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New tax law aims to give Philippines a fairer share of mining profits

On Thursday, Philippine President Ferdinand Marcos Jr. signed into law a measure that overhauls the country's tax system for mining. The aim is to provide a greater share of revenue to the government as well as more transparency in the sector.

The new law replaces the fragmented system that differed depending on what type of mining agreement was signed.

Marcos stated during the signing ceremony that "we are putting in place a more fair, clearer system that responds to both the needs of our people and environment."

The previous system required only mines located within mineral reserves to pay royalties. However, the fiscal obligations were different depending on the type mining agreement.

The new law simplifies and increases taxation on all large-scale metal mining operations. It is expected to generate additional revenue of approximately 6.26 billion pesos (110.56 millions) per year.

The margin-based royalties will range from 1% up to 5% depending on profitability.

When income margins are greater than 30%, there will be a tax rate of between 1% and 10%. This is to capture excess profits in commodity booms.

The law introduces a rule of ring-fencing, which means that each mining project is taxed separately. This prevents companies from balancing losses from one project with profits from another.

"The days of a mining contractor burying its profits under the weights of losses are over." Marcos stated that we can no longer use the failure of one project to hide the success of another. "Transparency has become the norm."

The Philippines has untapped copper, gold and nickel reserves worth an estimated $1 trillion.

Government data revealed that mining concessions cover less than 3% (or 22.22 million acres) of the 9 million hectares (9 million acres), which have been identified as areas with high mineral potential.

According to the Mines and Geosciences Bureau, in 2023, the exports of mineral products and non-metallic minerals will total $7.32 billion. This is a slight decrease from $7.53 million in 2022. ($1 = 56.6220 Philippine Pesos)

(source: Reuters)