New fiscal regime for mining industry signed into law

Philippine President Ferdinand R. Marcos, Jr. on Thursday signed into law a measure that overhauls the tax regime for large-scale metallic mining, imposing royalties and profit-based levies to boost government revenue and share gains with host communities.

“This reform mandates mining companies that operate within government-designated mining sites to pay a royalty of 5% of their gross output,” the President said during signing ceremonies for Republic Act No. 12253 or the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act at the presidential palace.

“Those operating outside mineral reservations, on the other hand, will be subject to a margin-based royalty on income from metallic mining operations,” he added.

The measure also introduces a windfall tax on companies whose profit margins exceed 30%. “This ensures that the government receives its fair share from the extra profit and that the benefits will ripple into the lives of ordinary Filipinos,” Mr. Marcos said.

Each mining contractor will now be treated as a separate taxable entity, preventing companies from offsetting one project’s losses against another’s gains.

The law directs the Bureau of Internal Revenue and the Bureau of Customs, in coordination with the Mines and Geosciences Bureau (MGB), to audit past mineral sales and exports.

Local governments are set to benefit from the reform, with 40% of gross collections from excise taxes, royalties, and related charges allocated to them, Malacañang said in a statement.

In addition, 10% of royalties from mining sites will go to the MGB and Metals Industry Research and Development Center to fund exploration, research and environmental protection initiatives.

“This marks a significant milestone in positioning the Philippine mining sector as a key player in the global value chain. By modernizing the industry’s fiscal regime, we aim to drive economic growth, especially in support of green technologies, while protecting our environment and natural heritage,” Secretary Frederick D. Go, the special assistant to the President for investment and economic affairs, said in a statement.

The Chamber of Mines of the Philippines Chairman Michael T. Toledo said the new law is a step towards establishing a “stable, transparent, and competitive fiscal environment for the mining industry.”

“We recognize that increased taxation is inevitable. The law provides predictability and consistency in the fiscal framework, which are essential for long-term planning and investment. It aligns the Philippines with global mining jurisdictions, making us more competitive and attractive to investors, especially amid rising global demand for critical minerals,” he said in a statement.

Mr. Toledo said the law ensures both the government and host communities receive a fair portion of revenues when metal prices are high, but also allowing “reasonable tax relief” for companies when prices fall.

Senator Joseph Victor “JV” G. Ejercito, who was the principal author of the law, acknowledged that the proposed five-year moratorium on the export of locally-extracted minerals was not adopted in the final version.

“Although the export ban wasn’t included, which I think could have been a game changer by encouraging local processing and creating more jobs, we will continue to push for it in the next Congress,” he said.

‘Gains and gaps’

Cielo Magno, associate professor at the UP School of Economics and longtime advocate for transparency in extractive industries, described the new law as favorable to the industry but raised concerns about its broader impacts.

“This new regime will bring additional revenue to the government by attracting new mines because it is very friendly to them. It still doesn’t guarantee payments for minerals extracted because it is based on margins of profit, which can be easily reduced to zero through accounting,” she told BusinessWorld.

“With weak government regulation and monitoring, it doesn’t guarantee fair payment for our minerals.”

Ms. Magno noted the policy was formulated without any regard to the social, environmental, and political impact of mining.

“We missed the opportunity to address how mining will aggravate climate change effects on communities. This new policy did not even consider policies that would maximize value-adding through processing of raw minerals. This policy is beneficial, but only for mining companies,” she added.

When asked what specific measures or safeguards the government should implement, Ms. Magno said, “They have to review the regulations related to social, environmental, and climate impacts and upgrade them.”

John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said the new mining fiscal reform is a long overdue step toward aligning mining revenues with actual profits.

“The shift to margin-based royalties and windfall taxes can improve equity, while transparency provisions help curb leakages and build investor trust,” Mr. Rivera said

“If implemented well, this can boost revenues, empower LGUs, and support long-term sustainability. The key now is consistent enforcement and clear, investor-friendly guidelines,” he added. — Erika Mae P. Sinaking