Republic of the Philippines

House oF Repucsenustivyes
Quezon City, Metra Manila

FIFTEENTH CONGRESS
2nd Regular Session

HOUSE BILL NO. 5143

Introduced by:
REP. FRANCISCO T. MATUGAS
15° District, Surigao del Norte (Siargao Island)

EXPLANATORY NOTE

Section 2, Article XIl of the Constitution expressly provides that all
lands of the public domain, water, minerals, forest, flora and fauna and
other natural resources are owned by the State and that all exploitation,
development and utilization of these resources shall be under its full
control and supervision.

The Philippines is one of the countries richly endowed with metallic
resources. In terms of occurence per unit area, it ranks third in gold,
fourth in copper, fifth in nickel and sixth in chromite. As absolute and
complete owner of these minerals and natural resources, it is expected
that the country can generate substantial income from the utilization of
these resources. However, it must be noted that although the gross
production value in mining has been high — Php102.2 Billion in 2007,
Php86.9 Billion in 2008, Php106.1 Billion in 2009 and around Php144.4
Billion in 2010, the Government was only able to generate the following
amounts in the form of excise faxes paid by mining companies —
Php942,1 Million in 2007, Phpé60.3 Million in 2008 and Php718.8 Million in
2009. For the first quarter of this year, excise tax collected from mining
amounted fo P833.533 million from an estimated gross production value
of Php29.2 Billion.

These amounts can be considered as insignificant considering the
fact that under Section 80 of the Philippine Mining Act of 1995 (Republic
Act No. 7942), the Government's share in a mineral production
agreement is already the excise tax paid on said mineral products. It
must also be noted that mining is an extractive activity and greatly


impacts the environment. The Government, as the owner of the mineral
lands, must therefore get its just share of revenues from mining activities.
There must, therefore, be an increase in the excise tax on minerals and
quarry resources, from 2% to 7%.

More importantly, local government units, which host these mining
activities, must be the ones most benefited by the same. Thus, majority of
the amount collected must be retained by the local government units.
They are the ones who, after all, bear the great impacts of mining
activities.

Approval of this bill is earnestly sought.

FRANCISCO T. MATUGAS


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City. Metro Manila

Fifteenth Congress
2nd Regular Session

HOUSE BILLNO. 5143

INTRODUCED BY:
REP. FRANCISCO T. MATUGAS
1# District, Surigao det Norte (Stargao Island)

AN ACT
INCREASING THE EXCISE TAX ON MINERALS, MINERAL PRODUCTS AND QUARRY
RESOURCES, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED

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

SECTION 1. Section 151 (A}, Chapter VII, Title VI of the National
Intemal Revenue Code of 1997, as amended, is hereby amended to
read as follows:

“Section 151, Mineral Products.

{A} Rates of Tox. - There shall be levied, assessed
and collected on minerals, mineral products and quarry
resources, excise tax as follows:

(1) On coal and coke, a tax of Ten pesos (P10.00}
per metric ton;

{2) ON ALL MINERALS, MINERAL PRODUCTS AND
QUARRY RESOURCES, A TAX OF SEVEN PERCENT {7%}
BASED ON THE ACTUAL MARKET VALUE OF THE GROSS
OUTPUT THEREOF AT THE TIME OF REMOVAL, IN THE CASE
OF THOSE LOCALLY EXTRACTED OR PRODUCED; OR THE
VALUE USED BY THE BUREAU OF CUSTOMS IN
DETERMINING TARIFF AND CUSTOMS DUTIES, NET OF


EXCISE TAX AND VALUE-ADDED TAX, IN THE CASE OF
(IMPORTATION.

Notwithstanding the provision of paragraph [4} of
Subsection (A) of Section 151, locally extracted natural
gas and liquefied natural gas shall be taxed at the rate
of two percent (2%);

{3} On all metallic minerals, a tax based on the
actual market value of the gross output thereof at the
time of removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax
and value-added tax, in the case of importation, in
accordance with the following schedule;

{a} Copper and other metallic minerals;

{i) On the first three (3) years upon the
effectivity of Republic Act No. 7729, one percent
(1%);

{ii) On the fourth and the fifth years, one and
a half percent (1 4%): and

{iii} On the sixth year and thereafter, two
percent (2%);

(b) Gold and chromite, two percent (2%).

(4) On indigenous petroleum, a tax of three
percent (3%) of the fair international market price
thereof, on the first taxable sale, barter, exchange or
such similar transaction, such tax to be paid by the buyer
or purchaser before removal from the place of
production. The phrase ‘first taxable sale, barter,
exchange or similar transaction’ means the transfer of
indigenous petroleum in its original state to a first taxable
transferee, The fair international market price shall be
determined in consultation with an appropriate
government agency.

For the purpose of this Subsection, ‘indigenous
petroleum! shall include focally-extracted mineral oil,


hydrocarbon gas, bitumen, crude asphalt, mineral gas
and all other similar or naturally associated substances
with the exception of coal, peat. bituminous shale
and/or stratified mineral deposits."

SECTION 2, Section 287, Chapter Il, Title XI of the National Internal
Revenue Code of 1997, as amended, is hereby amended to read as
follows:

“Section 287, Shares of Local Government Units in the
Proceeds from the Development and Utilization of the
National Wealth. - Local Government units shall have an
equitable share in the proceeds derived from the
utilization and development of the national wealth, within
their respective areas, including sharing the same with
the Inhabitants by way of direct benefits,

(A) AMOUNT OF SHARE OF LOCAL GOVERNMENT
UNITS. - LOCAL GOVERNMENT UNITS SHALL, IN ADDITION
TO THE INTERNAL REVENUE ALLOTMENT, HAVE A SHARE OF
FORTY PERCENT (40%) OF THE GROSS COLLECTION
DERIVED BY THE NATIONAL GOVERNMENT FROM THE
PRECEDING FISCAL YEAR FROM ROYALTIES, TAXES, FEES OR
CHARGES, INCLUDING RELATED SURCHARGES, INTERESTS
OR FINES, AND FROM ITS SHARE IN ANY CO-PRODUCTION,
JOINT VENTURE OR PRODUCTION SHARING AGREEMENT IN
THE UTILIZATION AND DEVELOPMENT OF THE NATIONAL
WEALTH WITHIN THEIR TERRITORIAL JURISDICTION, EXCEPT
FOR EXCISE TAX ON MINERAL PRODUCTS WHERE THE
SHARE OF THE LOCAL GOVERNMENT UNITS SHALL BE SIXTY
PERCENT (60%) OF THE GROSS COLLECTION DERIVED
FROM SAID EXCISE TAXES ON MINERALS.

(B) Share of the Local Governments from Any
Government Agency or Government-owned or -
Controlled Corporation. - Local Government Units shalt
have a share, based on the preceding fiscal year, from
the proceeds derived by any government agency or
government-owned or controlled corporation engaged
in the utilization and development of the national wealth
based on the following formula, whichever will produce a
higher share for the local government unit:


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{1} One percent (1%) of the gross sales or receipts of
the preceding calendar year, or

(2) Forly percent (40%} of the excise taxes on
mineral products, royalties. and such other faxes, fees or
charges, including related surcharges, interests or fines
the government agency or government-owned or -
controlled corporations would have paid if it were not
otherwise exempt.

(C) Allocation of Shares. - THE SHARE IN THE
PRECEDING SECTION, EXPECT FOR THE SHARE OF LOCAL
GOVERNMENTS FROM THE EXCISE TAX ON MINERALS,
MINERAL PRODUCTS AND QUARRY RESOURCES, SHALL BE
DISTRIBUTED IN THE FOLLOWING MANNER:

(1) Where the natural resources are located in the
province:

(a) Province - twenty percent (20%)

(b) Component city/municipality - forty-five percent
(45%): and

(c) Barangay - thirty-five percent (35%)

Provided, however, That where the natural
resources are located in two (2} or more provinces, or in
two {2} or more component cities or municipalities or in
two (2) or more barangays, their respective shares shall
be computed on the basis of: (1) Population - seventy
percent (70%); and (2) Land Area — thirty percent {30%).

(2) Where the natural resources are located in a
highly urbanized or independent component city:

{a} City - sixty - five percent (65%): and
(b) Barangay - thirty - five percent (35%)

Provided, however, That where the natural
resources are located in two (2) or more cities, the
allocation of shares shall be based on the formula on
population and land area as specified in subsection
{c}{1} hereof.


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{3} THE SHARE OF THE LOCAL GOVERNMENT UNITS
IN THE EXCISE TAX ON MINERALS, MINERAL PRODUCTS
AND QUARRY RESOURCES SHALL BE DISTRIBUTED IN THE
FOLLOWING MANNER:

(A) WHERE THE NATURAL RESOURCES ARE
LOCATED IN THE PROVINCE

()) PROVINCE - FORTY PERCENT (40%)

(ll) COMPONENT CITY/MUNICIPALITY - THIRTY
PERCENT (30%); AND

(lI) BARANGAY - THIRTY PERCENT (30%)

PROVIDED, HOWEVER, THAT WHERE THE NATURAL
RESOURCES ARE LOCATED IN TWO (2) OR MORE
PROVINCES, OR IN TWO (2) OR MORE COMPONENT CITIES
OR MUNICIPALITIES OR IN TWO (2) OR MORE BARANGAYS,
THE ALLOCATION OF SHARES SHALL BE BASED ON THE
FORMULA ON POPULATION AND LAND AREA AS SPECIFIED
IN SUBSECTION (C}(1) HEREOF.

(B) WHERE THE NATURAL RESOURCES ARE LOCATED IN A
HIGHLY URBANIZED OR INDEPENDENT COMPONENT CITY:

(I) CITY - SIXTY - FIVE PERCENT (65%); AND
(Il) BARANGAY - THIRTY - FIVE PERCENT (35%)

PROVIDED, HOWEVER, THAT WHERE THE NATURAL
RESOURCES ARE LOCATED IN TWO (2) OR MORE CITIES,
THE ALLOCATION OF SHARES SHALL BE BASED ON THE
FORMULA ON POPULATION AND LAND AREA AS SPECIFIED
IN SUBSECTION {C}(1] HEREOF.

THE REVENUES FROM THE EXCISE TAX ON MINERALS,
MINERAL PRODUCTS AND QUARRY RESOURCES
ALLOCATED TO THE LOCAL GOVERNMENT UNITS, AS
INDICATED IN THE FOREGOING, SHALL BE SET ASIDE AND
USED EXCLUSIVELY FOR HEALTH, EDUCATION AND
LIVELIHOOD PROJECTS OF THE LOCAL GOVERNMENT
UNITS CONCERNED.”


SECTION 3. Implementing Rules and Regulations. - The Secretary
of Finance shall, upon recommendation of the Commissioner of Internal
Revenue, promulgate the necessary mules and regulations for the
effective implementation of this Act.

SECTION 4. Separability Clause. If any clause, section or provision
of this Act is held or declared to be unconstitutional or invalid by a
competent court, the remaining parts shall not be affected thereby.

SECTION 5. Repealing Clause. Any law, presidential decree or
issuance, execulive order, mules 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 wo newspapers
of general circulation.

Approved,