EXTRACTION OF the Philippines’ mineral resources remains a highly controversial venture. Given the country’s surplus of precious metals, the key question around mining has shifted to how the country can make the most out of the destructive trade. As the mining industry ramps up the production of metallic minerals, so too does the government move closer towards maximizing the value gained from these ever-consequential resources.
The Act Enhancing the Fiscal Regime for the Mining Industry, or House Bill 8937, was approved on its third and final reading last September 26 as an overhaul of previous mining tax systems. Aiming to bolster exports of minerals, the bill props the Philippines up to mining companies as an attractive site for resource extraction.
Bill impositions
As mineral resources start off government-owned, the new fiscal regime proposal seeks to impose a 4% royalty. This fee to the local government on the total output of large-scale metallic mining operations extracted for private use is a notable decline from the 5% rate previously required.
The bill also adjusts these royalty payment guidelines based on each mining company’s level of output and includes special tax conditions in the event of a sudden increase in production. These tax guidelines are further adjusted for small-scale mining operations so that they will be taxed less than their larger competitors.
With these levies, the bill aims to create a mining tax system that fluidly adjusts to the output levels of individual mining corporations based on their rate of production, while remaining competitive in encouraging foreign investors.
From an interview with Reuters, President of the Philippine Nickel Industry Association Dante Bravo asserted that pursuing these types of bills will be pivotal for investor confidence. “If this policy of progressive taxation is pursued consistently as part of the continuing fiscal reforms, I think it is good for the investors’ perception,” he said.
Despite these favorable changes to the financial side of the mining sector however, the bill’s intent to reform a major revenue source calls for a salient understanding toward what may ultimately change upon its implementation
Crafty corporate practice
As of writing, the mining industry accounts for about Php 102.3 billion, or 0.6% of the nation’s economy. Alongside the Mining Fiscal Regime Bill, similar policies that adjust the extent of industry taxation ensure that the profits enjoyed by mining companies contribute greater amounts of fees from their revenue.
A nationwide shift in the sector’s production process, however, is not without risk. Despite the promises of the newly proposed bill, Gabriela Women’s Partylist Representative Arlene D. Brosas underscored the troubled reputation of mining corporations during an interview with BusinessWorld.
“The proposed graduated tax thresholds require stringent monitoring mechanisms to prevent companies from underreporting revenue,” she cautioned.
Local mining corporations already enjoy corporate tax breaks in efforts to stimulate the economy, as encouraged by the national government in the interest of global competitiveness. In an interview with Rappler, policy group Action for Economic Reforms (AER) highlighted the unfair nature of implementing a new fiscal regime for a sector so established with its status quo.
According to the AER, the regulations proposed by the bill are easy to circumvent, and the directive “will give mining companies greater incentive to obscure their financial data, leading to potential tax evasion or avoidance.”
Alongside these concerns, Brosas argued that tax collection from mining firms “will never compensate for the long-term disastrous implications” on the environment. Environmental groups remain concerned that the lower royalties proposed by the bill would result in a direct rise in mining activities—a notable policy change for an industry that, until 2021, had been stifled from expansion for fears of overexploitation.
Balancing the scales
With its extremely extractive yet profitable nature, mining remains an ever-controversial venture. Despite the Philippines’ edge in mineral resource supply, the development of the Philippine mining industry has been lackluster due to the constant contention among stakeholders.
In the same vein, the newly proposed fiscal regime has raised much hesitancy and friction among stakeholders, obscuring the new bill’s goals of making the most out of the high-risk industry. Nevertheless, the barrage of criticisms presents avenues to refine and adjust the proposed legislation before it becomes a law in full effect.
Upon the bill’s passage in the House of Representatives, the Senate is due to draft their own version, which will undergo three readings. The two versions will then be reconciled by a bicameral committee to create the final bill for the President’s approval or veto.
Given the rate of the its progress, policymakers, the mining sector, and the general public must remain vigilant at all costs towards the bill’s precarious stakes at hand.
