o
(S° RECEIVED
EIGHTEENTH CONGRESS OF THE +) '% ure, SEP 11
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

H.B.No._4541

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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

EXPLANATORY NOTE

The national government is perpetually searching for sources of revenues to finance
its operations. Over the years, the tax rates on some excisable products have remained
unchanged. Hence, increments in tax collections from these products come from increases in

the volume of removals or the products’ prices.

Historically, the excise tax on nonmetallic minerals and quarry resources is imposed
based on the actual value of the gross output at the rate of one and a half percent (1.5%) from
1939 to 1977. Then it was increased to three percent (3%) until 1994. The rate was reduced in
1994 to two percent (2%) of the actual market value or the value used by the Bureau of
Customs (BOC) in determining the tariff and customs duties in the case of importation. With
the enactment of Republic Act (RA) No. 10963 in 2017, the rate was again increased to four
percent (4%) based on the actual market value of the gross output or the value used by the
BOC in determining tariff and customs duties.

‘The rate on metallic minerals was initially set at one and a half percent (1.5%) of
actual market value of the annual gross output, and then increased to five percent (5%) in
1977. With the passage of Republic Act No. 7729 in 1994, the rates were trimmed down: for
copper and other metallic minerals, to one percent (1%) until 1997 and increased to its
Present rate at two percent (2%); and for gold and chromite, two percent (2%) of actual
market value of the annual gross output. Under the National Internal Revenue Code (NIRC),

1


as amended, the rates were uniform at two percent (2%) of actual market value of the annual
gross output. In 2017, the rates were increased to four percent (4%) for copper and other
metallic minerals and gold and chromite.

Based on available data, the excise tax collections from minerals and quarry resources
were P25.691 billion in 2017, P35.494 billion in 2016 and P32.751 billion in 2014.'

This bill proposes to increase the tax on minerals and quarry resources from four
percent (4%) to seven percent (7%). Although the ad valorem rate guarantees increased tax
revenues during periods of high commodity prices, these increments are volatile. With the
passage of this bill, the national government can look forward to higher revenues than it has
collected in recent years.

‘The potential revenue from the proposed increase in excise tax on mineral products
shall be equally divided between the national government and the local government units
(LGUs) where the mineral and quarry resources are extracted. In particular, revenues from
the three and a half percent (3.5%) tax on minerals shall accrue to the National Treasury,
while revenues from the other three and a half percent (3.5%) tax on minerals shall be
remitted directly to the LGUs as support for the Special Education Fund (SEF) of the LGUs.
With the infusion of additional funds, it is hoped that the perennial shortages of classrooms,
tables and chairs, books, teaching aids and other educational materials will be addressed.

The proposed increase in the excise tax on mineral and quarrying activities would not
even be commensurate to the natural hazards brought about by mining and quarrying
activities to our environment particularly in areas that are rich in biodiversity, in geohazard
zones or within the ancestral domain of indigenous peoples. Mineral wastes cause sulfurous
dust clouds that result in acid rain. Abandoned strip mines are often used as unregulated
landfills for hazardous wastes. Mine tailings and their associated metal contaminants, such as
arsenic, cadmium, lead, mercury, sodium cyanide, and zine can contaminate nearby water
sources rendering them useless as sources of food, water, and livelihood. Mining in upland
areas further reduce forest cover and leave a toxic heritage for succeeding generations.”

aah ay,

200)


It is hoped that the increase in tax on mineral products will become synonymous to a
revitalized and strengthened responsible mining and environmental protection.

In view of the foregoing, approval of this bill is



EIGHTEENTH CONGRESS OF THE 2.

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
‘H. B. No. 4541

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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 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:
“SEC. 151. Mineral Products. —
(A) Rates of Tax. - There shall be levied, assessed and collected on
minerals, mineral products and quarry resources, excise tax as follows:
“(1) On domestic or imported coal and coke, notwithstanding any incentives
granted in any law or special law:
“Effective January 1, 2018, Fifty pesos (P50.00) per metric ton;
“Effective January 1, 2019, One hundred pesos (P100.00) per metric
ton; and
“Effective January 1, 2020, One hundred fifty pesos (P150.00) per
metric ton.
(2) On all [nonmetatic] minerals, MINERAL PRODUCTS and
quarry resources, a tax of SEVEN [four] percent (7%) [(4%}] 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 (3) [¢4)] of
Subsection (A) of this Section, locally extracted natural gas and
liquefied natural gas shall not be subject to the excise tax imposed

herein.

[*(a)- Copper and other metallic minerals. four pereent 4%): and" |
[+(b} Gold and chromite four percent 426}]
(3)[4)] On indigenous petroleum, a tax of six percent (6%) 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. x x x.
Cee e

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

“SEC. 287, x x x

“(A) Amount of Share of Local Government Units (LGUs). — 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 (NG) from the preceding fiscal year from [exeise-taxes-on-mineral
produets;] royaltiesf;] and such other 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.

“(B) REVENUE FROM THE EXCISE TAX ON MINERALS, MINERAL
PRODUCTS AND QUARRY RESOURCES. ~ THE REVENUE COLLECTED
FROM THE EXCISE TAX ON MINERALS, MINERAL PRODUCTS AND
QUARRY RESOURCES SHALL BE EQUALLY DIVIDED BETWEEN
THE NG AND THE LGUs WHERE THE MINERALS, MINERAL
PRODUCTS AND QUARRY RESOURCES ARE EXTRACTED.

2


REVENUES EQUIVALENT TO THREE AND A HALF PERCENT (3.5%)
EXCISE TAX ON MINERALS, MINERAL PRODUCTS AND QUARRY
RESOURCES SHALL ACCRUE TO THE NG, AS PROVIDED IN
SECTION 283 OF THIS CODE, AND REVENUES EQUIVALENT TO THE
REMAINING THREE AND A HALF PERCENT (3.5%) EXCISE TAX ON
MINERALS, MINERAL PRODUCTS AND QUARRY RESOURCES
SHALL BE DIRECTLY REMITTED TO THE LGUs WHERE THE
RESOURCES ARE EXTRACTED.

PROVIDED, THAT, THE REVENUES EQUIVALENT TO THE
REMAINING THREE AND A HALF PERCENT (3.5%) EXCISE TAX ON
MINERALS, MINERAL PRODUCTS AND QUARRY RESOURCES
ALLOCATED TO THE LGUs SHALL BE SET ASIDE AND USED
EXCLUSIVELY AS SUPPORT TO THE SPECIAL EDUCATION FUND
(SEF) ADMINISTERED BY THE LGUs TO FINANCE THE HIRING OF
NEW TEACHERS, REPAIR OF CLASSROOMS, ACQUISITION OF
CHAIRS AND TABLES, AND PURCHASE OF TEXTBOOKS,
TEACHERS’ MANUALS AND TEACHING AIDS, AND OTHER
INSTRUCTIONAL MATERIALS.

PROVIDED, FINALLY, THAT THE ALLOCATION OF THE

LOCAL GOVERNMENT SHARE ON EXCISE TAX ON MINERALS,
MINERAL PRODUCTS AND QUARRY RESOURCES SHALL BE
DISTRIBUTED AS SPECIFIED IN SUBSECTION (D) HEREOF.
[)] “(C) Share of the Local Governments from Any Government Agency or
Government-Owned or -Controlled Corporation. ~ Local Government Units
shall 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] LGU:

(1) One percent (1%) of the gross sales or receipts of the preceding

calendar year, or

(2) Forty percent (40%) of the excise taxes on mineral products,

royalties, and such other taxes, fees or charges, including related

surcharges, interests or fines the government agency or government-

3


er AaHwewn

‘owned or -controlled corporations would have paid if it were not
otherwise exempt.
[1 “() Allocation of Shares. — The share in the preceding Section 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
(©) 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)]
(D)(1) hereof.

Sec. 3. Implementing Rules and Regulations. ~ The Secretary of Finance shall, upon
the recommendation of the Commissioner of Internal Revenue, within thirty (30) days from
the effectivity of this Act, promulgate the rules and regulations to effectively implement the
provisions of this Act.

See. 4. Separability Clause. — If any port
unconstitutional, the remainder of this Act or any provisions not affected thereby shall remain

or provision of this Act is declared

in force and effect.

Sec. 5. Repealing Clause. ~ Any law, presidential decree or issuance, executive order,
letter of instruction, rule or regulation inconsistent with the provisions of this Act is hereby
repealed or modified accordingly.


1 Sec. 6. Effectivity. - This Act shall take effect fifteen (15) days following its
2 complete publication in the Official Gazette or in two (2) newspapers of general circulation.
Approved,