By Melissa Luz T. Lopez, Reporter

Miners push back, endorse alternative tax bill

Posted on September 03, 2015

INSTEAD OF SUPPORTING the mining revenue sharing bill drafted by the Executive, industry officials said they are more likely to back a separate fiscal regime proposal which they find more attuned to their needs.

An official of the Chamber of Mines of the Philippines (COMP) said yesterday that the group is looking at House Bill (HB) 3586 filed by two lawmakers as an alternative to the version put forward by the government’s Mining Industry Coordinating Council (MICC), describing the latter bill as lethal for mining investment.

Ronald R.S. Recidoro, COMP vice-president for Legal & Policy, said the business group is more keen on HB 3586 filed by 1-BAP Rep. Silvestre H. Bello and Taguig Rep. Lino S. Cayetano for having flexible provisions on tax rates, which vary by the market price of mineral ores.

“When we looked at world regimes, we saw that the best way to do it... such that when net revenue is higher, the tax rate rises... It’s something like the Bello-Cayetano bill, and you treat nickel, gold, and copper differently because their markets are different and they behave differently,” Mr. Recidoro said in an interview on the sidelines of the second hearing on the mining bills by the House committee on ways and means.

“We’re studying that, we think it has some of the qualities that we’re looking for because as it is, it’s progressive. It adjusts when profits are up.”

Under HB 3586, the government’s total take from mining will be derived from three types of taxes:

government royalty, which sets variable rates of 2%-5% of net mining revenue from gold and copper depending on market prices, and 7% for nickel and other metal ores extracted from proclaimed mineral reservations and 4% for those extracted outside the reservations;

the regular 30% corporate income tax under the Tax Code; and

a special mines tax equal to 5% of a contractor’s yearly taxable income.

Mr. Recidoro said this regime as simple, adding that it would make collection easier compared to the MICC proposal.

The MICC version, filed as HB 5367 will collect either 10% of a miner’s gross revenue or 55% of “adjusted net mining revenues” (ANMR: gross revenue less production and other deductible costs but not to exceed 10% of direct mining, milling and processing costs), whichever is higher; and 60% of any windfall profit (in case the “ANMR margin” -- ANMR divided by gross revenue -- exceeds 50%, the government gets 55% of that threshold of 50% of gross revenue plus 60% of the excess).

This is in lieu of several taxes. Miners, however, must still pay value-added tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive income, donor’s tax, environmental fee, real property tax, Securities and Exchange Commission fee, water usage fee, as well as administrative and judicial costs and penalties.

A simulation conducted by the Finance department’s Fiscal Policy Division estimated an average effective tax rate (AETR) for the MICC regime of as much as 71%.

The business chamber has strongly opposed the government proposal, saying the steep rates are “absurd” and would have investors looking elsewhere.

Ramon L. Clarete, former dean of the University of the Philippines School of Economics, also presented before the committee a 2014 study which showed that increasing the effective tax rates on mining could cut total investments by as much as 67%.

“The mining tax regime of the country has a higher average effective tax rate than other countries in all three metals even without changing the tax regime,” Mr. Clarete said, citing comparisons made between the MICC bill and taxes imposed on gold, copper, and nickel miners in Canada, Australia, the United States, and Chile.

“The proposed MICC bill raises the AETR on mining (by between) 16% to 81%. Because investments are negatively correlated from AETR, the (investment decline will be) between 13% and 67%.”

The COMP is among the parties that commissioned Mr. Clarete’s research.

“We’ve actually shadowed Dr. Clarete’s study and our findings are very close to what he found... What the industry can support is something which is progressive, a tax rate that adjusts when profits are high and subsequently lowers when profits are down,” Mr. Recidoro told lawmakers.

Instead of installing one-tax scheme for all miners, Mr. Recidoro said a minimum guaranteed share for government equal to 2% of profits would be more agreeable.

“If we can come up with that mechanism, I think that’s something industry can support. But to propose a 55% share in ANMR is simply killing the goose that lays the golden eggs,” the chamber official added.

In a roundtable discussion with BusinessWorld last week, Finance Secretary Cesar V. Purisima said he is standing by the MICC bill as the government had every right to be “aggressive” in collecting high taxes for extracting finite resources.

With government and industry still deadlocked on the matter, committee chairman and Marikina Rep. Romero Federico S. Quimbo (2nd district) asked COMP to draft a counterproposal to allow the panel to arrive at a “workable” draft of the tax measure.

Succeeding deliberations on the bills will be held by the committee, Mr. Quimbo added.

The passage of a new mining bill would lift the nationwide moratorium on new permits put in place under Executive Order 79 signed by Pres. Benigno S. C. Aquino III on July 6, 2012.