Two more tax re­forms move to­wards fi­nal House OK

Business World - - Front Page - By Char­maine A. Tadalan Re­porter

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.

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