DOF now includes mining in tax reform » Manila Bulletin Business



By Chino S. Leyco

Finance Secretary Carlos G. Dominguez III said his department will review the current tax regime on mining and include the sector in the current tax reform program following President Rodrigo R. Duterte’s warning to impose higher levies on the sector considered destructive to the environment.

Finance Secretary Sonny Dominguez III ( Manila Bulletin file photo)

“That [higher mining tax] will certainly be part of it [tax reform program]. Originally, it was not part of it. But because the President made those very strong signals it will be part… a review of the taxes, or the [revenue] sharing [scheme],” the finance chief said.

While the multi-agency Mining Industry Coordinating Council (MICC) assures support to Duterte’s plan to tax miners “to death” if damage to the environment persisted, Dominguez said the upcoming review will be aligned with “what the current situation is.”

According to Dominguez, the MICC had scheduled a meeting before the State-of-the-Nation Address (SONA), but the President’s message on mining has made the council’s meeting more urgent.

“I think the essential message to the miners is follow the law. If you have a contract with the government and that contract is subject to the mining law, which says after you do an open pit mine you have to rehabilitate the area, you have to do it,” Dominguez told reporters.

“If you do not follow the law, you will be penalized and among the penalties, there will be financial penalties or closure, but again it will be following the due process,” he added.

Dominguez further emphasized that the forthcoming review, which will be led by the Department of Finance (DOF), will be based on Duterte’s recommendation with regard to taxation.

Dominguez also added the previous technical recommendation of the DOF issued during the Aquino administration will be subject to review.

In 2015, the DOF recommended to retain the current 2 percent excise tax on mineral production and subject all mining areas to a 5 percent royalty, regardless if the operation is inside or outside a mineral reservation.

The DOF also proposed to keep the local business tax, indigenous people royalty, corporate income tax and real property tax. But the department also recommended an additional surcharge of 10 percent on mining firm’s positive net cash flow.

“We will look at those previous recommendations, but obviously you know, you are in a situation, this thing is very fluid–the prices of commodities are also very volatile so we don’t want to be in a situation like what happened during Marcos regime,” Dominguez said.

He shared that during the Marcos administration in late 1970s to early 1980s, the government had put a tax on copper concentrate exports, but “it just wasn’t working to mines, so practically all the mines The mining industry has been under fire by Duterte’s government for alleged violations such as building mines in prohibited areas, including watersheds.

Duterte said in his State of the Nation Address last week that he wanted to stop exporting the country’s mineral resources, noting miners have “considerably neglected” their duty to protect the environment and to repair damage done by mining.

Meanwhile, Finance Undersecretary Bayani H. Agabin said the MICC, which is co-chaired by Dominguez and Environment Secretary Roy A. Cimatu, will proceed with the review of all mining operations in the country.

Agabin disclosed that MICC’s lead agencies DOF and Department of Environment and Natural Resources (DENR) earmarked an initial P20 million as budget for the planned comprehensive review of all mining contracts nationwide.

“The initially proposed P50 million-budget will be taken from the emergency funds of Malacañang, but this was not allowed. And so the co-chairs of the MICC, the DOF and the DENR, agreed to share first P10 million each from their budget to start the review process,” Agabin said.

“So when that paperwork on the budget is finalized and the terms of reference, we can start reviewing process,” he added.

But with the reduced budget, Agabin said the MICC will prioritize the review of the mining operations that were ordered for closure by former Environment Secretary Regina Paz L. Lopez.

Agabin, meanwhile, said the MICC supports the Duterte administration’s policy direction for the mining industry.

“The MICC fully supports the efforts of the President to review mining laws, so we have a clearer fiscal regime. With respect to the multi stakeholder review, the MICC approved the terms of reference,” Agabin said.

“This [TOR] will allow now the MICC to procure the experts and with that we hope to start the process soon,” he concluded.

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