Republic of the Philippines
House Or REPRESENTATIVES 2
Quezon City, Metro Manila

Sixteenth Congress
Second Regular Session

HOUSE BILL NO._ 4953

Introduced by Honorable Lilia Macrohon-Nufio

EXPLANATORY NOTE

The Bangko Sentral ng Pilipinas (BSP) has statutory authority to buy and
sell gold in any form at prevailing market prices. Historically, the BSP’s gold-
buying operations have played an integral role in managing the gross international
reserves of the country and in strengthening its international reserve position.

The BSP also maintains gold holdings for other vital reasons, such as
urity, diversifications and inflation hedging. Gold is perceived as an essential
et during financial turmoil and holding gold allows BSP to generate additional
income through selling of call options and spot trading. Gold acquired and refined
domestically are also traded in the international market for profit.

In sum, gold is perceived as the backbone of the country’s global financial
position — able to retain its value in times of internal and external political turmoil,
rising prices, war and even changes in government. The public is even known to
have taken confidence from the fact that its government holds gold, an
indestructible asset not prone to inflationary worries attributable to paper money.

In order to promote the accumulation of gold resources and the sale of gold
to the BSP, Section 17 of Republic Act No. 7076 mandates small-scale miners to
sell all gold obtained from any mineral area to the BSP at prices competitive with
those prevailing in the world market regardless of volume or weight. This is
primarily intended to assist BSP in attaining its objective of maintaining
international stability and convertibility of the Philippine peso. Section 26.6,
Chapter VI of the Department of Environment and Natural Resources
Administrative Order No. 34, Series of 1992 exempts the small-scale mining

Bill Drafting Service


contractor from the payment of excise tax from the sale of gold to the Central
Bank.

However, on April 2, 2012, the Bureau of Internal Revenue issued Revenue
Regulations No. 6-2012 which imposes a two percent (2%) excise tax and zero
percent (0%) value added tax on the gold sold to the BSP. Furthermore, the BSP
is being assessed and held liable for payment of excise taxes in the absence of
proof that the gold miner or producer had paid said taxes. This prompted BSP to
assume the responsibility of outrightly collecting the 2% excise tax from sellers of
gold.

Moreover, sellers of gold are required to pay income tax. For every gold
sold to the BSP, it is mandated by Revenue Regulations No. 6-2012, that the BSP
withhold 5% of gross payments as creditable withholding tax (CWT). The BSP
then remits to the Bureau of Internal Revenue the CWT withheld from the sale of
gold regardless of whoever is selling as provided in Section 5 of Revenue
Regulations No. 6-2012.

Due to the imposition of excise and income taxes on gold transactions,
small-scale miners and traders seeking to avoid its payment are selling or
smuggling their gold to other buyers and the black market. This inevitably gives
rise to adverse effects on BSP’s gold-buying activity.

In 2012, BSP’s gold purchases amounted to P2,332 billion — a 94%
reduction from P35,413 billion in 2011, while in 2013, a meager P1,060 billion
gold buys were recorded by BSP. Also, BSP purchased 32,888 fine troy ounces
(FTO) of gold in 2012 — a 94% decline from 554,964 FTO in 2011. In 2013, a
measly 17,778 FTO of gold were purchased by BSP.

Unless immediate action is taken to address the significant plunge in the
purchase of gold by BSP, the monetary, banking and credit system of the
Philippines will deteriorate to the prejudice of public interest. As gold is one of
the compositions of international reserves, BSP’s mandate to maintain adequate
international reserves to meet foreseeable net demands for foreign currencies is
clearly in danger of being compromised.

Furthermore, since gold purchased by BSP is devoted solely for the purpose
of achieving price stability towards a balanced and sustainable growth of the
economy, BSP is acting as mere instrument to further the governmental function of
promoting and maintaining monetary stability and convertibility of the Philippine
peso. The imposition of excise and value added taxes on the sale of gold to BSP,
therefore, has the roundabout effect of taking money from one pocket of the
government to put it in another pocket.


By removing excise tax on gold purchases, the State will encourage small-
scale miners, sellers and traders to sell their gold to BSP and perforce promote the
accumulation of gold resources by the latter. This is essential if the government
wants to avoid eventual depletion of BSP’s gold inventory, as well as any adverse
effects on the international reserve and the Philippine economy. Lastly, the
removal of excise tax on gold purchased by BSP will curb smuggling of gold out
of the country committed by small-scale miners and traders seeking to avoid its
payment.

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

Anruws

LILIA MACROHON-NUNO


Cor aunrwene

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Republic of the Philippines
House Or REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
Second Regular Session
HOUSE BILL No,_ 4953

Introduced by Honorable Lilia Macrohon-Nuiio

AN ACT
EXEMPTING THE SMALL-SCALE MINERS FROM THE PAYMENT
OF INCOME AND EXCISE TAXES FOR THE SALE OF GOLD TO
BANGKO SENTRAL NG PILIPINAS, AMENDING FOR THE PURPOSE
PRESIDENTIAL DECREE NO. 1158, AS AMENDED, OTHERWISE
KNOWN AS THE NATIONAL INTERNAL REVENUE CODE
Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:
SECTION 1. Section 32 of the National Internal Revenue Code, as
amended, is hereby further amended to read as follows:
“SEC. 32. Gross Income. ~
(A) General Definition. — Except when otherwise
provided in this Title, gross income means all income derived from

whatever source, including (but not limited to) the following items:

XXX XXX XXX

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(B) Exclusion from Gross Income. — The following items
shall not be included in gross income and shall be exempt from

taxation under this Title:

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(xxx
XXX Xxx XXX
(7) Miscellaneous Items. —
(a) xxx
XXX XXX XXX
(1) INCOME OF SMALL-SCALE MINERS
— INCOME DERIVED BY SMALL-SCALE

MINERS, AS DEFINED UNDER REPUBLIC ACT

NO. 7076, FROM THE SALE OF GOLD TO THE

BANGKO SENTRAL NG PILIPINAS.

XXX

SEC, 2. Section 151 of the same Code, as amended, is hereby further

amended to read as follows:

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“CHAPTER VII

XXX.

EXCISE TAX ON MINERAL PRODUCTS

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:

Q)

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(2) xxx XXX XXX
(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
schedule:
(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 %%); and
(iii) On the sixth year and thereafter, two
percent (2%).
(b) Gold and chromite, two percent (2%).
XXX XXX XXX
(C) NOTWITHSTANDING THE
FOREGOING PROVISIONS, GOLD SOLD TO

BANGKO SENTRAL NG PILIPINAS (BSP) BY


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SMALL-SCALE MINERS, AS DEFINED UNDER
REPUBLIC ACT NO. 7076, SHALL BE EXEMPT
FROM THE PAYMENT OF EXCISE TAX:
PROVIDED, THAT IF THE EXCISE TAX THEREON
WAS PAID PRIOR TO THE SALE OF GOLD TO
BSP, THE TAXPAYER MAY FILE A CLAIM FOR
REFUND OR CREDIT WITH THE COMMISSIONER
FOR THE EXCISE TAX PAID.
(4) xxx
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SEC. 4. Within sixty (60) days after the effectivity of this Act, the Secretary
of Finance shall, in coordination with the Governor of Bangko Sentral ng Pilipinas
and the Commissioner of Internal Revenue, promulgate the necessary rules and

regulations for the effective implementation of this Act.

SEC. 5. All laws, orders, rules, regulations and other issuances or parts
thereof, which are inconsistent with the provisions of this Act, are hereby revoked,
repealed or modified accordingly.

SEC. 6. This Act shall take effect fifteen (15) days after its publication in

the Official Gazette or in a newspaper of general circulation.

Approved,