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Sponsorship Speech of Sen. JV Ejercito on Enhanced Fiscal Regime for Large-Scale Metallic Mining Act

September 17, 2024

Mr. President, my dear colleagues, good afternoon.

It is my distinct honor to rise today to sponsor and champion, Senate Bill 2826 under Committee Report No. 329 or the “Enhanced Fiscal Regime for Large-Scale Metallic Mining Act”, one of the priority measures identified in the Legislative-Executive Development Advisory Council in the 19th Congress.

As the Philippine economy continues to recover from the lingering effects of the economic downturn brought about by the recent global pandemic, it is crucial that we leverage every available resource to strengthen and revitalize our economic standing. This proposed measure helps to answer that call.

The mining sector stands out as an industry we can leverage to achieve this aim. With the latest data presented by the Department of Finance, a total of Php 115.66 billion of taxes, fees, and royalties were collected by the national and local government units for a period covering the year 2020-2022 - this means that an average collection of Php 38.55 billion every year.

Mr. President, our nation’s economic managers see vast potential for growth in this sector, which remains underutilized and underdeveloped. According to the Mines and Geosciences Bureau of the DENR, out of the nine (9) million hectares identified as having high mineral potential across the Philippine archipelago, only 2.52% is covered by mining tenements. Moreover, NEDA Secretary Arsenio Balisacan, in a recently held forum on the revitalization of the industry, underscored that mining had a modest contribution of 0.5 percent of the nation’s gross domestic product (GDP) by the end of 2023, which points to the fact that there is still room for significant growth. In addition, it is undeniable that the mining sector contributes to the generation of additional jobs for our kababayans, which represents .45% to the total employment or 212,247 jobs in 2023.

It is only noteworthy to mention the mandatory social and environmental expenditures of the mining sector which covers the Annual Environmental Protection and Enhancement Program, Safety and Health Programs, Annual Social Development and Management Programs totaling to P26.05 billion from 2012 to 2021.

With our nation having some of the world’s largest mineral reserves in Nickel, Copper, Cobalt, Chromite and Gold, among other precious metals, the Philippines is strategically poised into the growing global demand for green technologies. By responsibly harnessing our abundant mineral resources, we can ensure maximum benefit for the Filipino people while contributing to a more sustainable future.

Mr. President, the strategy framework outlined in the Philippine Development Plan for 2023-2028 identifies the revitalization of our industrial capacity through science, technology, and innovation-led industrialization as key objectives. This revitalization seeks to achieve several interconnected outcomes: the creation of higher-quality employment opportunities, the expansion of our domestic market and supplier network, the development of robust value chains, and the enhancement of linkages across sectors.

Mr. President, we wholeheartedly support this strategic vision. The bill before us today serves as a critical building block in realizing the objectives of the Philippine Development Plan. This measure seeks to foster an enabling policy environment especially with an eye towards being more competitive with our regional competitors, by correcting the current mining tax regime that is fraught with complications. This shall enable the state to harness the full potential of our national mineral resources by reforming how the government derives its revenue share from the development and utilization of its resources.

This bill proposes a modernized tax regime specifically for large-scale mining activities—those involving exploration, feasibility, development, utilization, and processing, under a mineral agreement or financial or technical assistance agreement, as defined in Republic Act No.  7942 or the Philippine Mining Act of 1995. The proposed regime is designed to be fairer, simpler, more competitive, and sustainable.

This measure empowers the government to levy more revenues and royalties on all mining operations, whether inside or outside mineral reservations. Furthermore, the measure introduces a windfall profits tax based on simplified 5-tier rates ranging from 1% to 10%. This proposed concept will enable the government to have a larger share of the profits in cases when metal prices are high and mining companies are earning more. This will also streamline compliance and administration for both industry and government, while minimizing opportunities for aggressive accounting practices.

This measure also seeks to strengthen safeguards against tax minimization. It limits the prospect of thin capitalization by setting a cap on how much companies can rely on debt financing to reduce their taxes through deductible interest expenses. Additionally, this bill also seeks to protect against ring-fencing by treating each mining operation of a company with multiple projects as a separate taxable entity, preventing them from offsetting profits from one project with losses from another to lower their overall tax bill.

Should these reforms come to fruition, the DOF estimates that the proposal will garner an average of Php 6.26 billion annual additional income for our nation’s coffers.

For our local government units, whose concerns were highlighted by our Senate President Francis "Chiz" Escudero, this measure establishes a framework that streamlines the speedy and timely release of their rightful share of taxes generated from mining royalties and other fees. This will empower LGUs to utilize their revenue from mining sources for the benefit of their constituents in a more timely and efficient manner.

Kasama rin sa pagpapalawig ng suportang makukuha ay ang royalty na makukuha ng mga Indigenous Cultural Communities/Indigenous Peoples (lCCs/lPs) na isusuma base sa 2 percent ng total gross revenues of minerals produced from the ancestral domain.

Finally, Mr. President, this bill champions transparency and accountability in the management of our nation's mineral resources by institutionalizing a robust mechanism for public disclosure and scrutiny of extractive industry data. This aligns us with international best practices, ensuring that the wealth generated from our resources is managed openly and responsibly for the benefit of all Filipinos.

Ginoong Pangulo, habang kinikilala natin ang potensyal ng industriyang ito na palaguin ang ating ekonomiya, mahalagang balansehin ito sa mga karapatan at interes ng iba pang sektor ng lipunan. Umaasa tayo na sa pamamagitan ng pagpapalakas ng mga alituntunin para sa transparency at accountability, matutulungan natin ang DENR, mga LGU, at maging ang Civil Society na pangalagaan ang ating kalikasan.

Mr. President, my dear colleagues, the passage of this bill represents a pivotal moment in our nation’s journey towards a more prosperous and sustainable future. While we know that this won’t fix everything that needs fixing in the industry, we take heart knowing that by enacting these reforms, we are not only modernizing our mining tax regime but also laying the foundation for responsible resource management that benefits all Filipinos.

This legislation demonstrates our commitment to maximizing the value of our mineral wealth, fostering economic growth, and ensuring that future generations inherit a nation rich in both natural resources and opportunities. Let us seize this moment to create a legacy of responsible stewardship and shared prosperity. I urge my esteemed colleagues to join me in supporting this proposed measure.

Maraming salamat po.

 

               

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