Gov’t expects R2 billion a year from additional excise tax on minerals

The new fiscal regime on mining sector is finally moving, albeit slowly, with the inclusion of additional excise tax on minerals to the Tax Reform and Acceleration Inclusion (TRAIN) bill, which would inject additional earnings of more than R2 billion to the government every year.

Signed by President Rodrigo Duterte late Tuesday, the Senate version of TRAIN would double the excise taxes on metallic and non-metallic mining resources from 2 percent to 4 percent.

Mines and Geosciences Bureau (MGB) Director Danilo Uykieng said in an interview that based on the estimate of the Department of Finance (DOF), the government stand to gain additional R2.1 billion from the pending increase.

This will be on top of the R1.8 billion that the government get every year from excise tax on mining alone.

"From the 4 percent, [the earnings would be an additional] R2.1 billion on average based on the number of operating mines in the country," Uykieng said.

According to him, the DOF presented such projection to the Mining Industry Coordinating Council (MICC) held earlier this week.

"The 4 percent increase is okay. The industry accepted it also," Uykieng said.

Pushing for a new fiscal regime in mining can pave the way for the lifting of the ban on new mining projects.

In 2012, former President Benigno Aquino III signed an Executive Order (EO) 79 on mining wherein no new mineral agreements shall be approved until a legislation rationalizing existing revenue sharing schemes and mechanisms shall have taken effect.

To make things more complicated, former Environment Chief Regina Paz Lopez also issued a memorandum order in July last year imposing a continuing moratorium on new mining projects.

Uykieng also pointed out that excise tax is just one component to a new fiscal regime on mining. Other components in the fiscal regime would include adjustments in the corporate income tax, value-added tax, and withholding tax.

All in all, including the nearly R2billion current excise tax collection on mining, the government gets around R5.3 billion every year from the mining sector as far as the tax is concerned, Chamber of Mines of the Philippines (COMP) said.

During the previous term, a bill was filed in Congress that wants to compel mining firms to give the government 10 percent of its gross revenues or 55 percent tax on adjusted mining revenues plus a percentage of windfall profit, whichever is higher.

"There is still a continuing study on how to increase the tax because it's just excise tax that will get an increase now. How about the other portions of the fiscal regime?" Uykieng stressed.

Environment Chief Roy Cimatu already began giving hints as to how the future will look like for mining companies here in the Philippines.

Basically, it might involve imposing higher tax on mining operations; implementing measures that will increase the required rehabilitation funds for miners; and possibly, work on a law that will determine whether the country will allow open-pit mining method or not in the future.

Environment Undersecretary for Policy, Planning and International Affairs Jonas Leones said that Cimatu is now seriously looking at the current fiscal regime at the mining industry and how it could be improved.

In the meantime, MGB is also pushing for a per commodity basis increase in the mining tax.

MGB Director Wilfredo Moncano earlier said his agency will soon come up with its own proposal with regards to the call for a mining tax hike — saying that the increase in mining tax should not be uniform and that each commodity such as gold, nickel, and copper should have its own, different tax adjustment.

When asked if MGB presented this to this week's MICC meeting, Uykieng said "no," suggesting that the DOF may not be keen on such proposal.

"We did not present it. They decided to forego the 'by commodity' proposal. But the instruction is just continue with the study on the ideal tax regime for mining," Uykieng further said.

"We will still look at the 'per commodity' proposal. There are advantages and disadvantages to that. We will consider what will make things better," he added.