The Senate greenlights a bill that introduces a new royalty and windfall profit tax system for the mining sector, aimed at increasing the government’s share of mining profits.
Currently, mining firms are required to pay corporate income tax, excise tax, royalties, local business tax, real property tax, and fees to indigenous communities. The new measure seeks to raise the government’s revenue from the mining industry by creating a tiered royalty system based on profit margins.
The new royalty and windfall profit system will likely reshape mining operations, potentially driving local investments and higher revenues for the government.
In a Business World report, Senate Bill No. 2826 was passed on the third and final reading with a vote of 18-1, setting a five-tier royalty system ranging from 1% to 5%, and a corresponding windfall profit tax system between 1% and 10%.
The Senate bill also features a five-tier windfall profit tax ranging from 1% to 10%, in contrast to the House’s eight-tier system.
The House of Representatives approved its version of the bill in September, but there are key differences between the two. The Senate version mandates a 5% royalty for large-scale miners operating in mineral reservations, while the House bill requires only 4%.
The bill also includes a provision prohibiting the export of raw ore within five years of its enactment. This provision aims to encourage domestic mineral processing by compelling mining companies to build processing plants.
However, the Chamber of Mines of the Philippines has raised concerns about the potential job losses resulting from the raw ore export ban. They argue that mining firms may not be able to complete their processing plants within the mandated five-year period, which could disrupt the mineral trading industry.
Despite these concerns, tax experts have highlighted the importance of the bill’s additional revenue, with some estimating that the measure could generate P6.26 billion in additional revenue, although others note that this might not significantly impact the government’s long-term fiscal outlook.
With support from both the Senate and the House, the bill is poised to reshape the mining industry’s contribution to the national economy, balancing revenue generation with industry growth.
