MANILA, Philippines — The Chamber of Mines of the Philippines (CoMP) is urging the Bangko Sentral ng Pilipinas (BSP) to resume buying gold from small-scale miners to build up the country’s thinning reserves and at the same time plug the revenue leakage.
Gerard Brimo, chairman of CoMP and Nickel Asia Corp., said in a roundtable discussion with The STAR the government coffers is foregoing potential revenues as gross production of value have plunged since the imposition of excise tax on the sale of gold by small-scale miners to the BSP.
The law states that small miners should sell gold to the BSP. The gold purchased by the central bank are refined and included in the country’s gross international reserves (GIR).
In 2008, the BIR issued Revenue Regulation 7-2008 covering taxation on sale to BSP of gold and other metallic mineral products extracted or produced by small-scale miners. Such regulation requires imposition of two percent excise tax and five percent withholding tax on gold such miners produce and sell to BSP.
However, the BSP first asked the Department of Finance (DOF) in 2008 to reconsider the regulation that also assigned the BSP to not only collect the two percent excise tax on the sale of gold but also as withholding agent for the 10 percent creditable withholding tax.
“So much attention paid to the highly regulated large-scale sector, and so little to the largely illegal small-scale sector. Nobody is paying attention to this. This country is losing P40 billion worth of gold,” Brimo said.
Latest Mining Industry Statistics from the Mines and Geosciences Bureau of the Department of Environment and Natural Resources showed production value of small-scale gold miners plunged to P900 million in the first quarter of the year from P42.9 billion in 2010.
The production value of small-scale miners plummeted to as low as P300 million in 2013 before recovering to over P1 billion in 2014, 2015 and 2016.
The value fell anew to P900 million in 2017 and in the first quarter of 2018 as the excise tax on the sale of gold was doubled to four percent from two percent under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion Law that took effect last January.
“Now where did all of these output go because they (small-scale miners) are still mining away,” Brimo asked.
Gloria Tan-Climaco, director of CoMP and Filmenera Resources Corp., said the output are illegally transported to other countries and disappears into the gray market.
Climaco urged the central bank to shoulder the excise tax to convince small-scale miners to sell their gold to the BSP to beef up the country’s foreign exchange buffer.
“If I were the central bank governor, I’m going to pay the four percent excise tax and in exchange I will get all the gold. I am the central bank I am not in the business of making money. It is from one pocket to the other pocket,” she said.
The country’s GIR level has thinned to $74.77 billion in October enough to cover 6.8 months’ worth of imports from a record $86.14 billion equivalent to 10 months’ worth of imports in September 2016.
The BSP uses the buffer to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso.