With mine tax reform, DOF strives for ideal mix

Finance Secretary Cesar V. Purisima. AP FILE PHOTO

MANILA, Philippines—Finance Secretary Cesar Purisima on Wednesday said that, with the planned mining tax reform, the government hopes to strike a balance between generating more revenue for the state and keeping the country attractive to investors.

The Department of Finance is in the process of identifying the ideal tax rate to be imposed on mining companies—where the state gets its fair share of revenue while the miners remain profitable.

Currently, the government imposes a 2-percent excise tax on the gross revenue of mining firms. With that rate, the government may generate around P2 billion a year in revenue, based on data from the DOF. But the amount, which is below 1 percent of the Philippines’ gross domestic product (GDP), is lower than the mining taxes collected by other governments.

According to DOF figures, the amount in taxes collected by the governments of Indonesia and Peru exceeded 2 percent of their respective GDPs.

“We are working with stakeholders to determine the appropriate balance, or ‘sweet spot,’ that will attract mining investments while ensuring a sustainable fair share of mining revenue [for the government], with due consideration to social and environmental aspects,” Purisima told the Inquirer.

Apart from the 2-percent excise tax, mining companies in the country must also pay a 5-percent royalty tax if their operations are located in the property of indigenous people. The national government gets 60 percent of the tax proceeds while the rest goes to the local government unit concerned.

Mining firms in the country spend around P11 billion a year for national and local taxes, according to estimates.

The DOF is also studying whether it would be better to scrap the royalty tax and raise the excise tax by a commensurate margin instead.

But the removal of the royalty fee will mean that LGUs of indigenous communities may no longer collect their 40-percent share in the tax revenue.

Once it completes the study, the Finance department will draft and submit to Congress a proposed bill seeking to reform the country’s mining tax system.