Press Release / National Issues

On Removed TRAIN Bill Provision Requiring Local Coal Producers to Pay Taxes


Senator Joel Villanueva on Wednesday night expressed his dismay over the sudden removal of a provision in the bicameral report of the Tax Reform for Inclusion and Acceleration (TRAIN) bill requiring local coal producers to pay excise tax.
"Mr. President, yesterday, we made a shocking discovery as we were preparing to ratify the bicameral committee report on the TRAIN bill. This act of deletion displayed the hand of the industry with intentions as dark as the dirtiest of all fossil fuels,” said Villanueva, vice chairperson of the Senate committee on ways and means.
"We express our deepest disappointment to this act of secretly tampering with written documents. It puts our legislative efforts in the shadow of doubt of interference from an industry who wishes to get things their way, contrary to the hard-fought results of our democratic process within our legislative chambers," the senator said.
Last November 27, during the period of amendments for the TRAIN bill, the Senate voted to lift the tax exemption of the local coal production which had been in place since 1976 and to raise the coal excise tax from P10 per metric ton up to P300 per metric ton which had been unadjusted since 1988.
"Ang araw pong iyon ay magmamarka sa kasaysayan bilang araw na tumindig ang Senado upang ipaglaban ang kalikasan at kalusagan ng sambayang Pilipino laban sa industriyang mahigit apat na dekada na nating pinapaboran," Villanueva said.
"It is with deepest pride of this representation to have been a part of the said landmark decision.  For the similar reason, it is also with our deepest regret to see that vested interests continue to defeat our noble intentions to uphold the interest of the public," the senator stressed.
Coal mining in the Philippines
Villanueva shared that the coal mining industry in the Philippines, led by Semirara Mining Corporation, now produces more than 12 million metric tons of coal, and accounts for more than 95% of the country’s coal production. With this, the company stands as the monopoly on local coal in the country.  
The company, Villanueva said, also has exclusive contract to operate in Semirara Island in Caluya, Antique, where almost one quarter of the country’s mineable reserves is located. The company has enjoyed the exclusive contract for more than four decades, and is set to continue its exclusive operation in the island in the next three decades ahead.
Under the Presidential Decree No. 972 of 1976, Semirara is exempted from paying not only national taxes, but also local taxes and fees. The only national tax it is required to pay under the law is the corporate income tax. However, Villanueva revealed that the company has also availed itself of income tax holiday from the Board of Investment effective last September 2008 to September 2014, and extended further until September 2016 last year.  
With this tax holiday, the company paid less income tax than it is required under the tax code, and was able to save P10.7 billion pesos in income tax expense over the last five years from 2012 to 2016.
Also under PD 972, they are also entitled to recover a hefty portion of their cost equivalent to up to 90% from the total proceeds of coal.
"Mr. President, kung tutuusin, halos sinasagot ng publiko lahat ng gastusin ng kumpanyang ito - mula sweldo ng mga manggagawa, bayad sa kuryente at tubig, maging bonuses ng mga board members nila at ilan sa kanilang mga bayarin sa gobyerno," Villanueva said.
"In fact, even their expenses on corporate income tax – the only tax they are required to pay had they not availed the income tax holiday– may also be deducted from the coal revenues as part of their 90% recoverable costs," Villanueva added.
Villanueva further explained that from the 10% of what is left from the coal revenues after their expenses are deducted, Semirara is further entitled to a so-called 3% special allowance, and a 4% basic fee, still under PD 972.
"We, the inherent owners of the natural resources which this company exploits, are left with a share as small as 3% after we generously covered their expenses and assured profits. Sa liit ng nakukuha natin, para na ho tayong nanlilimos ng parte natin sa sarili nating likas-yaman," Villanueva said.
Reasonable coal tax rates
Villanueva further reiterated that the proposed coal tax rates by the Senate is equivalent to only 3% of the P24 billion revenue "they earned from exploiting the coal we own just in the past year."
"With the rates agreed upon in the bicam, what we ask from the local coal industry is to pay an additional amount of only P800 million in excise taxes. This is nothing compared to the P2.7 billion income tax the company saved last year from the income tax holiday we awarded to them. Yet, somehow, these vested interests think it is too much to ask," the senator explained.
"We call the Senate body to join this representation in addressing this dishonorable and deplorable act. Our efforts had been betrayed right within our own chamber by the those whose misplaced sense of entitlement led them to believe that they can get away with refusing to give their fair share to the country," Villanueva said.