MANILA, Philippines – Two lawmakers from gold-rich Benguet province have proposed to remove income and excise taxes on gold sold to the Bangko Sentral ng Pilipinas (BSP) to curb the smuggling of the precious metal out of the country.
House Bill 4951, filed by Rep. Nicasio Aliping, Jr. of Baguio City and Rep. Ronald Cosalan of Benguet, seeks to amend Sections 32 (B) (7) and 151 of Republic Act (RA) 8424, or the National Internal Revenue Code, as amended, so that gold sold by small-scale miners to the BSP will be exempted from the payment of income and excise taxes.
In the bill’s explanatory note, the legislators said the desire among small-scale miners to avoid paying taxes levied on gold prompts them to sell in the black market where gold ends up being smuggled out of the country.
Section 17 of RA 7076, or the People’s Small-Scale Mining Act of 1991, mandates that all gold produced by small-scale miners in any mineral area shall be sold to the BSP, or its duly authorized representatives, which shall buy it at prices competitive with prevailing world market rates regardless of volume or weight.
However, the lawmakers noted that the excise tax on gold is assessed against the BSP in the absence of proof that the gold miner or producer has paid the said tax.
“The BSP thus collects outright the 2-percent excise tax on gold based on the gross amount of gold sold. In addition, the BSP withholds 5-percent of gross payments as creditable withholding tax,” Aliping said in a statement.
“This has adversely affected the gold-buying operations of the BSP which resulted in a significant plunge in its purchases of gold in 2012 and 2013 as compared to 2011. So that from the 554, 994 fine troy ounces of gold purchased by the BSP in 2011, its purchases drastically dropped to only 32,888 fine troy ounces in 2012, and down further to a measly 17,778 fine troy ounces in 2013,” Aliping added.
Cosalan said any depletion of the BSP’s gold inventory would affect monetary stability and the convertibility of the Philippine peso.
“The banking and credit system will consequently suffer to the detriment of the economy,” Cosalan added.
The proposed law would encourage miners and traders to sell their gold to the BSP rather than in the black market, the legislators said.
“The BSP would thus be able to maintain adequate international reserves to meet forseeable net demands for foreign currencies,” Cosalan said.
HB 4951 is now pending at the Committee of Ways and Means chaired by Rep. Romero Quimbo of Marikina City.
With report from Cyra Moraleda