By Charmaine A. Tadalan
Reporter
THE HOUSE of Representatives on Wednesday night approved on second
reading a proposed reform that will give the government a bigger share
in miners’ revenues and will standardize real property valuation and
assessment by local governments.
The chamber approved House Bill (HB) No. 8400, An Act Establishing
the Fiscal Regime for the Mining Industry, which will raise the
effective tax rate (ETR) on the industry to 24.33% from 21.48% currently
that is already among the highest in Asia.
“[The] existing [ETR] is 21.48%, DoF (Department of Finance) is
29.18%. These numbers, including [the] HB ETR, are based on the FS
(financial statements) of 55 large taxpayers of BIR (Bureau of Internal
Revenue),” DoF Director Elsa P. Agustin explained in a mobile phone
message on Thursday.
House Ways and Means committee chairperson Rep. Estrellita B. Suansing of Nueva Ecija’s 1st district said the bill will be taken up on third reading as soon as lawmakers return from their Oct. 12-Nov. 11 break.
“Third-reading for mining tax is when we resume in November,” Ms.
Suansing said in a text message, adding that the plenary will likely
shift its attention afterwards to the proposed general tax amnesty bill
which her committee approved in September.
“Next… priority bill is the tax amnesty bill.”
The proposed mining tax reform will cut the royalty on large-scale
mining operations in mineral reservations to three percent from the
current five percent based on gross output, as opposed to the DoF
proposal to impose a five percent royalty based on gross output across
all mining operations, large and small.
It will also impose a 1-5% margin-based royalty on all large-scale
mining companies outside mineral reserves, specifically: one percent for
mining companies with 1-10% margin; 1.5% for mining firms with above
10% to 20% margin; two percent for those with above 20% to 30% margin;
2.5% for those with above 30% to 40% margin; three percent for firms
with above 40% to 50% margin; 3.5% for those with above 50% to 60%
margin; four percent for those with above 60% to 70% margin and five
percent for miners with margins beyond 70%.
Small-scale miners, meanwhile, will be levied a royalty equivalent to
one-tenth of one percent of gross output, whether the contractor
operates within or outside mineral reservations.
The bill defined margin as “the ratio of income from mining
operations before corporate income tax to gross output” and 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.”
The royalty will be imposed on top of other taxes, such as the
corporate income tax, excise tax which the Tax Reforms Acceleration and
Inclusion Act (TRAIN) doubled to four percent, the royalty to indigenous
communities, and local business tax among others.
Moreover, the proposed measure will also introduce a 1-10%
margin-based windfall profit tax on income before the corporate income
tax: a one percent windfall profit tax on mining businesses with over
35% to 40% margin; two percent if over 40% to 45% margin; three percent
if over 45% to 50% margin; four percent if over 50% to 55% margin; five
percent if over 55% to 60% margin; six percent if over 60% to 65%
margin; seven percent if over 65% to 70% margin; eight percent if over
70% to 75% margin; nine percent if over 75% to 80% margin; and 10% if
over 80% margin.
The measure also introduced a provision disallowing deduction of
interest expense once a miner records a 3:1 debt-to-equity ratio, which
reflects how much a company is financed by debt.
Also on Wednesday, the chamber approved on second reading HB 8453, or
the proposed Real Property Valuation and Assessment Reform Act.
It will mandate the Finance department’s Bureau of Local Government
and Finance (BLGF) to develop and maintain a uniform valuation standard,
consistent with international standards, which will guide local
government appraisers and assessors in preparing their schedules of
market value (SMV).
SMVs will be submitted to the regional offices of the BLGF and the Bureau of Internal Revenue for review.
Reviewed SMVs will then be subject to approval of the Finance Secretary.
“The approved SMV shall be used as basis for the determination of
real property-related taxes of national and local governments,” the bill
explained.
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