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By Kenneth Christiane L. Basilio, Correspondent
SENATORS and representatives have concurred to avoid prohibiting ore exports under a fresh fiscal framework for large-scale miners aimed at increasing the government’s share of mineral income.
A bicameral conference committee from the Senate and House of Representatives resolved conflicting sections of their legislation on Wednesday, following nearly ten years of legislative postponements.
At press time, the Senate had authorized the bicameral conference committee report, with only Senator Risa N. Hontiveros-Baraquel opposing it.
The House similarly ratified the report, which will now be forwarded to Malacañang for the President’s endorsement.
“This legislation has lingered for the past three Congresses,” Albay Rep. Jose Ma. Clemente S. Salceda, who chairs the House Ways and Means Committee, stated. “Today, it finally reaches the President’s desk.”
The Philippines aims to refine its mining fiscal framework for large-scale miners to secure a greater portion of industry profits. Tax responsibilities for miners presently differ based on their agreements with the government.
The proposed legislation intends to impose a charge of 5% on large-scale miners operating within mineral reservations based on their gross output, and establishes a five-tier margin-based royalty system ranging from 1% to 5% for those operating outside, as per a copy of the reconciled version acquired by BusinessWorld.
A five-tier windfall profits tax system ranging from 1% to 10% was also incorporated into the bill.
“Though a tax hike is unavoidable, we believe this progressive and adaptive strategy allows the government to gain more when global commodity prices surge, without imposing excessive strain on miners during market downturns,” Michael T. Toledo, chairman of the Chamber of Mines of the Philippines, remarked in a Viber message.
The proposal also suggests the “ring-fencing” of large-scale miners, categorizing miners as a distinct taxable entity based on each extraction agreement held with the government.
The Southeast Asian nation possesses an estimated $1 trillion in ore reserves and is among the globe’s largest nickel suppliers to major metal consumers China and Japan, as limited smelting capabilities due to soaring power costs and infrastructure limitations keep the nation dependent on ore exports.
Approximately $7.37 billion worth of ores were exported in the previous year, according to the Environment department’s Mines and Geosciences Bureau.
A copy of the reconciled version indicated the elimination of the Senate-proposed section concerning the ban on raw ore exports.
The Senate version proposed a five-year grace period prior to imposing a ban on unprocessed minerals to allow adequate time for miners to establish processing facilities in the country.
Mr. Salceda noted that there was no formal analysis on the implementation of the ore export ban.
“You can’t simply assert that we’ll implement a five-year delay for the establishment of domestic ore processing plants. What if it takes a decade?” he remarked.
Mr. Toledo appreciated the lawmakers’ decision to remove the suggested ban on ore exports.
“This is a strategic advancement towards revitalizing the Philippine mining sector,” he expressed.
The Philippine Nickel Industry Association stated that the decision was “a wise and forward-thinking move that safeguards jobs, maintains investor confidence, and demonstrates a more realistic comprehension of the challenges surrounding domestic mineral processing.”
Nonetheless, Mr. Salceda mentioned that the bicameral conference committee determined that the proposed ban on ore exports should be addressed by the subsequent Congress.
VALUE OF MINERALS
“The most significant aspect of this reform is not the tax rate. It is the state’s capacity to finally recognize and appreciate what is being extracted from our land,” remarked Mr. Salceda.
Under the proposed legislation, the bureaus of Internal Revenue and Customs are tasked with auditing the sales and exportation of minerals, with extended authority to examine mining documents, including marketing paperwork and assay reports.
It also mandates the establishment of laboratories and acquisition of advanced mineral analysis instruments to assist in determining the quality of raw ores sourced from mines.
“The government will also have the ability to utilize metal pricing databases and other global benchmarks to evaluate whether declared prices accurately reflect true arm’s length values,” Mr. Salceda stated.
The measure aims to provide a “fairer and more sustainable” source of government revenue and would stimulate foreign investment in the sector, as per Mr. Toledo. The government could potentially earn up to P5 billion annually from this measure, according to Mr. Salceda.
Meanwhile, Alfred Benjamin R. Garcia, head of research at AP Securities, Inc., advised that the government should consider reducing electricity costs and offering tax incentives to mining companies to motivate them to establish domestic mineral processing facilities instead of enforcing a ban on ore exports.
“It’s unnecessarily burdensome to mandate the industry to invest in processing and refining,” he communicated in a Viber message.
Implementing a transparent fiscal regime for the mining sector would render the country more appealing to foreign investors, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, indicated.
“Clarity regarding taxes diminishes regulatory ambiguity, which has historically served as a significant deterrent,” he mentioned in a Viber message.
The government should consider formulating a mineral development strategy and establishing a long-term industrialization plan for the mining industry to further draw investments into the domestic sector, he added.
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