By Arjay L. Balinbin, September 22 2019; Business World

Image Credit to Philippine Star

REPRESENTATIVE Jose Ma. Clemente S. Salceda, the Ways and Means committee chair from Albay’s second district, said he will push for a mining tax that sets aside 30% of the government revenue generated from the industry to help set up a sovereign wealth fund.

“I can assure you that (sovereign wealth fund) will be a key feature of the law,” he told BusinessWorld in a phone interview Friday.

Congress is currently considering legislation reforming the mining tax regime, and Mr. Salceda said his position is to share out mining taxes on a 70-30 basis, with 70% funding the spending by the national and local governments and the remainder going into the fund.

He also proposes an auction system for mining tenements, instead of the current “first-come, first-served” basis.

“I prefer 70% (of fund) current needs and 30% set aside for the future, (for the) sovereign wealth fund,” he said, adding that the remaining issue is the split between national and local governments of the 70% component.

Kasi yung ginto pag nawala, wala na, diba? Pero hindi naman lahat ng iyan ay atin lang, sa mga future Filipinos din ‘yun diba? So kailangan, lahat makinabang doon sa isang non-repeated source ng wealth of the nation. Ito para sa national, kasi ‘yung natural resources should be for everyone (When we deplete our gold reserves, they’re gone forever. But the gold is not entirely ours, it also belongs to future Filipinos. Everyone must benefit from depletable resources)” he said.

He said the grant of new mining tenements should be via “auction by the MGB (Mines and Geosciences Bureau), but the approval of the mining projects will be under an institutionalized MICC (Mining Industry Coordinating Council) with representatives from private sector and local community.”

He said the current “first-come, first-served” system does not adequately unlock the value of resources because there is no competition.

The basis for the auction could be “how much taxes are you willing to pay? How much share are you willing to give to the government?” he said.

Mr. Salceda said the proposed measure should be approved by Congress “before the end of the year.”

The Finance department has said the mining tax reform is part of the government’s comprehensive tax reform program although President Rodrigo R. Duterte did not mention it in his fourth State of the Nation Address on July 22.

Mr. Duterte has asked Congress to approve the remaining tax reform packages, starting with the proposal to reduce the corporate income tax rate to 20% by 2029 from 30% currently and rationalize fiscal incentives by making them more time-bound and performance-based. He also cited proposals to increase excise tax rates for alcohol products and e-cigarettes, centralize real property valuation and assessment, and simplify the tax structure for financial investment instruments.

The proposed tax reform for mineral products nearly made it out of the 17th Congress that ended in June, as the Senate adopted House Bill No. 8400 with minor amendments. The bill reduced the royalty on large-scale mining within mineral reserves to 3% of gross output from 5% currently and introduced a 1-5% margin-based royalty on those outside mineral reserves.

Senate President Vicente C. Sotto III and Majority Leader Juan Miguel F. Zubiri have each filed bills increasing the government’s revenue share from mineral products; while three bills have been filed in the House of Representatives.

If enacted, these will be levied on top of other taxes, such as the corporate income tax, the excise tax which Republic Act No. 10963 doubled to 4%, royalty to indigenous people and local business tax, among others.