Two more tax reforms move towards final House OK
THE HOUSE of Representatives on Wednesday night approved on second reading a proposed reform that will give the government a bigger share in miners’ revenues and will standardize real property valuation and assessment by local governments.
The chamber approved House Bill (HB) No. 8400, An Act Establishing the Fiscal Regime for the Mining Industry, which will raise the effective tax rate (ETR) on the industry to 24.33% from 21.48% currently that is already among the highest in Asia.
“[The] existing [ETR] is 21.48%, DoF (Department of Finance) is 29.18%. These numbers, including [the] HB ETR, are based on the FS (financial statements) of 55 large taxpayers of BIR (Bureau of Internal Revenue),” DoF Director Elsa P. Agustin explained in a mobile phone message on Thursday.
House Ways and Means committee chairperson Rep. Estrellita B. Suansing of Nueva Ecija’s 1st district said the bill will be taken up on third reading as soon as lawmakers return from their Oct. 12-Nov. 11 break.
“Third-reading for mining tax is when we resume in November,” Ms. Suansing said in a text message, adding that the plenary will likely shift its attention afterwards to the proposed general tax amnesty bill which her committee approved in September.
“Next… priority bill is the tax amnesty bill.”
The proposed mining tax reform will cut the royalty on large-scale mining operations in mineral reservations to three percent from the current five percent based on gross output, as opposed to the DoF proposal to impose a five percent royalty based on gross output across all mining operations, large and small.
It will also impose a 1-5% margin-based royalty on all large-scale mining companies outside mineral reserves, specifically: one percent for mining companies with 1-10% margin; 1.5% for mining firms with above 10% to 20% margin; two percent for those with above 20% to 30% margin; 2.5% for those with above 30% to 40% margin; three percent for firms with above 40% to 50% margin; 3.5% for those with above 50% to 60% margin; four percent for those with above 60% to 70% margin and five
percent for miners with margins beyond 70%.
Small-scale miners, meanwhile, will be levied a royalty equivalent to one-tenth of one percent of gross output, whether the contractor operates within or outside mineral reservations.
The bill defined margin as “the ratio of income from mining operations before corporate income tax to gross output” and gross output as “the actual market value of minerals or mineral products from each mine or mineral land operated as a separate entity, without any deduction for mining, processing, refining, transporting, handling, marketing or any other expenses.”
The royalty will be imposed on top of other taxes, such as the corporate income tax, excise tax which the Tax Reforms Acceleration and Inclusion Act (TRAIN) doubled to four percent, the royalty to indigenous communities, and local business tax among others.
Moreover, the proposed measure will also introduce a 1-10% margin-based windfall profit tax on income before the corporate income tax: a one percent windfall profit tax on mining businesses with over 35% to 40% margin; two percent if over 40% to 45% margin; three percent if over 45% to 50% margin; four percent if over 50% to 55% margin; five percent if over 55% to 60% margin; six percent if over 60% to 65% margin; seven percent if over 65% to 70% margin; eight percent if over 70% to 75% margin; nine percent if over 75% to 80% margin; and 10% if over 80% margin.
The measure also introduced a provision disallowing deduction of interest expense once a miner records a 3:1 debt-to-equity ratio, which reflects how much a company is financed by debt.
Also on Wednesday, the chamber approved on second reading HB 8453, or the proposed Real Property Valuation and Assessment Reform Act.
It will mandate the Finance department’s Bureau of Local Government and Finance (BLGF) to develop and maintain a uniform valuation standard, consistent with international standards, which will guide local government appraisers and assessors in preparing their schedules of market value (SMV).
SMVs will be submitted to the regional offices of the BLGF and the Bureau of Internal Revenue for review.
Reviewed SMVs will then be subject to approval of the Finance Secretary.
“The approved SMV shall be used as basis for the determination of real property-related taxes of national and local governments,” the bill explained.