With a total of 12 votes, the Senate on Tuesday approved on third and final reading a bill seeking to exempt small-scale miners from paying income and excise taxes when they sell their gold to the Bangko Sentral ng Pilipinas (BSP).
The proposed measure sought to amend a requirement from the Bureau of Internal Revenue (BIR) which imposed a 5-percent withholding tax and a 2-percent excise tax on the sale of gold to the BSP, according to Sen. Juan Edgardo M. Angara, author and sponsor of Senate Bill 2127.
Angara, chairman of the Senate Committee on Ways and Means, said that between the years 2005 and 2010, the BSP purchased close to 1,000,000 troy ounces of gold or 2,362 gold bars produced from small-scale mining activities.
He said the BSP’s gold purchases drastically declined to 35,000 troy ounces in 2012 after the BIR imposed the tax requirement in 2011 and further slid to 14,700 troy ounces of gold in 2017.
As of September last year, he said, the BSP had only purchased 7,600 troy ounces or an equivalent of 19 gold bars.
The reduced sale of gold, he said, had constrained the BSP from increasing the level of the country’s gross international reserves (GIR).
“We have seen the Philippines’s GIR drop to a seven-year low at $74.8 billion as of end-October 2018, $5.8 billion lower than the same month [in 2017],” Angara said in a statement.
He explained that central banks worldwide hold on to gold as part of their international reserves because it is less susceptible to foreign exchange controls and is less volatile as compared to the value of major currencies. Maintaining an adequate level of GIR, he said, would further improve the Philippines’s creditworthiness.
Angara said the country’s adequate levels of GIR would translate to higher credit ratings and lower borrowing costs for both the national government and the private sector.
“The measure enables the BSP to better build up the country’s GIR by buying domestically produced gold from small-scale miners using pesos,” he said.
“This bill also helps small-scale miners, who prefer to sell their gold to the BSP, which ensures that they would be able to receive a fair price for their gold, instead of selling it to the black market where prices are below market levels,” he added.
Angara urged lawmakers to look beyond the revenues collected from gold transactions, which amounted to a low P30 million in 2018 compared to the benefits that would be enjoyed by the country with an increased GIR.