The House of Representatives last month approved on third and final reading House Bill 8400 that seeks to rationalize and institute a single fiscal regime applicable to all mineral agreements. The bill was sponsored by Committee on Ways and Means chairperson Rep. Estrellita Suansing (1st District, Nueva Ecija) who is also the principal author of the bill. House Bill 8400 substituted HB 7994 of Suansing and HB 422 of Rep. Romero Quimbo (2nd District, Marikina City).
Speaker Gloria Macapagal-Arroyo led the list of House Members who co-authored the bill.
From the original proposal of the Department of Finance, which imposes a 5 percent royalty on all mining firms in and out of mineral reservations, HB 8400 mandates miners outside of mineral reservations to pay to the government a margin-based royalty on income from mining operations.
But DoF said that with HB 8400, the “expectation of DOF [in terms of revenues] has been reduced.”
“Based on the data for 2017, we were able to get estimates on how much we are getting on the existing regime, which is around P19.71 billion, including taxes. Under the DOF proposal, which imposes 5 percent royalty, we will get P26.8 billion and under the approved house bill, it is around P22 billion,” DOF Fiscal Policy and Planning Director IV Elsa Agustin said.
Based on the new computation made by the DOF, the total incremental revenues, including reduction to Corporate Income Tax, now stands at P3.73 billion annually. In the original proposal of the agency, the government would have gained about P8.19 billion.
In terms of mining royalty, the government will now only earn P2.57 billion instead of P4.59 billion in DOF’s original proposal. In the existing regime, earnings from royalty only stands at P1.13 billion.
Under HB 400, large-scale metallic and non-metallic mining operations located within mining reservation areas shall be imposed a royalty tax equivalent up to 3 percent of the gross output of the minerals, exclusive of all other taxes.
Mining contractors of small-scale metallic and non-metallic mining within or outside mineral reservations shall pay to the government a royalty equivalent to 1/10 of one percent of gross output.
The royalty rates shall be: one percent to 10 percent margin, one percent royalty; above 10 percent to 20 percent margin, 1.5 percent royalty; above 20 percent to 30 percent margin, 2 percent royalty; above 30 percent to 40 percent margin, 2.5 percent royalty; above 40 percent to 50 percent margin, 3 percent royalty; above 50 percent to 60 percent margin, 3.5 percent royalty; above 60 percent to 70 percent margin, 4 percent royalty; and 70 percent margin, 5 percent royalty.
“Margin” is referred in the bill as “the ratio of income from mining operations before corporate income tax to gross output.”
In the Senate, the DoF proposal on new mining fiscal regime was filed as Senate Bill (SB) 1979 by Senate President Vicente Sotto III.
For large-scale miners outside mineral reservations, Suansing said a margin-based royalty is imposed, “making them liable” as well to pay royalty tax as large-scale mining operators inside mineral reservations.
On the other hand, for all small-scale mining operations within or outside mineral reservations, a royalty equivalent to 1/10 of 1 percent of gross output shall be imposed.
The substitute bill also contains a provision proposed by the Speaker to prohibit open-pit mining.
The bill also proposes the exemption of all mining contractors from the coverage of the confidentiality clauses of the National Internal Revenue Code to ensure transparency and the requirement of registration for small-scale miners.