THE Department of Finance (DoF) said its proposal to charge a uniform 5% royalty for all mining operations will generate about P7.2 billion worth of revenue in the initial year of implementation.
In a statement sent to reporters on Tuesday, the DoF said it made a last-minute proposal to the Senate to pass its proposed uniform rate for all mining operations, whether located inside or outside mineral reservations.
Finance Assistant Secretary Ma. Teresa S. Habitan told senators before the adjournment of the congressional session last month that its proposal would earn a P7.2 billion in incremental revenue, almost double the P3.7-billion estimated earnings the government will collect from the fee structure outlined in the House of Representatives version approved in November.
“In the House, there was considerable discussion about how the royalty was going to be calculated… What finally was approved by the House can be considered a compromise position. The DoF always wanted a simpler manner of computing the royalty,” Ms. Habitan said during the Senate hearing on the proposed new fiscal regime for the mining industry last month.
Senate Bill No. 1979, written by Senate President Vicente C. Sotto which has yet to be approved at the committee level, will impose a 5% royalty based on gross output on both large-scale or small-scale miners in mineral reserves; and an initial 3% royalty based on gross output on mining outside mineral reserves for the first three years of implementation, increasing to 5% in the fourth year and to 5% in the fifth year.
Its counterpart measure, House Bill No. 8400, proposed to reduce the royalty on large-scale mining within mineral reserves to 3% of gross output from 5% currently, and introduce a 1-5% margin-based royalty on miners operating outside mineral reserves.
The House version was approved on third and final reading on Nov. 12.
In September, the DoF said the proposed fiscal regime for the mining industry will bring in P11.3 billion in incremental revenue within five years of implementation.
Ms. Habitan said the Finance department prefers a “rationalized and single fiscal regime for the mining industry” to simplify the tax system.
She added that most mines in the country operate outside mineral reservations and do not pay royalties.
“[I]n 2017, data from the Mines and Geosciences Bureau (MGB) and the Bureau of Internal Revenue (BIR) showed that the government collected P1.1 billion in royalties and P1.9 billion in excise taxes from mining operations. The royalties were collected only from operations inside mineral reservations,” Ms. Habitan said.
On top of the proposed fiscal regime, the DoF said it wants the existing taxes paid by mining contractors such as corporate income tax, excise tax, indigenous people’s royalty, local business tax and value-tax among others to be retained to “level the playing field among all other sectors.”
Ms. Habitan added a rationalized fiscal regime for the mining sector is in line with the “overriding” goal of the Comprehensive Tax Reform Program (CTRP). — Karl Angelo N. Vidal