THE SENATE approved on third and final reading on Monday a bill setting up a five-tier margin-based royalty and windfall profit system for the mining industry, which is expected to raise the government’s share of mining profits.
By a vote of 18-1 with zero abstentions, the chamber approved Senate Bill No. 2826, a priority measure that sets royalty tiers ranging range from 1% to 5%, while the five-tier windfall profit tax system will range from 1% to 10%.
Currently, mining firms pay corporate income tax, excise tax, royalty, local business tax, real property tax and fees to indigenous communities.
The House of Representatives approved its version of the bill in September.
Under House Bill No. 8937, large-scale miners inside mineral reservations must pay the government only 4% of their gross output, while the Senate version requires them to pay 5%.
The House version proposes an eight-tier margin-based royalty regime ranging from 1.5% to 5% and a 10-tier windfall profit tax system ranging from 1% to 10%.
According to the third-reading copy of the Senate bill, mining companies will be barred from exporting raw ore five years after the measure takes effect.
Senator Joseph Victor G. Ejercito, who sponsored the measure, told a news briefing last week that the provision would encourage investment in domestic mineral processing, compelling mining companies to construct their own plants.
“The rationale is for the mining firms to establish their processing plants because we want the finished product instead of just putting out raw materials for export,” he said last week.
The Chamber of Mines of the Philippines backs the bill but called on senators to scrap the raw ore export ban, saying it would lead to hundreds of thousands of job losses.
The chamber said mining companies are unlikely to finish building their plants within five years, adding that the ban could disrupt mineral trading.
“It’s still an additional tax take. Considering our increased budget, every little increase in the tax collection is important,” Eleanor L. Roque, tax principal of P&A Grant Thornton, said via Viber, commenting on the bill’s approval.
She said the Department of Finance’s estimate of additional revenue of P6.26 billion would not be a substantial boost to state revenue in the long run.
In October, Australian Ambassador to the Philippines Hae Kyong Yu said that the Australian Embassy in Manila had brought in Australian mining tax experts to work with their Philippine counterparts while Congress was working on the mining tax bill.
The embassy has also been encouraging Australia’s mining industry to partner with their Philippine counterparts on best practices. — John Victor D. Ordoñez
