26-9-2023 (MANILA) The lower house of the Philippines has given its approval to a bill that aims to revamp the tax system for the mining industry. The government believes that the proposed changes will simplify the tax regime and make the sector more appealing to investors.
However, the bill still needs to be passed by the Senate before the new rules can be implemented. The Philippines is a major supplier of nickel ore to China, the world’s largest consumer of metals. The country also produces copper, gold, and other critical minerals.
According to the bill, which is part of President Ferdinand Marcos Jr.’s tax reform measures, large-scale metallic mining operations within mineral reservations will be subject to a royalty rate of 4% of the gross output. Meanwhile, large-scale miners operating outside mineral reservations will pay a margin-based royalty on their income from mining operations. Small-scale mining operations, on the other hand, will be subject to a royalty rate equivalent to one-tenth of 1% of the gross minerals output.
Additionally, the bill proposes the implementation of a windfall profits tax on mining income.
Dante Bravo, the president of the Philippine Nickel Industry Association, believes that the progressive taxation policy outlined in the bill is a positive step for investor perception. He stated, “If this policy of progressive taxation is pursued consistently as part of the continuing fiscal reforms, I think it is good for the investors’ perception.”
The version of the bill approved by the lower house differs from an earlier proposal, which aimed to increase the effective tax rate on mining to 51% from 38% and impose a 5% royalty on the market value of gross output for large-scale mining operations.
Currently, mining companies in the Philippines are required to pay corporate income tax, excise tax, royalty, local business tax, real property tax, as well as fees to indigenous communities. The bill does not specify any tax on metallic mineral exports.
Previously, the industry expressed concerns about a potential tax of up to 10% on nickel ore exports, as proposed by the Department of Finance. Such a tax could lead to the closure of local producers. The intention behind the proposed tax was to encourage investment in domestic processing plants.
