The Department of Finance (DOF) expects Congress would support the proposed measure seeking to simplify the mining tax system, ensure the government's fair share of revenues, and establish good governance in the industry.

In a statement on Wednesday, March 6, Finance Secretary Ralph G. Recto said that the pending Rationalization of the Mining Fiscal Regime bill is a crucial and long-awaited reform.

“We began discussions to rationalize our country’s mining fiscal regime in 2012, yet the Philippines’ mining potential remains untapped. With this proposal, the nation will finally receive its rightful share of mining revenues to fund the country’s development goals,” Recto said.

Recently, the DOF briefed various mining and civil society stakeholders about the DOF mining reform plan.

“We are always willing to work with stakeholders to improve our proposals. I trust that Congress will also throw their support behind this long-overdue reform. The passage of this reform will establish a predictable and stable policy environment that is conducive to investments,” Recto said.

Under the current regime, mining obligations vary depending on the mining agreement, which can be undertaken via the Mineral Production Sharing Agreement (MPSA) and Financial or Technical Assistance Agreement (FTAA).

These mining agreements can be undertaken in several ways, resulting in a complex tax system and investor uncertainty.

The DOF’s version improves on House Bill 8937 and proposes to impose a four-tier margin-based royalty ranging from 1.5 percent to 5.0 percent on income from mining operations outside of mineral reservations to address constitutional issues.

Compared to the eight-tier structure from HB 8937, four-tier makes it simpler for investors and the Bureau of Internal Revenue (BIR) to compute the corresponding tax rates. Furthermore, the simplified DOF version will lessen incentives for the private sector to pursue aggressive accounting to avoid taxes.

The current regime only taxes mines operating within a mineral reservation.

Similarly, a four-tier, compared to the 10-tier structure in HB 8937, margin-based windfall profits tax rate ranging from 1.5 percent to 10 percent on income from mining operations is proposed in light of the sudden increases in the world prices of metal.

“This is just the first step. We can be a major player in this global economy in terms of mineral production. We just have to realize it with the right policies,” Officer-in-Charge Undersecretary Karlo Fermin S. Adriano said.