BSP rejects BIR plan on gold tax collection

By Ruben Hortelano

05/20/2008

The Bangko Sentral ng Pilipinas (BSP) opposed yesterday a plan of the Bureau of Internal Revenue (BIR) to use it as a collecting agent for the excise tax on gold as part of measures to raise revenues.

The law requires small scale miners to pay a 2-percent excise tax and royalty fees on the sale of gold but this law is hardly enforced.

BSP Deputy Gov. Diwa Guinigundo told reporters the BIR proposal is questionable, citing that this move needs an approval from Congress.

He said officials of the BSP and the BIR have not discussed the issue yet but he said the BSP would definitely reject the plan.

“We have questioned its legality. We fear if we begin collecting the tax from small-scale miners they would simply take their gold elsewhere and we do not want that to happen,” Guinigundo said.

Some 400,000 troy ounces of gold are sold to the BSP by thousands of small-scale gold miners every year.

Small miners prefer to sell to the government since they often fall victims of unfair practices from private gold buyers.

BIR Commissioner Lilian Hefti had directed the BSP to “act as tax collection agent” for the BIR on gold transactions, Guinigundo said.

The volume of gold passing through the buying stations was made possible only because the BSP undertook to buy them on condition of complete anonymity.

“If we now create a paper trail for these people, this would force them to bring their gold elsewhere, quite possibly to the country’s backdoor or to the blackmarket,” Guinigundo said.

He also said the BSP buying stations were preferable to others because these were staffed with professional assessors and their accurate scales and the fact that transactions are done “without any questions asked.”

Gold only needs to be mercury-free and the quality or purity of the metal has to meet the BSP standard, Guingundo said.

This arrangement has allowed the Philippines to rank fourth or fifth largest gold producer in the world, according to Guinigundo.

He also said the country’s gold holdings account for roughly 10 percent of the gross international reserves of more or less to $3 billion.

To date, small scale miners can sell their wares to the buying centers of the BSP, the biggest of which is the Security Plan Complex (SPC) along East Avenue in Quezon City. The other centers are in Baguio City, Naga, Zamboanga and Davao.

Guinigundo said on the average, the central bank buys about 700,000 troy ounces of gold yearly.

He said small scale miners are in a win-win situation when they sell their gold to the BSP since aside from correct weight and pricing, even the silver components of the gold are paid unlike when the item is sold in the black market.

“They are assured that they are being paid correctly and are paid on same day,” he said.

The BSP official also said security is not a question when miners sell their gold to the BSP unlike when they use middlemen.

He raised the big possibility of a decline in miners selling their gold to the BSP once BIR starts collecting the excise taxes since this would mean less revenue for the miners.

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