Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Wednesday the passage of a new law exempting small-scale miners from paying income and excise taxes if they sell their gold to the BSP will help build up the gross international reserves.
“[It is] an excellent and much-needed law. It remedies the 99-percent drop in domestic gold purchases from more than 900,000 fine troy ounces in 2010 to around 10,000 in 2019 as a result of the taxation of the sale of gold to the BSP beginning July 2011,” Diokno said in a message to reporters.
Diokno said higher reserves would lead to improved economic standing and lower cost of borrowing. “Moreover, it prevents the smuggling of Philippine gold through the black market to other countries,” he said.
BSP Deputy Governor Diwa Guinigundo said the new law was a positive development for the regulator which had been pushing for its passage. He said it was also a strong symbol that the government values the welfare of the small-scale miners who are forced to settle for lower prices for their gold in the black market.
“With the tax, they get an even lower return for their gold. It is a win situation for them, it is also a win situation for the BSP which can continue buying gold with peso so that there is additionality in the foreign exchange reserves,” Guinigundo said.
He said using dollars to buy gold from the world market would involve a rebalance of the foreign exchange reserve composition from the dollar to gold.
“With higher and sustained and comfortable import and short-term debt coverage, we can be favorably considered both by the market and the credit rating agencies. That should translate into lower borrowing costs for both the government and the corporates,” he said.
He said it should also be positive for the government because it was foregoing only less than P30 million in annual collection because very little gold was subjected to a very high tax regime.
President Rodrigo Duterte signed Republic Act 11256 on March 29 which amended some provisions of the National Internal Revenue Code so that the income derived from the sale of gold to the BSP by registered small-scale miners and accredited traders and the sale of gold by these miners to accredited traders for eventual sale to the BSP would not be included in gross income and would be exempted from taxation.
The gold sold or eventually sold to the BSP is exempted from the payment of excise tax. A taxpayer who had paid excise tax before the sale of gold to the BSP may file a claim for refund or credit with the Bureau of Internal Revenue commissioner for the excise tax paid.