COA backs DOF on uniform tax for mining firms

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    THE Commission on Audit (COA) has voiced support to the proposal of the Department of Finance (DOF) prodding Congress to pass a law imposing a uniform five percent royalty rate in all mining operations in the country.

    In its 2019 audit of the Mines and Geosciences Bureau (MGB), an attached agency of the Department of Environment and Natural Resources (DENR), the COA said the government could have earned at least P55.4 billion from 2010 to 2019 if such a measure was in place.

    “The government’s opportunity losses and/or foregone revenues from non-imposition of royalty fee to mining companies operating outside the MRAs (Mineral Reservation Areas) in the entire country for 2018 and 2019 alone, after COA recommended such measure, reached P13.229 billion,” the commission pointed out.

    It noted that the DOF has already asked the Senate to pass the original proposal of a uniform royalty rate of five percent for all mining operations whether located inside or outside the MRAs.

    “That is in line with the government’s reform objectives of making the country’s tax system simpler, more efficient and fairer to all taxpayers,” the COA added.

    In its communication to the Senate Committee on Ways and Means, the DOF said it expects to raise P7.2 billion from the mining tax in the first year alone.

    However, the MGB has submitted a contrary stand through a position paper submitted to the same committee insisting that the five percent royalty should only be imposed for minerals extracted within the MRAs.

    It proposed that royalty payment for metallic minerals outside of the MRAs be pegged at three percent of market value on gross output and only one percent for non-metallic minerals on the same base computations.

    In its report, the COA said the DOF position is more favorable to the government particularly with increased spending due to the COVID-19 response.

    “We find the original proposal of a uniform royalty rate at five percent for all mining operations… of the DOF more advantageous to the government. The taxes that could have been collected… can be used by the government to finance its priority programs and projects especially in this time of financial crisis due to the pandemic,” the audit team said.

    Based on a breakdown of collections attached to the audit report, mining companies paid P1.187 billion in royalty fees for operations inside MRAs in 2018 and P1.405 billion in 2019.

    If the same rates were applied to mining operations outside MRAs, government auditors said the collections would have been P6.147 billion in 2018 and P7.081 billion in 2019.

    The COA recommended that the MGB support the DOF on uniform royalty rate for all mining operations but the bureau insisted that it is backing the version of the House of Representatives under HB No. 8400 which proposes a lower rate for mining firms operating outside of MRAs.