SIXTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES —_)
First Regular Session )

HOUSE OF REPRESENTATIVES

House Bill No, 3717

Introduced by Representative Susan A. Yap and Dakila Carlo E. Cua

EXPLANATORY NOTE,

‘The Philippines has long regarded jewelry as a luxury and as such has subjected jewelry to excise
tax of 20% as well as the value added tax of 12%, These taxes have proven to be unjust and inequitable as
it has driven the industry underground, Aside from driving the industry underground, the unjust and
inequitable taxes have resulted in the proliferation of smuggling to the detriment of those jewelry
enterprises trying to surface from the underground. While R.A. 8502, the Jewelry Industry Development
Act of 1998 has helped, the Philippines must think out of the box and undertake drastic remedial
measures to assist the development of the jewelry industry,

While the Philippines has repressed its jewelry industry even though it is the only country in
Southeast Asia with over US$12 trillion in mineral reserves of gold, the key raw material for jewelry,
other countries in the area have nurtured their infant jewelry industries through legislation and sustained
promotion and assistance in recognition of the role of the jewelry industry as an engine of growth for the
country and more importantly for the workers in the industry, The jewelry industry is the only industry
which can provide high wages and salaries for uneducated workers, commensurate to employees of call
centers, Goldsmiths’ daily rate start at PHP 800 while stone setters can earn up to PHP1,500 per day
Even at this rates, the Philippines can compete as shown by the growth of its exports from US$14.6
million in 1997 before R.A. 8502 was passed to US$55 million in 2010. This represents an average
annual growth rate of 21.3%. Removal of the major limiting factor, the excise tax, would enable the
Philippine jewelry industry to finally grow.

It should be pointed out that the collections for excise tax has been negligible over the years s
the industry has been driven underground, With the passage of R.A. 8502, income tax collections from
the industry for 2001 amounted to PHP 42.2 million growing by 17.5% from PHP 35.9 million in 2000,

Thus, the jewelry industry believes that the removal of excise tax would result in a win-win
situation for the country as the following benefits will eventually materialize:

1, the jewelry industry can join the formal sector which would result in taxes collected from
the enterprises as well as its workers;

2. the growth of the sector into an export industry with foreign exchange earings and
improved income tax collections;

3. provision of lucrative work for Filipinos who have not been able to study and enable the
education of their children as a way out of poverty; and

4, reduction of red tape, graft and corruption for enterprises in order to stay in business.

This bill repeals Sec. 150 and amends portions of Sec. 151 of the National Intemal Revenue
Code. There is urgency in passing this measure as the Philippine jewelry industry has been left behind by
its neighbors in the area and the Philippines needs to generate employment for the uneducated as well as
educated Filipinos. —

DAKHCA CARLO E. CUA
Representative awDistrict of Tarlac Repyésentatve, Lone District of Quitino


SIXTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

House Bill No.__ 3717

Introduced by Representative Susan A. Yap and Dakila Carlo E. Cua

AN ACT
REPEALING SEC.150 (A) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997
AND DECLARING THE NON-APPLICABILITY OF SECTION I51 (A) (2) AND (A) (3)
(A) AND (B) TO JEWELERY ENTERPRISES

Be it enacted by he Senate and Flouse of Representatives ofthe Phippines in Congres assembled:

SI ci

TION 1. This Act shall be known as the Repeal of

Tax on Jewelry.

SECTION 2. Declaration of Government Policies. - The jewelry industry of the
Philippines shall be developed to enhance its competitiveness domestically as well as in the
global economy and encourage investments so that output of gold and silver from the mining
industry will eventually be utilized for the jewelry industry. Accordingly, the following are the
declared policies of the State:

1. The State recognizes that jewelry is a valuable potential contributor to the
Philippine economy rather than a luxury or non-essential goods;

2. The State recognizes that the jewelry industry can be even more competitive
through the removal of taxes;

3. The State recognizes that the jewelry industry is a prime target for hidden
transactional costs and seeks to minimize these opportunities by simplifying the
taxes levied on the industry,

4. The State recognizes that gold, silver, gemstones are items of intrinsic value or
near cash items and as such should be considered as alternative savings in
recognition of our cultural traditions,

5. The State also recognizes that taxation should be equitable and just and should not
cause an industry to go underground for its survival.

SECTION 3: Repeal of Excise Tax on Jewelry and its inputs ~ In accordance with the
State's policies, the following are hereby repealed:

A. Section 150 (a) of the National Internal Revenue Code (RA 7729) which reads
as follows:

“SEC.150. Non-Essential Goods. - There shall be levied, assessed and collected a
tax equivalent to twenty percent (20%) based on the wholesale price or the value
of importation used by the Bureau of Customs in determining tariff and customs
duties, net of excise tax and value-added tax, of the following goods:

(a) All goods commonly or commercially known as jewelry, whether real
or imitation, pearls, precious and semi-precious stones and imitations
thereof; goods made of, or omamented, mounted or fitted with, precious
metals or imitations thereof or ivory (not including surgical and dental
instruments, silver-plated wares, frames or mountings for spectacles or


eyeglasses, and dental gold or gold alloys and other precious metals used
in filling, mounting or fitting the teeth); opera glasses and lorgnettes. The
term "precious metals" shall include platinum, gold, silver and other
metals of similar or greater value. The term ‘imitations thereof shall
include platings and alloys of such metals;”

is hereby repealed.

B. Section 151 (a) (2) of the National Internal Revenue Code (RA7729) which
reads as follo’

“SEC. 151.Mineral Products. -

(A) Rates of Tax. - There shall be levied, assessed and collected on
minerals, mineral products and quarry resources, excise tax as follows:

(2) On all non-metallic minerals and quarry resources, a tax of two percent
(2%) based on the actual market value of the gross output thereof at the
time of removal, in the case of those locally extracted or produced; or the
value used by the Bureau of Customs in determining tariff and customs
duties, net of excise tax and value-added tax, in the case of importation”

is hereby declared not applicable to importations, and purchases of jewelry
enterprises for production supplies such as but not limited to investment powder,
abrasives and other items made from mineral resources required to produce
jewelry.

C. Section (a) (3) (a) of the National Internal Revenue Code (RA7729) which
reads as follows:
“(3) On all metallic minerals, a tax based on the actual market value of the gross
output thereof at the time of removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in determining tariff and
customs duties, net of excise tax and value-added tax, in the case of importation,
in accordance with the following schedul
(a) Copper and other metallic minerals;
(i) On the first three (3) years upon the effectivity of Republic Act No.
7729, one percent (1%);
(ii) On the fourth and the fifth years, one and a half percent (1 14%); and
(iii)On the sixth year and thereafter, two percent (2%);”

is hereby declared not applicable to purchases, and importations of copper and
exports of finished / semifinished fine or costume jewelry of Philippine jewelry
enterprises.

D. Section 151 (a) (3) (b) of the National Internal Revenue Code (RA7729) which
reads as follows: “(b) Gold and chromite, two percent (2%)” is hereby declared not
applicable to purchases, importations and exports of finished goods of jewelry
enterprises.

Section 4: All production inputs of jewelry enterprises not itemized above but which may
be made of mineral products and locally purchased or imported are exempted from excise tax. In
addition, copper, gold, silver, platinum, palladium and its alloys imported or locally purchased
are exempted from excise tax whenever purchased or used by jewelry enterprises. Likewise
plating solutions made of gold, silver, platinum, rhodium, ruthenium, copper or some other
metallic mineral are exempted from excise tax when purchased, imported or used by
jewelry enterprises.


Section 5, All domestic sales and export sales of finished/ semifinished fine or costume
jewelry made by Philippine jewelry enterprises are likewise exempted from excise tax.

Section 6. Implementing body. ~ The Department of Finance through the Bureau of
Internal Revenue shall monitor, oversee, supervise and take responsibility for the implementation
of this Act and shall submit to Congress a yearly report thereof.

Section 7. Implementing rules and regulations. ~ Within thirty (30) days from approval
of this Act, the Commissioner of Internal Revenue shall promulgate the rules and regulations
implementing the provisions of this Act.

Section 8, Separability clause. ~ The provisions of this Act are hereby declared to be
separable, If any provisions thereof is declared unconstitutional, the remaining provisions thereof
not otherwise affected shall remain in full force and effect,

Section 9. Repealing clause. ~ Any laws, executive orders, rules and regulations or parts
thereof inconsistent herewith are hereby repealed or modified accordingly

Section 10. Effectivity, ~ This Act shall take effect fifteen (15) days after its publication
in two (2) newspapers of general circulation.

Approved,