NextGen Day

A panel of the House of Representatives adopted a new fiscal system for the mining industry on Wednesday, which is anticipated to bring in PHP37.5 billion in its first full year of operation.

A bill calling for a streamlined and uniform fiscal system that would apply to all current and future large-scale metals mines, regardless of location, was passed by the House ways and means committee.

The Department of Finance’s proposal, which would “raise the country’s effective tax rate on mining (counting all taxes) to 51%, up from 38% under the current system,” was approved by the committee.

The committee’s chair, Rep. Joey Salceda of Albay, stated that the Philippines will move up from being towards the bottom of the list to being “closer to the middle of the pack” among major mining nations.

“51 percent is a fair number because it gets us closer to Australia’s effective tax rate, which, when royalties are taken into account, is roughly 51 percent. Only Chile and South Africa have lower effective tax rates than us among large nations. Our regional comparators, Australia and Indonesia, are closer to us thanks to this idea. According to Salceda, China’s effective tax rate on gold miners is a relatively high 71 percent.

He said that by submitting the plan, the panel would uphold its promise to President Ferdinand “Bongbong” Marcos Jr. and the Department of Finance to raise money for the administration’s top priorities.

Salceda stated, “With this bill, we are delivering on our promise to the President and to the DOF to raise funds to support PBBM’s key programs.

Salceda stated that the revenue program expects a tax-to-gross domestic product (GDP) growth of 0.3 percent yearly under Marcos’ Medium Term Fiscal Framework.

“Half of that presumption is already addressed by the mining tax reform. Therefore, if passed, it will greatly benefit President BBM’s larger goals for infrastructure, an agrarian revolution, and a strong middle class in the Philippines, he stated.

The bill calls for the implementation of a royalty tax of 5% on the gross output market value of significant mining activities.

Additionally, it specifies that mining activities will be subject to a minimum government share of 60% of all net mining income, including all government taxes, fees, and charges.

To promote the domestic processing of mineral products, a 10% export tax will also be applied to the market value of mineral ore exports.

The value of exports has increased but mining GVA has decreased, suggesting that the majority of exports are ores with little or no domestic value-added. I intend to keep talking to stakeholders about how we might use a charge like this to strengthen the domestic mining value chain, Salceda said.

Additionally, each mining project would be recognized as an independent tax entity. This will prevent tax avoidance by dividing expenditures among linked projects carried out by the same business, he emphasized.

Transfer pricing, or the manipulation of expenses by a corporation with numerous subsidiaries or connected parties in order to avoid taxes, is less likely to occur, he claimed.

The government will put in place a system for public disclosure and examination of all mining tax and revenue data in the extractives value chain in order to institutionalize transparency norms.

Salceda made the point that these standards might make it easier for mining businesses to obtain more affordable and foreign funding as well as more advanced technology.

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