Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The Philippines’ lower house on Tuesday approved a bill that overhauls the tax system for mining, which the government said will be simplified to make the industry more attractive to investors.
However, with the Senate yet to pass its own mining fiscal regime bill, it will be some time before the new rules are implemented. The Philippines is one of the biggest nickel ore suppliers to top metals consumer China, and also produces copper, gold and other critical minerals.
Under the bill, part of tax reform measures under President Ferdinand Marcos Jr.’s administration, large-scale metallic mining operations within mineral reservations shall be subject to a royalty rate of 4% of the gross output.
Large-scale miners operating outside mineral reservations shall pay a margin-based royalty on income from mining operations. Small-scale mining operations shall be subject to a royalty rate equivalent to one-tenth of 1% of gross minerals output.
The bill also seeks to subject mining income to a windfall profits tax.
“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,” said Dante Bravo, president of the Philippine Nickel Industry Association.
The House-approved measure differs from an earlier proposal that sought to raise the effective tax rate on mining to 51% from 38% and impose a 5% royalty on the market value of gross output for large-scale mining operations.
At present, mining companies pay corporate income tax, excise tax, royalty, local business tax, real property tax, as well as fees to indigenous communities.
The bill does not stipulate any tax on metallic mineral exports.
The industry had earlier warned against imposing an up to 10% tax on nickel ore exports, as reportedly proposed earlier by the Department of Finance, because it could require local producers to close.
The proposed tax on nickel ore exports was supposedly intended to encourage investment in domestic processing plants.
(By Enrico Dela Cruz; Editing by Christian Schmollinger)
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