The Department of Finance (DOF) kickstarted its series of stakeholder briefings for its refined priority tax measures on February 29, 2024 to work with various groups to push for the measures’ immediate passage.
Among the DOF priority measures are the Value-added Tax (VAT) on Digital Service Providers (DSP); the Imposition of Excise Tax on Single-use Plastics (SUPs); Package 4 of the Comprehensive Tax Reform Program (CTRP); the Rationalization of the Mining Fiscal Regime; and the Reform on the Motor Vehicle Users’ Charge (MVUC).
Finance Secretary Ralph G. Recto previously stated that the proposals were refined in consideration of the economic situation where some proposals might have unintended consequences in terms of inflation or in terms of possibly hindering growth in some sectors.
The first briefing conducted was on the Rationalization of the Mining Fiscal Regime, which aims to simplify the tax system, ensure the government’s fair share in mining revenues, and establish good governance in the mining industry.
Fiscal Policy and Monitoring Group (FPMG) Officer-in-Charge Undersecretary Karlo Fermin S. Adriano briefed various mining and civil society stakeholders from the Chamber of Mines of the Philippines (COMP); Bantay Kita; Philippine Nickel Industry Association (PNIA); Philippine Extractive Industries Transparency Initiative (PH-EITI); Bureau of Internal Revenue (BIR); and National Tax Research Center (NTRC).
Under the current regime, mining obligations vary depending on the mining agreement, which can be undertaken via the Mineral Production Sharing Agreement (MPSA) and Financial or Technical Assistance Agreement (FTAA).
These mining agreements can be undertaken in several ways, resulting in a complex tax system and investor uncertainty.
The DOF’s version improves on House Bill 8937 and proposes to impose a 4-tier margin-based royalty ranging from 1.5% to 5% on income from mining operations outside of mineral reservations to address constitutional issues.
Compared to the 8-tier structure from HB 8937, 4-tier makes it simpler for investors and the Bureau of Internal Revenue (BIR) to compute the corresponding tax rates. Furthermore, the simplified DOF version will lessen incentives for the private sector to pursue aggressive accounting to avoid taxes.
The current regime only taxes mines operating within a mineral reservation.
Similarly, a 4-tier, compared to the 10-tier structure in HB 8937, margin-based windfall profits tax rate ranging from 1.5% to 10% on income from mining operations is proposed in light of the sudden increases in the world prices of metal.
“This is just the first step. We can be a major player in this global economy in terms of mineral production. We just have to realize it with the right policies,” OIC Undersecretary Adriano said.
Stakeholder groups expressed their support for the government’s initiative and shared inputs to remedy the unstable policy environment which is not conducive to investments.
On transparency and accountability concerns, the PH-EITI will steadfastly ensure that data is accessible to the public, fostering greater multi-stakeholder dialogue in the extractive sector.
“We began discussions to rationalize our country’s mining fiscal regime in 2012, yet the Philippines’ mining potential remains untapped. With this proposal, the nation will finally receive its rightful share of mining revenues to fund the country’s development goals,” Secretary Recto said.
“We are always willing to work with stakeholders to improve our proposals. I trust that Congress will also throw their support behind this long-overdue reform. The passage of this reform will establish a predictable and stable policy environment that is conducive to investments,” he added.
