The Senate has approved on second 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).
Senator Juan Edgardo "Sonny" Angara, author and sponsor of Senate Bill No. 2127, otherwise known as the Act to Strengthen the Country's Gross Internal Reserves (GIR), said the proposed measure sought to amend a requirement from the Bureau of Internal Revenue (BIR) which imposed five percent withholding taxes and two percent excise taxes on the sale of gold to the BSP.
Angara, chairman of the Senate Committee on Ways and Means, said that between the years 2005 and 2010, BSP purchased close to 1,000,000 troy ounces of gold or 2,362 gold bars produced from small-scale mining activities.
He said BSP's gold purchases drastically declined to 35,000 troy ounces in 2012 after 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, 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 GIR.
"We have seen the Philippines' GIR drop to a seven-year low at $74.8 billion as of end-October 2018, $5.8 billion lower than the same month last year," Angara revealed.
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' creditworthiness.
He 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," Angara 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 the gold to the black market where prices are below market levels," he added.
He 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.
"It would be far more prudent if we work towards deepening our international reserves, instead of focusing on collecting rather shallow revenues from gold sales. The first undoubtedly overshadows the latter—considering social impact of returning to the formal sector the sale of gold from small-scale mining," Angara said.