Se Ro ORESENTATIVES

HCCEIVE
“24 AUG 2016
ae

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

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SEVENTEENTH CONGRESS
First Regular Session

3304

House Bill No.

Introduced by Representative GLORIA MACAPAGAL ARROYO

AN ACT
TO STRENGTHEN THE COUNTRY’S GROSS INTERNATIONAL RESERVES.
(GIR) AMENDING FOR THE PURPOSE SECTIONS 32 AND 151 OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES

EXPLANATORY NOTE

Section 17 of Republic Act No. 7076 or the People’s Small-Scale Mining Act of
1991, provides that “all gold produced by small-scale miners in any mineral area
shall be sold to the Central Bank, or its duly authorized representative, which
shall buy it at prices comparative with those prevailing in the world market
regardless of volume or weight.”

One of the key benefits of RA No. 7076 is that it enables the Bangko Sentral ng
Pilipinas (BSP) to build up the country's gross international reserves (GIR) by
buying domestically produces gold from small-scale miners using pesos.

However, per Bureau of Internal Revenue (BIR) Revenue Regulation No. 6-2012,
the BSP started to withhold and remit to the National Government 2% excise tax
and 5% creditable withholding tax (CWT) on its purchase of gold from small-
scale miners and traders. As a result of this tax imposition, the volume of gold
sold to BSP declined drastically. Compared to BSP’s total gold purchases in
2010 of 918,110 troy ounces, purchases decreased by 98% to 20,354 troy
ounces only in 2014. In terms of value, from the 2010 figure of P49,543million,
BSP only purchased P984million worth of gold in 2014. Evidently, small-scale
miners and traders had opted to sell their gold elsewhere rather than to the BSP.

Based on the foregoing, the BSP for practical purposes, has lost the opportunity
to build up its gold reserves using pesos. Buying gold from the domestic market
results in a rise in the GIR, unlike buying using foreign currency, which simply
alters the composition of the GIR. Meanwhile, purchasing gold using dollars
acquired from the market affects the money supply. To keep money supply
manageable and maintain growth would entail additional cost for the BSP.
Moreover, the BSP buys gold as part of its international reserves as gold stil
represents the ultimate form of payment in the world. Central banks have long
held on to gold as part of their international reserves for the following reasons: 1)


Asset diversification — to invest in various revenue sources to protect the value of
total reserve portfolio; 2) Economic security — gold value is less volatile as
compared to the value of currencies; and 3) Physical security — gold maintains an
intrinsic value and is less susceptible to foreign exchange controls. Finally, the
BSP’s gold refinery facility if currently operating at below capacity. With the
contraction in the volume of gold to the BSP, it may have to raise gold refining
charges, which would further discourage small-scale miners and their traders
from selling to the BSP.

The dwindling tax collections of the National Government from the sale of gold to
BSP should not take precedence over the undue burden that the tax collection
has caused to BSP and the small-scale miners.

In view of the foregoing, immediate approval of this measure is earnestly sought.

GLORIA/MACAPAGAL ARROYO
2" District, Pampanga


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

304

House Bill No.

Introduced by Representative GLORIA MACAPAGAL ARROYO.

AN ACT
TO STRENGTHEN THE COUNTRY’S GROSS INTERNATIONAL RESERVES
(GIR) AMENDING FOR THE PURPOSE SECTIONS 32 AND 151 OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Amendment of Section 32 of the National Interal Revenue
Code. — Section 32 (B) (7) of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

SECTION 32. Gross Income. —
XXX

B) Exclusions from Gross Income. ~ The following items shall not be
included in gross income and shall be exempt from taxation under this
Title

7) Miscellaneous Items. —
XXX

i) | INCOME DERIVED FROM THE SALE OF GOLD PURSUANT TO
REPUBLIC ACT NO. 7076 —- INCOME DERIVED FROM THE
FOLLOWING TRANSACTIONS PURSUANT TO R.A. NO. 7076,
OTHERWISE KNOWN AS THE PEOPLE'S SMALL-SCALE MINING
ACT OF 1991

1) THE SALE OF GOLD TO THE BANGKO SENTRAL NG
PILIPINAS BY REGISTERED SMALL-SCALE MINERS, AS
DEFINED UNDER R.A. 7076, AND ACCREDITED TRADERS;
AND


2) THE SALE OF GOLD BY REGISTERED SMALL-SCALE
MINERS TO ACCREDITED TRADERS FOR EVENTUAL SALE
TO THE BANGKO SENTRAL NG PILIPINAS.

SECTION 2. Amendment of Section 151 of the National Internal Revenue
Code. — Section 151 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

SECTION 151. Mineral Products. —
XXX

“C) NOTWITHSTANDING THE FOREGOING, GOLD WHICH IS COLD,
OR EVENTUALLY SOLD, TO THE BANGKO SENTRAL NG PILIPINAS,
IN ACCORDANCE WITH SECTION 32 (B) (7) (i), SHALL BE EXEMPT
FROM THE PAYMENT OF EXCISE TAX: PROVIDED, HOWEVER,
THAT IF EXCISE TAX DUE THEREON HAD BEEN PAID PRIOR TO THE
SALE OF GOLD TO THE BANGKO SENTRAL NG PILIPINAS, THE
TAXPAYER MAY FILE A CLAIM FOR REFUND OR CREDIT WITH THE
COMMISSIONER FOR THE EXCISE TAX PAID.”

SECTION 3. Tax Incentives and Privileges of Small-Scale Miners. — In
addition to the foregoing, and notwithstanding the existing provisions of Republic
Act No. 6938, otherwise known as the Cooperative Code of the Philippines, as
amended, and other applicable laws, the sale of gold by registered small-scale
miners, as defined under R.A. 7076, to accredited traders for eventual sale to the
Bangko Sentral ng Pilipinas shall enjoy the same tax treatment and privileges
given to the direct sale of gold to the Bangko Sentral ng Pilipinas under the Tax
Code.

SECTION 4. Implementing Rules and Regulations. — Within sixty (60)
days after the effectivity of this Act, the Governor of the Bangko Sentral ng
Pilipinas, the Secretary of Environment and Natural Resources, the Secretary of
Interior and Local Government and the Commissioner of Internal Revenue shall
recommend to the Secretary of Finance, for promulgation, the necessary rules
and regulations necessary for the effective implementation of this Act. The rules
and regulations shall include provisions for the registration and accreditation
requirements of small-scale miners and traders in order to avail of the tax
exemptions under this Act.

SECTION 5. Separability Clause. — Any provision of this Act declared
unconstitutional shall not affect the validity of the other provisions thereof.

SECTION 6. Repealing Clause. — All orders, rules, regulations and other
issuances, or parts thereof, which are inconsistent with this Act, are hereby
repealed or modified accordingly.

SECTION 7. Effectivity. — This law shall take effect fifteen (15) days after
its publication in the Official Gazette on in a newspaper of general circulation

Approved,