Mining revenue scheme filed in House

February 9, 2015 at 11:11

Posted on February 04, 2015 10:29:00 PM


By Melissa Luz T. LopezReporter

A NEW revenue sharing scheme the mining industry has been anticipating for more than two years now has finally entered the legislative mill, with the bill endorsed by Malacañang itself filed in the House of Representatives.

But while the Palace has expressed its desire to have this priority measure approved by Congress before it adjourns on June 11 — in order to avoid inaction as legislators begin preparations for the 2016 national and local elections — House leaders yesterday could not give such assurance.

House Bill No. 5367, which provides a new revenue-sharing arrangement between government and large-scale mining companies has been filed at the chamber and referred to its Committee on Ways and Means, according a higher share to government “as owner of the minerals.”

“The State shall get a fair and equitable share of the revenues and economic benefits derived from the mineral resources. Any economic rent arising from such exploration, extraction and utilization belongs to the State,” the bill reads.

The bill’s author, Ways and Means committee Chairman Rep. Romero S. Quimbo of Marikina (2nd district) , confirmed that the measure is the one drafted by the Malacañang-created Mining Industry Coordinating Council (MICC) .

The interagency MICC is tasked to implement Executive Order 79, signed by President Benigno S.C. Aquino III on July 6, 2012, which mandates reforms in the mining sector, including the crafting of a new revenue regime.

Issuance of new operating permits has been suspended pending the new fiscal regime, with the government bent on getting a larger, more equitable share of industry revenues.

Malacañang regards the rationalization of the mining fiscal regime as one of its legislative priorities for both the second and third regular sessions of the current Congress, and included it on the list of 29 priority bills that was submitted to legislators in June last year.

Under Republic Act No. 7942, or the Philippine Mining Act of 1995, government gets a 50% share in profits of foreign miners operating in the Philippines under Financial or Technical Assistance Agreements, and a 2% excise tax on actual market value of output under Mineral Production Sharing Agreements with local companies.

The new proposal now with the House, provides:

• for a government share of 10% of gross revenue or 55% of adjusted net mining revenue (ANMR, or gross revenue less production and other deductible costs “but not to exceed 10% of direct mining, milling and processing costs”) , whichever is higher;

• in case the ANMR margin (ANMR divided by gross revenue) exceeds 50% “due to increase in metal prices or other factors”, the government gets 55% of the threshold ANMR (50% of gross revenue) plus 60% of the excess.

The national government will get 60% of the state’s share, while host local government units (LGUs) will get 40%. If the contract area is located in an ancentral domain, royalties for indigenous cultural communities (ICCs) will be taken from the government share, with the balance shared by the national and local governments according to the aforementioned ratio.

Within five days from the end of each quarter, the mining companies will directly pay ICCs their share as well as the government share (net of ICCs’ share) .

The measure also provides that the government’s share will be in lieu of corporate income tax, royalty to ICCs, duties on imported specialized capital mining equipment, mayor’s fee and/or business permits “and other fees and charges imposed by the host LGUs pursuant to the Local Government Code of 1991, as amended.”

However, mining companies will still have to pay value added tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive income, donor’s tax, environmental fee, real property tax, Securities and Exchange Commission fee, water usage fee, as well as administrative and judicial cost and penalty.

“The list of exceptions shall be reviewed annually, or as often as may be necessary; provided, however, that none of the exceptions indicated herein shall be delisted,” the bill read.

Sought for clarification, Mines and Geosciences Bureau Director Leo L. Jasareno explained that mining firms would still have to pay some taxes under the new scheme.

“There are still some exceptions… They will still have to pay some taxes, but in terms of significance, these are not that much,” Mr. Jasareno said by phone.

“They will no longer have to pay bulk of taxes.”

Finally, the bill provides for the designation of Mining Industry Zones — or the approved mining areas — that will be administered by the Philippine Mining Development Corp.

While Malacañang is targeting congressional approval by early June, legislative leaders could not commit to such timetable.

Mr. Quimbo said he expects exhaustive debates on the proposal before it can secure approval.

“Any bill that seeks to change the fiscal regime will always be contentious… The rates can go up or down,” Mr. Quimbo said in a text message.

“What we are certain is that we will pass this before the President ends his term,” he added.

“More importantly, what bill will be eventually approved is one that makes investors more confident in our business environment, with permanent rules that don’t change from one administration to the next,” he continued.

“The bill will likewise consider the extraordinary financial risks that mining companies are exposed to as well. It will have to be competitive with other countries and give the investors a reasonable return on their investments.”

Natural Resources committee Chairman Rep. Francisco T. Matugas of Surigao del Norte (1st district) said the bill will have to be certified as urgent by Malacañang if it wants a June approval.

“If that will be certified as urgent, we can (pass it) . It will take time with the opposition,” Mr. Matugas said in an interview, adding that he himself wants even faster remittance of LGUs’ share.

Currently, it usually takes the Treasury bureau two to three years to give local governments mining revenues due them, Mr. Matugas noted, depriving especially poor municipalities of much-needed development funds.

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