Mining Tax Reform, Manila-Bicol Railway, And This Week’s Hottest Financial News

Mining Tax Reform still targeted by the government as per DOF

Even though it was not mentioned in President Rodrigo Duterte’s latest State of the Nation Address (SONA) last July 22, increasing the state’s share in mining revenues is one of the tax reforms targeted by the government for enactment in the next two years.

In his fourth SONA last July 22, President Duterte asked the Congress to approve the remaining tax reform packages, starting with the proposal to reduce the corporate income tax rate to 20% by 2029 from the current 30% and rationalize fiscal incentives by making them more time-bound and performance-based.

According to Department of Finance (DOF) Assistant Secretary Antonio Joselito G. Lambino, the measure that will reform the fiscal regime of the mining industry is still part of the comprehensive tax reform program and that he will pursue it after the others are enacted.

The proposed tax reform for mineral products nearly made it out of the 17th Congress that ended in June, as the Senate adopted House Bill No. 8400 with minor amendments.

The said bill reduced the royalty on large-scale mining within mineral reserves to 3% of gross output from the current 5% and introduced a 1-5% margin-based royalty on those outside mineral reserves.

Senate President Vicente C. Sotto III and Majority Leader Juan Miguel F. Zubiri have each filed a bill increasing the government’s revenue share from mineral products, while three other bills have already been filed in the House of Representatives.

If enacted, this will be levied on top of other taxes, such as the corporate income tax, excise tax which Republic Act No. 10963 doubled to 4%, and royalty to indigenous people and local business tax, among others.

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Senator Francis Pangilinan urges the government to release cash aid to farmers

Senator Francis Pangilinan has called on the government to release P20 billion worth of cash aid to farmers affected by the Rice Tariffication Act using collected tariffs and funds allocated under the said law.

During his privilege speech on August 15, Senator Pangilinan said that farmers produce 20 billion kilos of unhusked rice (palay). The price of palay dropped by at least P3 compared to the prices in 2018, bringing total loss in profit to around P60 billion from January to August 2019.

He also cited the family income and expenditure survey of the Philippine Statistics Authority (PSA) in 2015, which found that farmers only earn P100,000 a year or P8,300 a month, well below the poverty line of P108,800.

And now, with the harvest season approaching in just a month, Senator Pangilinan suggested 6 ways on how the government can help Filipino farmers.

  1. Use of the agriculture special safeguards under Republic Act No. 8800 or the Safeguard Measures Act, when triggered by a volume or price threshold of imports.
  2. A recourse to the general safeguards and anti-dumping duties.
  3. For the Department of Agriculture (DA) to put in place monitoring and possible imposition of a suggested retail price for rice.
  4. For the Philippine Competition Commission to investigate existing rice importers for exploitative acts.
  5. To hasten the Survival and Recovery Loan assistance of P25,000 loan with zero interest for farmers.
  6. For the Department of Social Welfare and Development’s (DSWD) cash-for-work program to provide emergency employment for distressed farmers.

Signed last February, the law replaced quantitative restrictions on rice imports with tariffs. It mandated a P10 billion worth of subsidy under the Rice Competitiveness Enhancement Fund (RCEF) to cushion the effects on local farmers. It is meant for the purchase of equipment, research and seed input, credit, and training and seminars.

The Senate is set to investigate the use of RCEF, as Senator Cynthia Villar has already filed a resolution seeking a probe, in aid of legislation, into finding out where the fund is being used.

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BSP to do quarterly pre-announcement of banks’ RRR

As per Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, the central bank will pre-announce on a quarterly basis its intention on banks’ reserve requirement ratio (RRR) in order to prepare markets.

“The consensus of Monetary Board (MB) members is we will pre-announce on a quarterly basis,” BSP Governor Diokno stated on the sideline of an event when asked about the succeeding reductions in banks’ RRR.

“Hindi naman ‘yung sasabihin ko na for the next three years eto ’yung 5% cut every quarter. Walang ganon. Quarterly, we will pre-announce kung anong gusto namin,” he added.

“We will pre-announce it para hindi nagugulat. Na-appreciate naman nila yun, di ba? Para mawala na rin yung everyday na lang nag-e-speculate,” he said.

He even added that they still have six weeks until the Monetary Board’s September 26 policy review and they might and might not cut the RRR on or before the specified review date.

In non-interest rate-setting meetings last May, the MB implemented a multi-phased 200 basis point reduction in RRR to 16% for big banks and to 6% for thrift banks by the end of July.

Although the timing of the RRR cut depends on liquidity, the central bank chief has committed to paring the RRR down to single-digit level before he ends his term in July 2023.

Resorts World Manila’s developer and operator plans to delist from the PSE

Six years after its local stock market debut, Resorts World Manila developer and operator Travellers International Hotel Group announces its plan to voluntary delist from the Philippine Stock Exchange (PSE).

In a regulatory filing submitted by corporate information officer Bernard Tan, Travellers International said its board of directors approved the voluntary delisting of its common shares from the PSE’s main board.

The casino and hotels operator said it will conduct a tender offer of up to 1,582,867,900 shares in line with the Securities Regulation Code and the PSE delisting rules.

About 10 percent of the company’s shares are currently held by the public, while the rest are held by the group of tycoon Andrew Tan and the Genting group of Malaysia.

Once the tender offer is consummated, at least 90% of the total listed and outstanding common shares of the company shall collectively be held by non-public shareholders.

Travellers, which trades under the ticker RWM, requested for a trading suspension on Wednesday to allow investors to digest this material information.

According to Travellers International, the date of delisting is on October 15, 2019.

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Philippine and Chinese Governments to sign loan agreement for Manila-Bicol Railway Project

According to the Department of Finance (DOF), the Philippine and Chinese governments will sign the loan agreement covering project management consultancy for the railway project that will run between Manila and Bicol during President Rodrigo Duterte’s visit to China later this month.

As for the initial phase of the Mindanao Railway Project in Davao Region, Socioeconomic Planning Secretary Ernesto M. Pernia said last week that it’s scheduled for financing by China, as of now.

The National Economic and Development Authority-Investment Coordination Committee-Cabinet Committee (NEDA ICC-CabCom) last month approved to more than double the project cost of Mindanao Railway Project-Phase 1, the Tagum-Davao-Digos Segment, to P82.9 billion from the previous budget of P35.9 billion.

Secretary Pernia, who heads the state planning agency, said the increase in project cost took into consideration the railway’s alignment crossing a mountainous area.

In October last year, the ICC-CabCom approved the change in financing to official development assistance (ODA), from local funding previously, for the 102-kilometer railway to be built in Region 11 by the Department of Transportation (DOTr).

As for the P175.3-billion, 639-kilometer South Long-Haul Project of the Philippine National Railways (PNR), Department of Finance (DOF) Undersecretary Mark Dennis Y.C. Joven last week said that the P14.39-billion project management consultancy will be among the five agreements tentatively scheduled for signing by Filipino and Chinese officials on the sidelines of the President’s upcoming official visit to China.

According to NEDA, the Philippine and Chinese governments had agreed to sign two loan agreements separately covering the project management consultancy and the design-build contracts of the PNR South Long-Haul Project.

The PNR’s abandoned train operations in Lucena, Quezon will be revived in the Manila-Bicol railway project.