Miners oppose government plan to impose mining royalty

MANILA, Philippines — The mining industry has expressed concern over government’s plan to impose royalty on all mining operations, saying such a move is detrimental to the sector.

Under the proposed second package of the tax reform,  the government plans to slap royalty on mining contractors for all metallic and non-metallic operations in the country.

The Chamber of Mines of the Philippines said the plan would severely hurt the sector.

“We hope this new proposal will only apply to future projects and not the existing ones. It will be a bit unfair to the existing because current mines already have their feasibility studies,” COMP executive director Ronald Recidoro told The STAR.

According to reports, the Department of Finance proposed the imposition of royalties on all operations regardless if they are operating outside of mineral reservation areas.

At present, only five percent royalty is slapped on those operating in the nine mineral reservation areas in the Philippines.

“We hope the DOF will consult with the industry to arrive at a rational fiscal regime. We want to contribute to the national economy but we can not do that if we will all close because it has already become too expensive,” Recidoro said.

The industry has just started to feel the impact of the doubling of the excise tax under the first package of the tax reform program.

Mining companies operating under a mineral production sharing agreement pay the regular corporate income tax, business tax, and the indigenous people directly affected by mining operations, among others.

“Their new proposal would likely impact more on copper and gold production because they are more expensive to operate,” Recidoro said.

To date, there are only nine mineral reservation areas in the Philippines namely, Ilocos Norte feldspar, Zambales chromite, Biak-na-Bato, Siruma white clay, Samar bauxite, Zamboanga, Mt. Diwalwal Gold, Surigao, as well as all offshore areas within the country’s territorial limits.

The Mines and Geosciences Bureau identifies and recommends an area to be declared as mineral reservation by the Office of the President based on the area’s economic potential.

Once declared as mineral reservation, an area covered by the proclamation shall be “reserved” for future mining exploration and exploitation, and will be covered by the five-percent royalty tax under the mining law.

Mining royalty tax represents five percent of the market value of the gross output of the minerals produced by mining companies within a declared mineral reservation area.