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Sovereign tax on mining excites Dominguez

Chino S. Leyco | Manila Bulletin | October 21, 2019

Finance Secretary Carlos G. Dominguez III is amenable to the proposal seeking to introduce a new tax on mining to generate funds for future generations calling it “good idea.”

President Duterte’s chief economic manager cited the plan of Albay Second District Rep. Clemente Joey S. Salceda, chair of the House ways and means committee, to impose a two percent sovereign wealth fund tax on gross revenues generated by mining companies.

“First of all, the idea of a sovereign fund is actually a good idea,” Dominguez told reporters, noting such proposal will be similar to the “coco levy fund,” though controversial but had generated up to ₱150 billion in assets.

Dominguez added that a sovereign wealth tax on mining is an acceptable proposal as the country’s minerals are irreplaceable.

“The idea is what they call intergenerational equity. You get the gold now and sell it, your grandchild cannot do it anymore, so if you take part of that and invest it, in such a way he benefits, that’s a good idea,” the finance chief explained.

But Dominguez added that Albay Second District Rep. Clemente Joey S. Salceda has yet to discuss with the DOF his planned sovereign wealth tax.

“I haven;t seen the details, but I think it’s a good idea. It answers a question that you are using a non-renewable resource and passing on the benefits to the future generation,” he said.

In September, Salceda said that he will propose a two percent sovereign tax on miners’ gross revenues as well as increase the industry’s current four percent excise tax rate to five percent.

Salceda also wants to auction off the mining tenements in the country to raise additional funds, instead of the existing first-come, first-served policy being implemented by the government.

Currently, miners pay the government the 12 percent value-added tax (VAT) that they can recover once the minerals were exported. Also, there is the 30 percent corporate income tax, as well as four percent excise tax and windfall taxes that include royalties.

But the existing taxes and fees were not enough for the House ways and means chairman, thus he is now proposing for the establishment of a trust fund under the Bureau of the Treasury from the sovereign wealth fund tax.

Salceda proposed “all collections [from the sovereign wealth fund tax] by one administration ca’t be used by them. It can only be used by the next administration. At least there’s a six-year accumulation.”

“A trust fund is way of perpetuating the land… it’s a self-limiting incentive system,” Salceda said, noting Norway also imposes a sovereign wealth fund tax on their oil reserve.

“They’re not repeating resources because you have to wait two million years for a new induction to produce the next ounce of gold. There should be an intertemporal benefit across generations,” the lawmaker pointed out.

But Salceda admitted that he has yet to discuss his mining tax proposal with Dominguez, saying “It was never discussed, they were like ‘it’s up to you’.”

Aside from the DOF, Salceda also plans to consult the mining stakeholders to determine the costs and potential revenues once his proposed measures was passed into law.

The DOF earlier supported a measure aiming to introduce amendments to the existing fiscal regime covering all mining operations in the country.

The department also wanted to impose a uniform royalty rate of five percent for all mining operations, whether located inside or outside a mineral reservation.

Source: https://www.pressreader.com/philippines/manila-bulletin/20191021/page/11