Moratorium on new PH mines stays for now

By on January 3, 2019

The government is maintaining for now a six-year-old moratorium on new mining permits as it awaits enactment of a new revenue-sharing scheme with the industry that has just hurdled the House of Representatives, according to a press statement of the Finance department (DoF), which co-chairs the Mining Industry Coordinating Council (MICC) with the Environment department.

The same news release said the MICC is preparing to conduct an “objective, science-based and fact-finding review” of the remaining 15 of the country’s 41 mines that were not covered by the first audit.

These were the results of the MICC’s 33rd meeting on Dec. 12 that was co-chaired by Finance Secretary Carlos G. Dominguez III and Environment and Natural Resources Secretary Roy A. Cimatu, BusinessWorld reported.

That meeting tackled Executive Order No. 79, which in July 2012 imposed a moratorium on new mining permits “until a legislation rationalizing existing revenue-sharing schemes and mechanisms shall have taken effect.”

“During the same meeting, the MICC deferred a recommendation on the lifting of the moratorium on the issuance of new mineral agreements,” DoF said.

The DoF said that Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect in January, did not satisfy EO 79’s condition for the lifting of the moratorium.

TRAIN increased only the excise tax on mineral products, doubling the rate to four percent, but did not set up a new fiscal regime for miners — covering royalty, profit, windfall earnings and incentives — to give the government just compensation as the owner of the country’s natural resources.

“Given the clarification, the MICC resolved to defer a recommendation to lift the moratorium on new mineral agreements, stressing that a new revenue-sharing scheme and mechanisms for mining will be covered in the Package 2-plus of the Comprehensive Tax Reform Program,” the statement read.

“There’s a pending bill on the new fiscal regime for mining. It has passed third reading in the House of Representatives and is now with the Senate,” Finance Undersecretary Bayani H. Agabin said in a mobile phone message.

“The MICC agreed to discuss the lifting of the moratorium when this is passed into law.”

House Bill No. 8400 proposes to slap a 1-5% margin-based royalty on all large-scale mines outside mineral reserves, while lowering the same levy on those large-scale mines within mineral reserves to three percent from five percent currently, on top of all other national and local taxes.

Small-scale miners will be levied a royalty equivalent to one-tenth of one percent of gross output, regardless whether it is operating in or outside mineral reserves.

The measure will also introduce a 1-10% margin-based windfall profit tax on income before corporate income tax, and a provision that disallows interest expense deduction when a mining contractor records a 3:1 debt-to-equity ratio. It also said that each mining operation would be treated as separate taxable entities.

The bill’s explanatory note said that the bill seeks to lift the moratorium imposed by EO 79.

The bill is now up for Senate committee-level deliberations.

“We believe it should be enough to lift the moratorium. Given the pressure for further tax increases, the Chamber of Mines of the Philippines is of the opinion that a structure based on a profits-based royalty and a windfall profits tax as passed by the House Ways and Means Committee, with the rates thereon tied to operating margins, is the most equitable tax regime,” Rocky G. Dimaculangan, vice-president for communications of the Chamber of Mines of the Philippines, said in a mobile phone message.

Moreover, the DoF also said that the MICC “has agreed to conduct the second round of ‘objective, science-based, and fact-finding’ review of mining operations in 2019 to cover the remaining 15 mining companies which were part of the 41 mines initially reviewed by the Department of Environment and Natural Resources under former Secretary Regina [Paz L.] Lopez in 2016.”

Although there was no date provided for the start of the review, the DoF said that the MICC plans to get the same team of experts who conducted the first round of the three-month audit that began in March.

Moreover, the Environment department “was tasked to study the process of delineating the ‘go and no-go zones’ for mining application identified under EO 79.”

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