The proposed imposition of royalty on all mining operations will bring about incremental revenues of up to P11.3 billion to government coffers in the next five years, the Department of Finance said Monday.
“A rationalized and a single fiscal regime applicable to all mineral agreements promotes fairness and would complement the enacted Tax Reform for Acceleration and Inclusion (TRAIN) Law, which aimed to make the tax system simpler, fairer and more efficient,” Finance Assistant Secretary Maria Teresa S. Habitan told the House ways and means committee during a hearing on the pending DOF-backed mining measure that formed part of tax reform package “2 Plus.”
The DOF proposal was contained in House Bill No. 7951 filed by the new ways and means committee chair, Nueva Ecija Rep. Estrellita B. Suansing.
In the upper chamber, the DOF proposal was filed as Senate Bill No. 1979 by Senate President Vicente C. Sotto III.
“The government seeks to impose a uniform fiscal regime regardless of the nature of the agreement or the size of the mining contractor which are based on the same source, the minerals,” Habitan said, citing that at present, only those within mineral reservations were being slapped a royalty.
According to Habitan, the rationalized and single fiscal regime will apply “to all existing and prospective large metallic, non-metallic, and small-scale mines, and shall be applied to all mines regardless of whether the mine is located outside or inside a mineral reservation.”
Under DOF proposal, the corporate income tax, 4-percent excise tax, 1-percent ancestral domain royalty as well as 1.7-percent local business tax will be retained.
As for the royalty, the 5-percent levied on those located within a mineral reservation will be retained, while those outside will be slapped a phased-in, increasing rate: 3 percent yearly during the first three years; 4 percent on the fourth year; and 5 percent on the fifth year.
Incremental revenues from the new royalty on operations outside mineral reservations were estimated to amount P1.83 billion in 2019, P1.94 billion in 2020, P1.86 billion in 2021, P2.5 billion in 2022, and P3.16 billion in 2023.
The proposal will also impose additional government share, equivalent to the difference between 50 percent of net mining revenue and basic government share.
The net mining revenue refers to gross output minus deductible expenses, while the basic government share refers to the taxes and fees paid to the government.
The proposed mining fiscal regime will also introduce thin capitalization and ring-fencing, Habitan said.
“We are introducing thin capitalization in order for the businesses not to depend on excessive debt funding which would result in high interest expense deductions, and thereby reducing corporate income tax liability,” Habitan explained.
As for ring-fencing, Habitan said that this would allow the government to “maximize its share” by “preventing consolidation of income and expenses of all mining projects by the same taxpayer, hence losses from other mining projects could not be deducted from more profitable projects.”
Besides the new mining taxes, tax package 2 Plus also aimed to slap higher excise taxes on tobacco and alcohol products, as well as stop the sale of “loose” or per-stick cigarettes and e-cigarettes. /atm