The Department of Finance (DOF) urged the Senate to rethink the mining revenue reform bill that was approved by the House of Representatives November last year and instead pass the original proposal of uniform royalty rate for all miners.
In a press release issued by DOF, the department said their proposed five percent mining royalty fee is in line with the government’s reform objectives of making the country’s tax system simpler, more efficient, and fairer for all taxpayers.
Meanwhile, Finance Assistant Secretary Ma. Teresa Habitan said DOF prefers a rationalized and single fiscal regime for the mining industry which will allow for a simpler, more equitable, and more efficient tax system for the mining sector.
During a recent hearing on the proposed new fiscal regime for the mining industry conducted by the Senate ways and means committee, Habitan said that what the congress approved on how the royalty for mining was going to be calculated can be considered as a compromise position.
The finance department asserted the need for a simpler royalty computation, arguing that with their proposal, an estimated P 7.2 billion in incremental revenues to the state funds will be collected in the first year of its implementation.
DOF’s expected amount is double the P 3.7 billion that the government will collect from the mining revenue reform bill passed by the congress which lowered the current five percent on large-scale mining inside mineral reservations to three percent.
Congress also proposed a royalty equivalent to one to five percent of profit margins for large-scale mining outside mineral reservations, and 0.1 percent of gross output for small-scale mining outside or inside mineral reservations.
Mining operations outside mineral reservations which do not need royalty payment is more common in the country, the finance assistant secretary said.
Habitan used data from the Mines and Geoscience Bureau (MGB) and the Bureau of Internal Revenue (BIR) showing that royalties collected from operations inside mineral reservations only accumulated P 1.1 billion in royalties and P 1.9 billion in excise taxes for 2017.
Currently, mining contractors are required to pay the corporate income tax, excise tax, indigenous people’s royalty, local business tax and value-added tax, among others.
The DOF is eyeing a more leveled playing field by keeping mentioned taxes under the new fiscal regime which they hope will include the proposed royalty of five percent on gross output paid to the government on all mining operations, regardless of the nature of the agreement, whether large-scale or small; metallic or non-metallic minerals extraction; or located inside or outside of mineral reservations.
