Voting 158-7 without abstention, the House of Representatives has passed on third and final reading House Bill 8400 that codifies all laws, regulations and agreements governing economic benefits due the government from mining.
The bill, principally authored by Committee on Ways and Means Chairperson Rep. Estrellita Suansing (1st District, Nueva Ecija), promotes fairness by providing a fiscal regime that is applicable to all existing and prospective large metallic, non-metallic, and small-scale mines, and shall be applied to all mines regardless of whether the mine is located outside or inside a mineral reservation.
The bill, co-authored by Speaker Gloria Macapagal Arroyo, provides for the amendment of Section 151 of Chapter VII, Title VI of the National Internal Revenue Code of 1997, as amended.
It mandates mining contractors of large-scale metallic and non-metallic mining operations outside of mineral reservations to pay to the government a margin-based royalty on income from mining operations.
Based on the bill, the royalty rates shall be: 1 percent to 10-percent margin, 1-percent royalty; above 10 percent to 20-percent margin, 1.5-percent royalty; above 20 percent to 30-percent margin, 2-percent royalty; above 30 percent to 40-percent margin, 2.5- percent royalty; above 40 percent to 50-percent margin, 3-percent royalty; above 50 percent to 60-percent margin, 3.5-percent royalty; above 60 percent to 70-percent margin, 4-percent royalty; and 70-percent margin, 5-percent royalty.
Large-scale metallic and non-metallic mining operations located within mining reservation areas shall be imposed a royalty tax equivalent to 3 percent of the gross output of the minerals or mineral products extracted or produced by the mining operations, exclusive of all other taxes.
Mining contractors of small-scale metallic and non-metallic mining within or outside mineral reservations shall pay to the government a royalty equivalent to 1/10 of 1 percent of gross output.
In addition to the taxes imposed under the NIRC, there shall be imposed for each taxable year a margin-based windfall profits tax on income from mining operations before corporate income tax. It shall be deductible from taxable income, as defined in Section 31, Chapter 5, Title II of the NIRC.
The profits tax shall be: For over 35 percent to 40-percent margin, windfall profits tax shall be 1 percent; over 40 percent to 45 percent, tax of 2 percent ; over 45 percent to 50 percent, tax of 3 percent; over 50 percent to 55 percent, tax of 4 percent; over 55 percent to 60 percent, tax of 5 percent; over 60 percent to 65 percent, tax of 6 percent; over 65 percent to 70 percent, tax of 7 percent; over 70 percent to 75 percent, tax of 8 percent; over 75 percent to 80 percent, tax of 9 percent; and 80 percent, tax of 10 percent.
“Margin” is referred in the bill as “the ratio of income from mining operations before corporate income tax to gross output.” It refers to 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.”
Meanwhile, income from mining operations shall mean the “gross output less deductible expenses.”
Additionally, the bill also mandates mining contractors for all mining operations, whether large-scale or small-scale, to observe fiscal transparency and shall be exempted from application of the confidentiality clauses of the NIRC of 1977, as amended, to the extent of their participation in Extractive Industries Transparency Initiative.
The fiscal regime provided herein and the applicable terms and conditions provided under existing laws shall be embodied in the minerals agreements and Financial or Technical Assistance Agreements entered into by the government.
Valid mineral agreements and FTAA existing prior to the effectivity of the Act shall be continued to be governed by their respective terms and conditions.
Finally, all persons undertaking small-scale mining activities shall register as miners with the Mining Board of the concerned local government units in accordance with Republic Act 7076 or “An Act Creating a People’s Small-Scale Mining Program and for Other Purposes” and with the Mines and Geosciences Bureau, and may organize themselves into cooperatives in order to qualify for the awarding of a people’s small-scale mining contract.
Citing data from the Department of Finance, Suansing said the government collected total taxes, fees and royalties from the mining industry in the amount of P32.76 billion in 2014, P30.07 billion in 2015 and P33.43 billion in 2016.
“In terms of revenues, the mining industry has merely accounted for no more than 0.26 percent of the GDP in 2014 and was reduced to 0.23 percent both in 2015 and 2016,” said Suansing.
Presently, for large mines, mining contracts offer varying fiscal regimes and therefore fiscal burden is differentiated, she said. Suansing explained the fiscal regime depends on whether the mine is operating in a mineral reservation and whether the mine is operated under a Mineral Production Sharing Agreement or FTAA. To date almost all mining contracts are under MPSA, while those in mineral reservations are composed mainly of nickel mines. All FTAA agreements are for mines outside mineral reservations, she said.
“Under this measure there is no more distinction on whether mining exploration is conducted outside or inside a mineral reservation and whether it is large scale or small scale. Equity dictates that fiscal burden should be shared equally by all who explore the natural resources of the country,” said Suansing.