HOUSE OF REPRESENTATIVES

Republic of the Philippisfes yy. -

House of Representativys  @ECERVED
Quezon City

Seventeenth Congress
First Regular Sessioi

Introduced by Honorable Joseph Stephen S, Paduano

EXPLANATORY NOTE

This bill sceks to exempt small-scale miners from the payment of income
and excise taxes for the sale of gold to the Bangko Sentral ng Pilipinas (BSP),
amending for the purpose Presidential Decree No, 1158, as amended, otherwise
known as the National Internal Revenue Code.

ion 3(c) of Republic Act (RA) No. 7076, otherwise known as the
“People's Small-Scale Mining Act of 1991” defines small-scale miners as
“Filipino citizens who, individually or in the company of other Filipino citizens,
voluntarily form a cooperative duly licensed by the Department of Environment
and Natural Resources to engage, under the terms and conditions of a contract,
in the extraction or removal of minerals or ore-bearing materials from the
ground.” Section 13(d) of the same law provides that the holder of small-scale
mining contract shall have the obligation to “pay all taxes, royalties or
government production share as are now or may hereafier be provided by law.”

Pursuant to the provisions of RA 7076 and consistent with the National
Internal Revenue Code (NIRC), small-scale miners are obligated to pay an
excise tax of 2%, income tax between 5-32% in case of individual taxpayers
and 30% in case of corporations, and a creditable withholding tax of 5% of
gross payments. Due to this multitude of tax obligations, small-scale miners and
traders seeking to avoid its payment are selling or smuggling their gold to the
black market rather than selling the gold to the BSP at competitive price:
mandated by RA 7076. According to the law, the BSP or its duly authorized
representatives, has the authority to buy and sell gold at prices competitive with
those prevailing in the world market regardless of volume or weight.



It is within the BSP’s mandate to maintain monetary stability and
convertibility of the Philippine peso, as expressed under RA 7653, otherwise
known as the “New Central Bank Act,” To fulfill this, the BSP shall maintain
adequate international reserves which include gold, the ultimate form of
payment in the world, This may be done by purchasing gold from both large-
scale and small-scale miners.

Alarmingly, based on available data from the Mines and Geosciences
Bureau, BSP’s gold purchases significantly declined from 48.93 billion in 2010,
34.67 billion in 2011, down to 2.30 billion in 2012, The trend continued in 2013
with 1,06 billion and in 2014 with 1.01 billion, This plunge in BSP’s gold
purchase clearly compromised the country’s gross international reserves and
may further lead to a depletion of the gold inventory of the BSP. Eventually,
this will have an adverse effect on the Philippine economy.

By removing excise and income taxes from the sale of gold to BSP,
small-scale miners, sellers and traders will be encouraged to sell their gold to
the BSP instead of the black market and curb the smuggling of gold out of the
country.

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



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Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
First Regular Session

3470

HOUSE BILL NO.

Introduced by Honorable Joseph Stephen S. Paduano

AN ACT
EXEMPTING SMALL-SCALE MINERS FROM THE PAYMENT OF
INCOME AND EXCISE TAXES FOR THE SALE OF GOLD TO THE
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 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

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

(1) xxx


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wy
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a

2

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1)

XXX

XXX

INCOME OF SMALL-SCALE MINERS

Xxx Xxx
Miscellaneous Items, ~
(a) xxx

xxx Xxx
O)
INCOME,

DERIVED BY SMALL-SCALE

MINERS, AS DEFINED UNDER REPUBLIC ACT

NO.

“PEOPLE'S

1991," FROM

7076,

OTHERWISE KNOWN AS THE

SMALL-SCALE

MINING

BANGKO SENTRAL NG PILIPINAS,

XXX

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

amended to read as follows:

XXX

“CHAPTER VII

XXX.”

ACT OF

THE SALE OF GOLD TO THE

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:

XXX

XXX


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(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 4%); 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
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

XXX XXX, XXX.”

SEC. 3. Within sixty (60) days afer 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. 4, 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.

Ss

5. This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,