One of the economic measures being fast-tracked by Congress is House Bill No. 6135 or the Fiscal Mining Regime Bill. The objective of the bill is to rationalize and institutionalize a fiscal regime applicable to all mineral agreements. This would enhance the government’s equitable share in the utilization of natural resources without compromising the mining sector’s need for a reasonable return on investment.
Tax Implication of the Fiscal Mining Regime Bill
The proposed bill seeks to amend Sections 34 and 151 of the National Internal Revenue Code, as amended. By the proposed change, Section 34 would include a limitation of interest expense deductions for mining contractors depending on the debt-to-equity ratio. On the other hand, Section 151 would impose royalty payments in accordance with the following:
For large-scale metallic mining operations within mineral reservations, 3% of the gross input
For large-scale metallic mining operations outside mineral reservations:
|1% up to 10%||1.00%|
|Above 10% up to 20%||1.50%|
|Above 20% up to 30%||2.00%|
|Above 30% up to 40%||2.50%|
|Above 40% up to 50%||3.00%|
|Above 50% up to 60%||3.50%|
|Above 60% up to 70%||4.00%|
For small-scale metallic mining operations, 1/10 of 1% of gross output.
Salient Portions of the Fiscal Mining Regime Bill
The other salient provisions of the Fiscal Mining Regime Bill include:
- The imposition of a margin-based windfall profits tax gained from mining operations based on the profit margin;
- Proposal of ring-fencing to prevent consolidation of income and expenses of all mining projects by the same taxpayer, and to ensure that losses from other mining projects could not be deducted from more profitable projects;
- Exemption of mining contractors from the application of the confidentiality clauses of the NIRC, as amended, for the purpose of complying with the requirements of the Philippine Extractive Industries Transparency Initiative (PH-EITI);
- Requirement of small-scale miners to register with the Mining Board of the concerned local government unit and the Mines and Geosciences Bureau for taxation purposes; and
- The creation of a Natural Resource Trust Fund from the revenues to be collected from the margin-based royalty (paid by large-scale metallic mining operations outside of mineral reservations) to fund projects that will redound to the benefit of local governments directly affected by mining activities.
With the devastating effects of the pandemic, this bill would be one of the many measures that would help the country recover economically. Not only that it would help generate the much-needed financial resources to jumpstart the economy, but it will also make the fiscal standing of the government rock solid.