House OK’s mining fiscal regime bill

The House of Representatives on Monday approved on second reading a bill establishing a new fiscal regime for the mining sector, which seeks to impose a margin-based royalty and windfall profits tax on miners.

Lawmakers approved House Bill No. 8937, one of the priority measures of the Marcos administration, through voice vote.

Under the bill, large-scale metallic mining operations within mineral reservations would be subject to a 4% royalty rate of the gross output of minerals or mineral products extracted.

Iloilo Rep. Lorenz R. Defensor had introduced the amendment to raise the royalty rate to 4%, from 3% in the committee report.

A margin-based royalty will be imposed on income of metallic mining operations outside mineral reservations.

For instance, miners with margins of 1% up to 10% would be subject to a 1% rate. This royalty rate can go up to as high as 5% for those with margins above 70%.

Under the bill, small-scale mining operations would face a royalty rate equivalent to 1/10 of 1% of gross output of minerals or mineral products extracted or produced. 

The measure would also impose a margin-based windfall profits tax on mining operations. Miners with margins of more than 35% up to 40% would face a tax rate of 1%, while those with margins of more than 80% will be imposed a 10% rate.

The Mines and Geosciences Bureau would also require metallic mining companies to submit an assay report for each shipment before leaving the loading ports.

The bill also mandates “ring-fencing to prevent consolidation of income and expenses of all mining projects by the same taxpayer to ensure that losses from other mining projects could not be deducted from more profitable projects.”

All small-scale miners would be required to register with the Mines and Geosciences Bureau, as well as local government units. The bill encourages them to organize into cooperatives to qualify for the awarding of a People’s Small-Scale Mining Contract.

“With the structural changes to the mining fiscal regime proposed under House Bill No. 8937, the government is projected to collect an additional PHP 1.93 billion in royalties and taxes every year,” House Ways and Means Committee Vice Chairperson and Nueva Ecija Rep. Mikaela Angela B. Suansing said in her sponsorship speech on Sept. 5.

The proposed fiscal regime for the mining sector is expected to yield PHP 12.4 billion in 2025, PHP 12.9 billion in 2026, PHP 13.4 billion in 2027, and PHP 13.9 billion in 2028, according to Finance Secretary Benjamin E. Diokno.

Mr. Diokno in July urged Congress to immediately pass the mining tax reform measure, noting that foreign investors want a more simplified tax regime for the sector.

In his State of the Nation Address last July, President Ferdinand R. Marcos, Jr. said the proposed mining fiscal regime is one of his administration’s priority measures.

However, it is not included in the Legislative-Executive Development Advisory Council’s list of 20 priority measures targeted for Congress approval by December.

There is currently no counterpart measure filed in the Senate. — Beatriz Marie D. Cruz