Proposed mining fiscal regime taking shape

MANILA, Philippines — The Senate is working toward a mining fiscal regime that would have more tiers and lower rates deemed acceptable to both the government and the local industry.

The chamber’s proposal on the rationalization of the country’s mining regime is slowly taking shape with provisional rates and tiers, based on a draft Senate bill obtained by The STAR.

Like its counterpart in the House of Representatives, the draft Senate bill will introduce a windfall profit tax (WPT) scheme on net income and margin-based royalty on gross income of operations outside mineral reservation areas.

Based on the draft as of May 7, the Senate is looking at a five-tier structure with lower minimum rates for both the WPT and the margin-based royalty, compared to the earlier proposal of the Department of Finance (DOF) that pitched a four-tier approach with higher starting rates.

Under the draft Senate bill, the WPT will start at a 30 percent net income margin with a minimum rate of one percent of the margin.

The DOF’s earlier proposal for the WPT is to have four tiers, with a minimum rate of 1.5 percent of the margin starting at a 26 percent net income margin.

The WPT mechanism is seen to ensure the government’s fair share when there are positive circumstances such as price spikes in the global market, whether short-term or long-term.

As for the royalty outside mineral reservations, the Senate draft bill is proposing a minimum rate of one percent starting with a margin equal to one percent of gross income. The DOF’s initial proposal was to have four tiers with a minimum rate of 1.5 percent of gross income.

The Senate’s current proposal contains half of the proposed 10 tiers for the WPT under the approved House Bill (HB) 8937. Furthermore, the Senate’s proposal for the royalty outside mineral reservations is three tiers fewer than the eight-tier structure under HB 8937.

The draft bill is the result of the series of dialogue by the technical working group (TWG) of the Senate Committee on Ways and Means - subcommittee on the rationalization of the mining fiscal regime that involve industry representatives and government officials. The same TWG is set to meet today (Monday) to continue its work on the draft bill.

Chamber of Mines of the Philippines (COMP) executives earlier disclosed that the industry and the government have reached a middle ground on the proposed WPT and additional royalty that could pave the way for the approval of the long-awaited mining fiscal regime.

COMP chairman Michael Toledo said the tweaks made in the windfall profit tax proposal are not just minor tweaks, as a percentage point difference in levied tax is “quite substantial.”

COMP is hopeful that the rationalization of the mining fiscal regime would be approved before the State of the Nation Address of President Marcos Jr. in July. Marcos earlier identified the rationalization of the mining fiscal regime as a priority measure of his administration.

“I am cautiously optimistic that this is the time that after so many decades of waiting for it that we will come up with a sound, acceptable and transparent fiscal mining regime,” Toledo said.

Toledo noted that the absence of a clear-cut law on the mining fiscal regime is one of the primary concerns raised by foreign investors.