The Mines and Geosciences Bureau (MGB) and the inter-agency Mining Industry Coordinating Council (MICC) will be recommending the lifting of the suspension on the issuance of new mining permits once the second package of the administration’s tax reform is implemented.
Speaking to reporters on the sidelines of the Philippine Mine Safety and Environment Association conference in Baguio City, MGB director Wilfredo Moncano said the additional taxes to be imposed on mining firms were already enough to fulfill the condition of an executive order on the suspension on the issuance of new mining permits.
Under Executive Order 79 issued by former President Benigno Aquino III, the issuance of new Mining Production Sharing Agreements (MPSAs) would remain suspended until a new revenue-sharing scheme has taken effect.
Since the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law doubled the excise tax on mining operations to 4 percent from 2 percent, MGB and the mining groups, started lobbying for the lifting of the moratorium.
But according to Moncano, the Department of Finance wants to include royalty payments in the sector’s taxation scheme before the moratorium is lifted.
In a separate interview, MGB assistant director Danilo Uykieng said the DOF wanted to impose a higher tax rate on mining, “preferably 10 percent.”
The second package of the TRAIN law—which was passed in the House and now pending in the Senate—proposes a 5-percent royalty on all mining operations, even those outside mineral reservation areas, or higher than MGB’s recommendation of 3 percent.
Royalties are originally slapped on mineral reservation areas only since the government spends considerable amount of funds to explore these properties itself.
With the doubling of the excise tax to 4 percent and the proposal of royalty fees at 5 percent, the mining industry stands to pay the government 9 percent in taxes.
Moncano said the two tax reforms should be enough grounds for the industry to ask for the lifting of the suspension on the issuance of new mining permits.
He added that non-metallic mines operators were wary the new tax scheme would be inflationary since companies that could not bear the additional tax might need to pass it on to consumers. Non-metallic mines produce materials for construction such as cement, sand and gravel.
Chamber of Mines of the Philippines chair and Nickel Asia Corp. president Gerard H. Brimo earlier said the additional 5 percent royalty might also run the risk of mines closing down, noting that this would make mining operations “too expensive.”