Work on new mining taxes begins

February 13, 2018 at 10:00

Work on new mining taxes begins


New mining permits had been on hold since 2012 under Executive Order 79 signed by then President Benigno S.C. Aquino III. A new mining law or a new executive order by President Rodrigo R. Duterte could render that six-year-old directive obsolete. — AFP

The government is moving closer to lifting the ban on new mining projects as the interagency Mining Industry Coordinating Council (MICC) works out a new tax regime for the mineral industry, in conjunction with the Finance department’s efforts to generate fresh revenue streams.

Finance Secretary Carlos G. Dominguez III, who co-chairs the MICC together with Environment chief Roy A. Cimatu, said Friday last week that the MICC will convene by the “first week of March” to “discuss” options the government could take that will effectively render Executive Order 79 obsolete.

A new law governing taxes for the mineral industry would lift that six-year-old order signed by then-President Benigno S.C. Aquino III which imposed a moratorium on the grant of new mining permits.

The 16th Congress attempted to mint a new revenue-sharing measure for the industry, but did not go beyond committee-level discussions.

A new mining bill will be submitted to the 17th Congress as part of “Package Two Plus” — a supplement of sorts to Package Two under the Duterte administration’s tax reform program and one that’s being prepared by the Finance department.

Finance Undersecretary Karl Kendrick T. Chua said last Friday that the agency is “still consulting” industry players on the proposed tax scheme, which could delay the submission of this supplement measure to Congress.

Package Two — submitted last month when Congress resumed session — seeks to impose additional taxes on gambling activities, as well as on coal production and alcohol and tobacco manufacturing. These are expected to complement the proposal to reduce corporate income taxes to 25% from 30%, alongside the removal of tax perks being enjoyed by big companies.

Since the MICC consultations have to be concluded first before writing “Package Two Plus,” the second round of tax proposals will likely appear as multiple bills referred to Congress on a piecemeal basis.

Mr. Dominguez said the proposal to provide different tax schemes for various metals is also being explored, an idea earlier floated by the Mines and Geosciences Bureau (MGB).

MGB Director Wilfredo G. Moncano said in November last year that his agency wants to impose taxes on a per-commodity basis, versus plans of maintaining a uniform tax rate for all mineral producers.

“It makes sense. You don’t tax nickel at the same rate as you tax copper,” Mr. Dominguez told reporters when asked about the plan late Friday. “First of all, the extractive costs are different and secondly, the values are different.”

The Cabinet official said these discussions are live even “at the technical level.”

Uncertainty over local mining policy has driven flighty foreign capital out of the Philippines in 2017.

That came in the wake of former Environment Secretary Regina Paz “Gina” L. Lopez’s announcement that she was closing 23 of the country’s 41 mines and suspending operations in five other sites a year ago. She later on said she wanted contracts for 75 projects in pre-operation stage also cancelled for being located in watersheds.

Business groups had warned the government of the negative impact of these shutdowns on the country’s overall investment climate, while pointing out the need to “fully explain and justify” the cancellations of mining permits.

The MICC is currently carrying out an audit of these shuttered mines through industry experts commissioned for the review, which is targeted to be completed by March.

President Rodrigo R. Duterte’s entire tax reform program aims to shift the burden to those who can afford to pay more and raise additional revenues to help support his administration’s “Build, Build, Build” program that will see P8.44 trillion spent on major public infrastructure until he ends his term in mid-2022.


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