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House suspends mining tax hearing pending further talks

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The 17th Congress ahead of President Rodrigo Duterte’s State of the Nation Address at Congress on July 23. -- AFP

THE House Committee on Ways and Means on Wednesday deferred consideration of the proposed mining tax reform as the positions of the Department of Finance (DoF) and the mining industry are currently irreconcilable.

The committee was due to consider approval of the unnumbered substitute bill that will increase the current effective tax rate imposed on mining firms to 21% from 11%, much higher than the industry proposal for a rate of 13%.

“It seems there is a deadlock now. The mining industry is submitting a proposal which is different from the stand of the DoF,” Rep. Johnny Ty Pimentel of the second district of Surigao del Sur, a committee member, said during the deliberations.

The bill, “An Act Establishing the Fiscal Regime For Mining Industry,” in its latest version, proposes a 5% royalty for all mining operations, regardless of the mineral product.

The 5% royalty is currently levied only on mining operations within Mineral Reserves; but, as proposed, will be applied outside Mineral Reserves, in increments from 3 to 5% within five years of enactment.

Chamber of Mines of the Philippines (CoMP) Chairman Gerard H. Brimo said the 5% royalty on top of all other taxes, such as the 4% excise tax, average 1.7% local business tax, among others is “very punishing.”

“That brings a total imposition on gross revenues, payable whether a mining company makes money or not, to close to 12%, and I can categorically say without any doubt that is the highest in the world,” Mr. Brimo said.

The CoMP proposed to instead impose varying rates depending on the type of mineral product and to distinguish between those operating in and out of mineral reserves.

The DoF said it has reservations about such a scheme, but signalled that it is willing to accept an effective rate close to its own number.

“What we’re looking at is an effective tax rate which is approximate to what we have proposed. If it’s not as high, something very close to that,” Finance Assistant Secretary Teresa S. Habitan told BusinessWorld.

Since the two sides are not “close” she asked the committee for time to find common ground in the form of a taxation rate that “more or less” represents a “common unhappiness level.”

Given the distance between both sides’ positions, Mr. Pimentel recommended that the panel hold another meeting to accordingly find a compromise between the government and the mining industry.

The committee had earlier set an ultimatum for the DoF to submit a new draft with inputs from the mining sector and threatened to proceed with its own draft. — Charmaine A. Tadalan