Republic of the Philippines
HOUSE OF REPRESENTATIVES
@ueson Cit, Metre Manila

FIFTEENTH CONGRESS
2nd Regular Session

HOUSE BILLNO. _ 5058

Introduced by:
REP. FRANCISCO T. MATUGAS.
15' District, Surigao del Norte (Siargao Island)

EXPLANATORY NOTE

| can be said that there has always been a strong
opposition to mining activities in this country. Many local
communities are not too keen on and have protested the
establishment of mining operations in their areas. This negative
perception, however, has been tempered by the Government's
promotion of the rational exploration, development, utilization
and conservation of mineral resources. This policy, coupled with
the assurance that affected and neighboring communities and
the local government units can share in the wealth generated
from mining activities, have led communities to be more open to
the idea of mining. Income generated from mining activities has
been and can be used to fund other wealth generating
opportunities for the people and other environment-responsible
endeavors.

In this regard, Section 80 of the Philippine Mining Act of 1995
{Republic Act No. 7942) provides that the total Government share
in a mineral production agreement shall be the excise tax on
mineral products as provided in the National Internal Revenue
Code. Under Section 290 of the Local Government Code
{Republic Act No. 7160) 40% of the gross collection from this tax
goes fo the local goverment unit concemed - 20% thereof to the
concemed province, 45% to the component city or municipality
and 35% to the barangay.


Recently, however, mining companies have availed of a
scheme to reduce the taxes paid to the Government and have
thus, deprived local government units of their share in the income
derived from mining activities. Areas where there are mining
operations, especially where there are minerals processing
projects are sought to be declared as Special Economic Zones
(ECOZONEs} under the Special Economic Zone Act of 1995
(Republic Act No. 7916}. As ECOZONEs. they now become
exempt from all national and local taxes and are only imposed a
special tax equivalent to 5% of gross income, are allowed to
import raw materials, capital equipment. machineries and spare
parts, tax and duly free, are exempt from wharfage dues and
export tax, impos! and fees, enjoy VAT zero-rating on local
purchases, exempted from paying any and ail local government
imposts, fees, licenses and fees, and exempted from expanded
withholding tax.

Some of the ECOZONES which involve mining projects are:
(a) the Rio Tuba Export Processing Zone in Rio Tuba, Bataraza,
Palawan covering 423.95 hectares; (b) the Taganito Special
Economic Zone in Claver, Surigao Del Norte covering 680
hectares; and {c} the Rapu-Rapu Ecozone in Rapu-Rapu, Albay
covering an area of 41.39 hectares.

In view of the foregoing, Republic Act No. 7916 or the
Special Economic Zone Act of 1995 must be amended in order to
suppress ihe above-mentioned scheme adopted by various
mining companies. The early passoge of this bill is earnestly
sought.

FRANCISCO T. MATUGAS


Repubsc of the Phiippines

HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila

Fifteenth Congress
2nd Regular Session

HOUSE BILL No. _ 5058

INTRODUCED BY:
REP. FRANCISCO T. MATUGAS
1# District, Surigao del Norte

AN ACT
AMENDING REPUBLIC ACT NO. 7916 (AS AMENDED BY REPUBLIC ACT NO. 8748)
OR THE SPECIAL ECONOMIC ZONE ACT OF 1995, THEREBY EXCLUDING MINING
OPERATIONS FROM ACTIVITIES ELIGIBLE FOR PEZA REGISTRATION AND
INCENTIVES:

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

Section 1. Section 4 (a) of Republic Act Numbered 7916, as amended,
entitled "The Special Economic Zone Act of 1995" is hereby amended
by inserting a paragraph after the first paragraph thereof:

“SEC. 4. Definition of Terms. — For purposes of this Act, the following
definitions shall apply to the following terms:

{a) ‘Special Economic Zones {SEZ)' - hereinafter referred to as
the ECOZONES, are selected areas with highly developed or
which have the potential to be developed into agro-
industial, Industrial tourist/recreational, commercial,
banking, investment and financial centers. An ECOZONE
may contain any or all of the following: Industrial Estates
{IEs}, Export Processing Zones {EPZs), Free Trade Zones, and
Tourist/Recreational Centers.


IT IS UNDERSTOOD THAT AREAS WHERE MINING PROJECTS,
INCLUDING MINERALS PROCESSING PROJECTS, ARE
LOCATED SHALL NOT BE DECLARED AS ECOZONES.

Section 2. The first paragraph of Section 6 of the same law is hereby
amended to read as follows:

“Criteria for the Establishment of Other ECOZONES. — In addition to the
ECOZONES identified in Section 5 of this Act. other areas may be
established as ECOZONES in a proclamation to be issued by the
President of the Philippines subject to the evaluation and
recommendation of the PEZA: PROVIDED, THAT. AREAS WHERE MINING
PROJECTS, INCLUDING MINERALS PROCESSING PROJECTS, ARE
LOCATED SHALL NOT BE DECLARED AS ECOZONES. THE EVALUATION
AND RECOMMENDATION TO BE MADE BY THE PEZA SHALL BE BASED ON
A DETAILED FEASIBILITY AND ENGINEERING STUDY WHICH MUST
CONFORM TO THE FOLLOWING CRITER|

Section 3. An additional paragraph, which reads as follows, shall be
added at the end of Section 7 of said law:

“NO INDIVIDUAL, PARTNERSHIP, CORPORATION, JOINT VENTURE OR ANY
OTHER ENTITY ENGAGED IN MINING OPERATIONS, INCLUDING MINERALS,
PROCESSING, SHALL BE ALLOWED TO SET UP ENTERPRISES IN ECOZONES.”

Section 4, The provisions of this Act shall not prejudice existing rights.

Section 5. Repealing Clause. Any law, presidential decree or issuance,
executive order, rule or regulation contrary to or inconsistent with the
provisions of this Act is hereby repealed, modified or amended
accordingly.

Section 6. Effectivity. This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two newspapers of
general circulation.

Approved,