to expand their industries.

Currently, the suggested new mining fiscal system is being examined by the House Committee on Ways and Means.

The most recent iteration of the bill outlines that large-scale miners operating within reservations will face a 5% royalty on the market value of their gross output as a requirement.

Meanwhile, the rates for large-scale miners outside mineral reservations will be subject to margin-based royalty on income from their operations. For miners with a margin ranging from 1% to 10%, they will be obligated to pay a royalty of 1%. Meanwhile, miners with a margin surpassing 10% to 20% will be required to pay a higher royalty rate of 1.5%.

Small-scale miners, however, will be required to pay a royalty equal to 2% of the market value of their gross output.

A windfall profits tax depending on their operating income is another proposal in the bill. For instance, a fee of 0.5% will be charged to those having margins of more than 35% and up to 40%.

The Finance department further suggested levying a 3% royalty on the market value of the gross production of large-scale mining activities outside mineral reservations in a meeting of the House Ways and Means Committee.

Tags: department of financedofHouse Bill No. 373margin-based royaltywindfall profit tax

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