NEWS

By Charmaine A. Tadalan

INCREASING the state’s share in mining revenues is one of the tax reforms targeted by the government for enactment in the next two years, even as President Rodrigo R. Duterte did not mention it in his July 22 State of the Nation Address (SoNA), but it will take a back seat to the other measures, a senior official of the Department of Finance (DoF) said last weekend.

President Rodrigo R. Duterte, in his fourth SoNA last July 22, asked Congress to approve the remaining tax reform packages, starting with the proposal to reduce the corporate income tax rate to 20% by 2029 from 30% currently and rationalize fiscal incentives by making them more time-bound and performance-based. He also cited proposals to increase excise tax rates for alcohol products and e-cigarettes, centralize real property valuation and assessment, and simplify the tax structure for financial investment instruments.

Finance Assistant Secretary Antonio Joselito G. Lambino II said in a mobile phone message on Sunday that the measure that will reform the fiscal regime of the mining industry is “still part of the comprehensive tax reform program and we will pursue it after the others are enacted.”

At the same time, “[w]e are prioritizing presidential directives from the SoNA,” Mr. Lambino said.

The proposed tax reform for mineral products nearly made it out of the 17th Congress that ended in June, as the Senate adopted House Bill No. 8400 with minor amendments. The said bill reduced the royalty on large-scale mining within mineral reserves to three percent of gross output from five percent currently and introduced a 1-5% margin-based royalty on those outside mineral reserves.

Senate President Vicente C. Sotto III and Majority Leader Juan Miguel F. Zubiri have each filed bills increasing the government’s revenue share from mineral products; while three bills have already been filed in the House of Representatives.

If enacted, this will be levied on top of other taxes, such as the corporate income tax, excise tax which Republic Act No. 10963 doubled to four percent, royalty to indigenous people and local business tax, among others.

The government has so far enacted RA 10963, which slashed personal income tax and increased or added levies on several goods and services; RA 11213, which offers estate tax amnesty and amnesty for delinquent accounts that remained unpaid even after being given final assessment; and RA 11346, which will gradually increase excise tax on tobacco products to P60 per pack by 2023 from the current P35.

Finance Secretary Carlos G. Dominguez III had earlier said that tax measures should be approved by Congress within 15-18 months, which Senator Pia S. Cayetano, ways and means committee chairperson, had said is a “reasonable time to study and vote on the four priority measures.”

Her counterpart, Albay 2nd District Rep. Jose Ma. Clemente S. Salceda, for his part, plans to apply Rule 48, which will allow the House ways and means committee to immediately submit for plenary action a measure that secured third-reading approval in the preceding Congress.

Moody’s Investors Service, in the annual credit analysis on the Philippines that it e-mailed to journalists on Friday last week, gave a “moderate(+)” score on “the government’s demonstrated ability to pursue its economic and fiscal reform agenda in the face of increasing political noise” and the country’s “longer track record of sustaining improvements in its fiscal profile than its peers.”

At the same time, while “[t]he strong pro-administration majority in both houses of the legislature enhances the prospects for further reform… the government has a comparatively short window of about two years to pursue its legislative agenda,” Moody’s said.

“We expect campaigning to detract attention away from reform in the year prior to the next general election scheduled for 2022.”

The mining industry has struggled under a trying policy environment since Executive Order No. 79 in 2012 imposed a moratorium on permits for new projects until enactment of a new law that would give the government a bigger share in industry revenues.

But Fraser Institute’s Survey of Mining Companies 2018 released at the end of February showed that while the Philippines has stayed at the bottom fifth of mining territories in terms of investment attractiveness, it has been improving in rank in terms of mineral potential.

Mines and Geosciences Bureau (MGB) data as of May 30 showed metallic mineral production in the Philippines growing in value by 11.57% to P27.466 billion in the first quarter from P24.618 billion a year ago.

Mining contributed about 0.66% to gross domestic product in this year’s first three months, roughly steady since at least 2016.

Taxes, fees and royalties from the industry have been on a steady decline from P35.494 billion in 2016 to P25.691 billion in 2017 and to P11.733 billion last year. Levies totaled some P268.8 million in the first quarter, MGB data showed.

Source: Busines World