Foreigners Gold Buying Alarms Jewelers

Manila Bulletin Wed, Aug 22, 2012

Source: https://ph.news.yahoo.com/foreigners-gold-buying-alarms-jewelers-084517951--finance.html
MANILA, Philippines - Domestic jewelers have raised concerns over the legality on the flagrant buying of gold
pieces and other precious metals in the country by foreigners amid the sharp decline in gold purchases by the
Bangko Sentral ng Pilipinas (BSP).
Jewelers, however, refused to be quoted, but insisted that there must be something "wrong" going on as they
noted of the full page ads that have been running for days on major newspapers for several days announcing
buying sprees of gold in high-end hotels in Metro Manila and Cebu.
Based on the advertisements, the buyers claimed to be "America's most trusted gold buyers" and they are
enticing Filipinos to sell gold, silver, platinum, unwanted jewelries, stamped sterling, flatware and service sets.
Philippine Exporters Confederation (PhilExport) president Sergio Ortiz-Luis Jr., however, did not see anything
wrong with these jewelry-buying operations.
The recent buying expeditions of these foreign groups came at a time when gold is on its all-time high level and
world's known investors were investing in gold, which already hit over $1,600 per ounce.
"For as long as they pay the right taxes and licenses and not violating any rules, then they are legal," he said.
The insinuation was that since the Bureau of Internal Revenue (BIR) is now closely guarding the sale of gold to
be able to collect the right taxes, sellers or the small-scale miners are trying to avoid the BIR trap and could be
selling through these foreign buyers.
Another concern raised is where these buyers are going to bring all the gold pieces they bought here or are they
smuggled out of the country.
Ortiz-Luis said that while there is no prohibition in the export of gold, this could be used as a tool for money
launderers.
One jeweler cited the recent Bangko Sentral ng Pilipinas and BIR agreement on the collection of taxes on the sale
of gold by small-scale miners.
On April 2, 2012, the BIR issued Revenue Regulations 6-2012 reducing the CWT from 10 percent to 5 percent.
The new RR superseded RR 7-2008 issued on March 25, 2008.
Following this, the BSP through its buying stations in Baguio, Davao City, Zamboanga City, Naga City and
Quezon City now deduct the corresponding taxes from the small-scale miners and traders and remit the same to
the BIR.
Notably, the BSP also announced a 95 percent drop in its purchases of gold during the first half of 2012.
The BSP attributed the huge drop to the continuing high price of gold in the international market and the
smuggling of the precious metal.
Environment Secretary Ramon J.P. Paje said the decline is started in the second half of 2011 when the BIR strictly
enforced the collection of the 2-percent excise tax and 10-percent creditable withholding tax (CWT) from the sale
of gold by small-scale miners.

Philippines Issues Tax Compliance Regulations

by Mary Swire, Tax-News.com, Hong Kong
30 April 2013
Source: http://www.tax-news.com/news/Philippines_Issues_Tax_Compliance_Regulations____60587.html
The Philippine Bureau of Internal Revenue (BIR) has recently issued two Revenue Regulations (RRs) on sales
of jewelry, gold and other precious metals, particularly to non-resident foreign individuals or corporations; and
of shares of stock of domestic corporations not traded in the local stock exchange to improve the collection of
taxes.
Finance Secretary Cesar Purisima welcomed the regulations as further increasing the transparency of the
business environment, in addition to curbing tax evasion. "These RRs are important because they allow the BIR
to account for a wider scope of economic activity in the country. With these issuances, the government is more
empowered to collect the taxes due from transactions that used to be hard to spot," he said.
In April 2012, the BIR issued RR No. 6-2012, which imposed excise, value added and income taxes on the sale of
gold and other metallic minerals to other persons or entities, including the Bangko Sentral ng Pilipinas (BSP).
The BIR has observed, however, that in order to avoid taxation, many parties have chosen to sell their gold to
non-BSP buyers that do not impose the taxes, thereby avoiding taxation.
Under new RR No. 5-2013, sellers of jewelry, gold and other metallic minerals are now required to pay the
appropriate taxes in advance through the BIR Revenue District Office (RDO) having jurisdiction over the place
where the transaction occurs. Once the tax has been paid, the transaction will be validated by the issuance of an
official revenue receipt.
The advance tax payments will, subsequently, be credited against the actual business tax and income tax due
from sellers for the taxable period in which such advance payments were remitted to the BIR.
In addition to the regulations on advance tax payments, owners and operators of venues where organized
meetings for sale of gold take place are required to provide RDOs with identification information on foreign
individual or corporate buyers, including their names, nationality and passport numbers.
On the other hand, RR No. 6-2013 amends the rules for the sale, barter, exchange or other disposition of the
shares of domestic corporations not traded on the local stock exchange. The RR provides that non-publicly
traded shares shall be assessed at their fair market value for capital gains tax purposes.

Manila gold trader hit with US$17.4 million tax evasion charge
Source: http://www.digitaljournal.com/article/340457
By Antonio Figueroa Jan 4, 2013 in Business
Manila - The intensified campaign of the Philippine government to snare tax evaders got another boost after a
Manila gold trader was charged before the Department of Justice (DOJ) by the Bureau of Internal Revenue (BIR)
for under-declaration of income tax.
Estela V. Sales, BIR deputy commissioner, identified the violator as Teofilo T. Oraa who was found to have
willfully supplied incorrect information in his annual income tax and for failure to pay the correct taxes for the
year 2009.
Oraa, Sales pointed out, violated Section 254 and Section 255 of the National Internal Revenue Code of 1997,
which makes an under-declaration of taxable income by over 30 percent constitutes prima facie case of fraud
tantamount to tax evasion.
Documents show that Oraa sold refined gold and silver in 2009 to the Bangko Sentral ng Pilipinas (BSP), the
countrys central bank, in the amount of P1.116 billion (US$26.57 million), but failed to declare all his income for
that year.
A BIR comparison of the gross sales he declared in his income tax return (ITR) showed only P0.634 million
(US$15.095 million) while the net payment he received from BSP that same year reached P1.115 billion
(US$27.875 million), which is 175,796% higher than his sales declaration, or a discrepancy of P1.114 billion
(US$26.523 million).
For the violation, he was assessed by the government a deficiency of P731.67 million (US$17.4 million) in income
tax for 2009, inclusive of surcharges and interests.
Earlier, the BIR clarified that gold sellers should pay 34 percent, or nearly five times more than the seven percent
tax required on gold sales, which, in 2012, Congress wanted to suspend.
Under the Tax Code, if the individual annual income is over P500,000 (US$11,900), the tax should be 32 percent,
which is definitely lower than the income level declared by gold traders who sell their items to the central bank.
More than a month earlier, two gold sellers were also charged by the BIR separately.
Junrie Daitol Tenorio, a Cebu City-based gold trader sold gold to BSP worth P3.95 billion (US$94.047
million)during a five-year period, but failed to file the required tax returns. He did not also pay the income taxes
due on the taxable years.
On the other hand, Francois Joseph Xavier Rast, another Manila trader, was also slapped a tax evasion case for
owing the government P558.03 million (US$13.286 million) for taxable years 2006 to 2009.
Rast, who sold gold and silver amounting to P872.62 million (US$20.766 million) to the central bank, was found
to have failed to declare all his income for the taxable years and grossly under-declared his income by over 30
percent, which was equivalent to P775.07 million (US$18.454 million) in unpaid tax returns.

Top | Wed Aug 22, 2012 10:33pm EDT

Special Report: Philippines' black market is China's golden connection

MOUNT DIWATA, PHILIPPINES | BY ROSEMARIE FRANCISCO

Source: http://www.reuters.com/article/2012/08/23/us-philippines-gold-idUSBRE87M02120120823
(Reuters) - Erich Mulato walked out of a dingy workshop in this mountain village and into a gold shop next
door, clutching a handful of shiny warm nuggets newly refined from the ore he had brought in.
The 53-year-old father of six had come off a 24-hour shift at one of the hundreds of small-scale mines in this
region of southern Philippines. He sold the 5.49 grams of gold in his hand - his share of the day's output - for
8,260 pesos ($200). That's more than 16 times what a manual laborer earns daily in Manila.
"Here, we can easily make money," Mulato said, blowing smoke from a cigarette as he waited for his money at
the gold shop. "Whatever we want to buy, we can buy ... Making a living is better here.
Better for Mulato, but not for the Philippine government.
In all likelihood, Mulato's gold will find its way through middlemen and into the luggage of a tourist or the
black market in Manila - not to its only legal destination, the Bangko Sentral ng Pilipinas or the central bank.
Up to 90 percent of small-scale Philippine gold production is being smuggled out of the Southeast Asian
country, according to estimates from officials and traders, much of it to China.
The potential revenue being lost is considerable: The Philippines, the world's 18th largest gold miner, produced
just over 1 million troy ounces of gold in 2011, worth $1.6 billion at current prices. About 56 percent of that came
from small-scale miners, data from the Bureau of Mines showed.
A top central bank official told Reuters new taxes on gold sales imposed last year appear to be a key factor in the
alarming rise in gold smuggling. But the head of the revenue agency said in an interview the 7 percent tax on
gold sales will not be rolled back and suggested better policing of the borders instead.
The Customs Department, however, told Reuters the problem has become so overwhelming it can do little about
the smuggling of gold and other minerals out of the archipelago of more than 7,100 islands.
SMUGGLED TO HONG KONG
"All the production of small-scale mines, almost all, now goes to the black market, because there is no tax in the
black market," said Rex Banggawan, an accountant for a small-scale mining cooperative that buys and sells gold
in the mountain city of Baguio in northern Philippines. "After that, smuggling is automatic."
Arthur Uy, who looks after Mount Diwata as governor of Compostela Valley province in southern Philippines,
the top small-scale gold mining province in the Philippines, said the black market in gold is mainly based in the
capital, Manila.
"Most of the gold is being smuggled out to Hong Kong, that's the biggest market," said Uy, a two-term governor
whose family of Chinese descent partly owns one of the four most productive small-scale mines on Mount
Diwata.
Both Uy and Banggawan estimated 90 percent of the gold produced by small-scale miners is going into the black
market.
Official data reflects those estimates.
The amount of gold sold by small-scale miners and traders to the Philippine central bank in the second quarter
plunged 98 percent from a year earlier, according to the latest government data. By law, all gold produced by
miners such as Mulato in the Philippines should be sold to the central bank at around world market prices.
It has been an accelerating trend over the past year. The data shows central bank gold purchases dropped an
annual 4 percent, 76 percent and 88 percent in the second, third, and fourth quarters of 2011, respectively. It fell
92 percent in the first quarter.

Small-scale gold mining output, is the main source of the central bank's gold reserves, which hit a record high of
$10.4 billion early this year.
POROUS ARCHIPELAGO
The problem extends beyond gold to other minerals, which are being smuggled out of the porous and
inadequately policed borders of the archipelago.
The Philippines has one of Asia's richest trove of minerals with reserves of gold, copper, nickel, chromite,
manganese, silver and iron worth a total of around $1 trillion.
Foreign investors are circling around one of Asia's hottest emerging markets. The $225 billion economy grew 6.4
percent in the first quarter, second only to China among Asian economies. But mining investment has been held
up for various reasons, including a moratorium on new projects until Congress passes long delayed legislation
governing the industry.
That has left the field largely to small-scale miners, who fall under local regulations and are often in collusion
with the officials governing them.
CHINA CONNECTION
The record-breaking bull run in gold prices over the past decade has spurred small-scale gold mining, much of it
illegal, across the developing world.
The Canada-based Artisanal Gold Council estimates it now accounts for 15 percent of global gold supply - a
$20.5 billion industry that employs 10-15 million people.
Like the Philippines, some countries have tried to tax the output, only to find that just diverts it into the black
market. Sierra Leone announced last week, for instance, it is cutting taxes nearly in half on gold produced by
small miners to reduce smuggling.
An estimated 40-60 percent of Burkina Faso's small-scale mining out is smuggled out of the country, officials
there say.
In Mongolia, a spike in black market demand from China has spawned a small army of "ninja miners", so named
because of the large green pans carried on their backs that look like turtle shells. As in the Philippines,
Mongolian producers are obliged to sell their gold to the central bank and it is subject to a 10 percent tax. The
lion's share, however, is being smuggled across the border to China, which overtook India as the world's top
gold consumer last year.
Chinese citizens have swelled the ranks of illegal gold miners in Africa and elsewhere. That prompted a warning
in May from China's foreign ministry after dozens were arrested in Ghana: "Recently there have been many
incidents of Chinese citizens alleged to be involved in illegal gold mining", it said, and urged them to apply for
work and residence permits.
PUZZLING STATISTICS
The Philippine government is aware that gold from small-scale mines either passes through traders in the black
market or is sold directly from mines to foreigners coming in on a tourist visa, Leo Jasareno, head of the Mines
and Geosciences Bureau, told Reuters.
"We have heard a lot of rumors about that - that it is being sold in Binondo (Chinatown)," he said.
Traders and officials say it looks like much of the gold is going to Hong Kong, the main conduit for gold flows
into China.

Hong Kong's top source of gold imports from 2005 to 2010 was the Philippines, official data from the Chinese
territory shows. Philippines gold shipments to Hong Kong hit a peak of 81,471 kilograms in 2010, way above
imports of just 11 kilos nine years earlier, and were steady at 81,192 kilos in 2011.
Hong Kong customs regulations require all trade- or business-related gold shipments be registered with
authorities, but they do not put restrictions on gold carried by passengers.
Official statistics in the Philippines, reflecting legal exports, show gold exports to Hong Kong in 2010 and 2011 at
just around 3 percent of the total volume recorded by Hong Kong authorities.
The Philippines data represents only shipments by big mining firms with supply contracts, as exports of gold
from small-scale mines are banned. Officials from the statistics office could not explain the discrepancy, saying
the data was based on Customs records.
China, which strictly controls gold imports, does not publish trade data for the metal, considering it a state
secret. Hong Kong's data, however, is used as a proxy for Chinese demand.
Gold exports in the first half of this year from Hong Kong to China soared six times over the same period a year
ago.
China's gold output reached a record 361 metric tonnes last year, but in the first half of 2012 alone, China
imported more than 380 tonnes of gold from Hong Kong, the Hong Kong Census and Statistics Department said
on its website.(www.censtatd.gov.hk.)
HAND-CARRIED SMUGGLING
Foreign gold buyers have been coming in droves to the Philippines, where they can buy the metal cheaper in the
black market, said a 42-year old jeweler, who asked for anonymity to protect her family business.
"Whether they make it into smaller nuggets or smaller sheets, that's what they take with them, hand carried," she
said. "They know they can get gold cheaper here."
Rozzano Rufino Biazon, head of the Philippines' Bureau of Customs, agreed "hand-carried smuggling" accounts
for much of the outflow of gold.
He explained that the Customs agency only has 40 offices to cover all airports and ports in the archipelago,
which also sends huge shipments of other minerals - chromite, nickel and copper - to China.
Biazon cited as an example of the difficulties he faces a recent case in which nine cargo vessels shipped 75,000
metric tonnes of smuggled chromite to China from a private port in Zambales province, 50 miles from the
nearest Customs office.
TAX FACTOR
Traders and officials say the biggest factor behind the spike in the gold smuggling trend the past year is a 2
percent excise tax and a 5 percent withholding tax approved in 2008 but which the Bureau of Internal Revenue
only started enforcing last year. The tax is imposed on gold sales to the central bank, so is usually borne by the
traders.
Tagum city, the provincial capital of Davao del Norte, is the biggest gold-buying centre nearest to Mount
Diwata. Known as the "city of palm trees", Tagum has become one of the fastest-growing cities in the
Philippines, driven by the small-scale gold-mining boom.
Gold traders in Tagum say if not for the tax, they would rather sell to the central bank than in the black market
where prices fluctuate fast.

"Our mark-up cannot even cover (the tax) because of the tight competition and the fast turnover of supply," said
one trader who asked for anonymity. "As far as I know, no one is selling to the central bank anymore," said the
trader, who buys and sells at least 100 kilograms (3,215 troy ounce) of gold monthly.
Diwa Guinigundo, a career central banker and now deputy governor of the central bank, said the drop in gold
sales to the central bank is likely to persist if the current tax regime remains.
"The ball is with them," he said, referring to the Bureau of Internal Revenue.
But like the Customs Department, the Bureau of Internal Revenue has marching orders to prop up state
revenues to pay for an array of public infrastructure projects -- needed to lure private investment and drive
growth, perhaps earn the Philippines investment grade status from ratings agencies for the first time.
Internal Revenue head Kim Henares said smuggling was a long-standing problem even before the agency's July
2011 imposition of taxes on gold sales.
"The revenue regulation stays," Henares declared, referring to the tax on gold sales. If smuggling was the
problem, she said, then it was up to other agencies to tighten controls on the movement of minerals.
HARDER TO MINE
Tax or no tax, sustained demand for gold and firm prices will keep miners on Mount Diwata pounding on the
rocky walls of its deep tunnels to extract gold ore, with some using illegal dynamite to blast it out.
The gold is harder to find these days, and the ore not as rich, but the work is far more remunerative than it used
to be, miners say.
"In the 1980s, one bag (of ore) could produce 5 to 10 grams of gold, but the price then was just 160 pesos ($3.82)
per gram," said George Cantilla, a 51-year-old underground mine supervisor who has been working in mines
since finishing college.
"Now, you get tiny amounts of about 0.2 gram per bag, but the price now is so much higher."
($1 = 41.77 Philippine pesos)
(Additional reporting by Rujun Shen in Singapore, Polly Lam in Hong Kong, Karen Lema and Erik dela Cruz in
Manila)
(Reporting by Rosemarie Francisco; editing by Bill Tarrant)

Smugglers now control 95% of Philippine gold trade

Daxim L. Lucas Philippine Daily Inquirer
http://business.inquirer.net/93838/smugglers-now-control-95-of-philippine-gold-trade
The local gold trade is now almost completely in the hands of black market operators and the countrys central
bankthe agency tasked with buying the precious metal from minersis completely powerless to stop it.
This was disclosed by an official of the Bangko Sentral ng Pilipinas in a recent talk with reporters, who pointed
out that the central monetary authority has neither the necessary resources nor the mandate to prevent gold
smuggling.
We cant stop smuggling, BSP Assistant Governor Manuel Torres said in a forum in Quezon City. The BSP
has no police powers to stop such illegal activities.
The official, who oversees the operations of the central banks mint, refinery and printing operations in Quezon
City, said that as much as 95 percent of gold trade in the Philippines is now made through the black market.
The amount corresponds to the drop in the volume of gold sold by traders and small-scale miners to the central
bank after authorities started collecting a 7-percent tax on gold salesconsisting of a 2-percent excise tax and a
5-percent creditable withholding taxsince last year.
Under the law, the BSP is required to buy all the gold from local producers. Since the BIR imposed the tax at the
point of sale, however, gold traders have shied away from the BSP, with most choosing to sell their precious
metals to smugglers who do not impose excise taxes.

Monitoring Non-Metallic Minerals and SSM goldminers

Excerpt from http://www.chamberofmines.com.ph/06042014.html
For non-metallic mines, it was found out that only those producing cement with quarry operations as well as
those into marble quarrying pay taxes. A number of non-metallic producers all over the country are not within
the BIRs watch list and production figures cannot correctly be sourced from local government units that grant
non-metallic mining permits. For instance, hundreds of sand and gravel quarrying are hard to monitor even by
the LGUs.
Small scale gold miners used to sell to BSPs buying stations located in areas where this activity thrives. This
system has been going on for decades as BSP previously buys gold without getting the names of the sellers.
However, in 2010 when the BIR started imposing an excise tax and a withholding tax to the small miners and
sellers, gold buying from BSP started to dwindle. Currently, most if not all of SSMs production have been
smuggled out of the country. This fact is indicated in the decline in BSP gold buying from 2012 onwards.
The BIRs Large Taxpayers Division supervises only all large mining taxpayers with the rest being monitored
by their regional offices. Tax records however are not disaggregated by sector except for excise taxes. This may
indicate a big gap in the recording of tax payments such that what is reported may only come from payments by
large taxpayers. With all the errors in monitoring and reporting, the Chamber of Mines has been proposing that
total taxes paid by the industry be disaggregated in the same manner as the reporting of metallic, non-metallic
and small scale mineral production quantity and value are documented. This way, the large metallic mineral
producers will not bear the brunt of the tax evasion or non-payment of taxes by small scale and other nonmetallic producers.
On a parallel note, the governments concern that the mining sectors payments to government as a share of total
taxes being less than the mining sectors share to GDP needs careful scrutiny. The National Statistical
Coordination Board (NSCB) indicates that the gross output and the intermediate inputs of non-metallic mines,
small-scale mines and even the informal sector are included in the computation of the mining sectors gross
value added in the gross domestic product. (GDP) Considering that small scale gold production constitute about
a third (34% per IMF report) of mineral production, this would validate the reason why the mining sectors tax
payments is less than the sectors share to GDP. This should be an eye opener for those anxious in finding out
why on a national level, there is a declining rate of tax effort relative to the countrys GDP from about 17%
during the Ramos administration to only about 12% currently. This particular concern and the amount of tax
collections from promoted growth sectors such as the services, BPO, tourism and agribusiness can be further
studied.

BIR digs BSP gold trade mine, sues Unregistered Bulacan trader for 2.22B tax evasion
https://tuklasinnatin.wordpress.com/2011/05/12/bir-digs-bsp-gold-trade-mine-sues-unregistered-bulacantrader-for-2-22b-tax-evasion/ (SOURCE)
The Bureau of Internal Revenue (BIR) today filed with the Department of Justice (DOJ) a complaint against
another Bulacan gold trader AURELIO S. BARING (Baring) for five (5) counts of attempt to evade or defeat
tax, fifteen (15) counts of failure to file Quarterly Income Tax Returns, and five (5) counts of failure to file Annual
Income Tax Returns and to pay tax, in violation of Sections 254 and 255 of the Tax Code.
Sometime in August 2010, Baring was included in the list given by the Bangko Sentral ng Pilipinas (BSP) to the
BIR containing the names of individuals who had gold transactions with the BSP.
Investigation revealed that Baring listed his addresses at 91 St. James LFS, Viente Reales, Valenzuela City;
Tugatog, Valenzuela City; and Saluysoy, Meycauayan, Bulacan. He was not registered with the BIR and neither
did he register with the Department of Trade and Industry.
Furthermore, the BIR discovered that Baring sold (refined) gold to the BSP in the years 2005 to 2009 amounting
to P3.21 billion. A certification of the total sales and net payments received by Baring and copies of the Letters of
Delivery and Sale detailing the number of pieces and the weight of the gold sold signed by him were obtained
by the BIR from BSP.
Despite receiving taxable income from his gold transactions with the BSP, Baring however failed to file his
Quarterly and Annual Income Tax Returns for taxable years 2005 to 2009. Not only did he fail to file twenty (20)
tax returns during the period in question, he also did not pay his income taxes due on the same taxable years.
Baring was assessed deficiency income taxes for five (5) taxable years in the aggregate amount of P2.22 billion,
inclusive of surcharges and interests, broken down as follows: P555.35 million 2005; P649.43 million 2006;
P179.04 million 2007; P823.21 million 2008; and P16.11 million 2009.
The case against AURELIO S. BARING is the forty-third (43rd) filed under the Run After Tax Evaders (RATE)
Program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares. (reytdlc)

P1.1-B GOLD SALE HAUNTS TRADER

Posted by Online on Sep 26th, 2012
Source: http://www.tempo.com.ph/2012/09/26/p1-1-b-gold-sale-haunts-trader/
Owes BIR P.8-B in taxes
By JUN RAMIREZ
Manila, Philippines A gold trader, who sold P1.1 billion worth of gold to the Bangko Sentral ng Pilipinas
(BSP), is wanted by police after failing to report and pay income taxes to the Bureau of Internal Revenue (BIR).
The Court of Tax Appeals (CTA) issued the warrant of arrest and asked law enforcement authorities to arrest
Virgilio I. Ocampo of Daang Munti, Saluysuy, Meycauyan, Bulacan after he failed to attend the court hearings
and post the necessary bail bond.
Ocampo was one of the 14 gold traders who were separately charged with tax evasion by the BIR before the
Department of Justice (DOJ) for not paying income taxes after selling gold to the BSP amounting to more than
P21 billion since 2005.
The BIR said Ocampo sold refined gold to the BSP for the years 2005 to 2008 totaling R1.1 billion.
BIR Commissioner Kim S. Jacin to-Henares said letters of delivery and sale detailing the number of pieces and
the weight of the gold signed by Ocampo were obtained by the BIR from the BSP.
Despite receiving the huge income, Ms. Henares said Ocampo did not only file the required income tax returns
but also failed to pay income tax amounting to R804.4 million, including interests and surcharges. His case is
docketed as CTA Criminal Case No. 0-294 However, informed sources believe that almost all the 14 accused
were only representatives, or dummies of the actual owners of the gold who were paid on commission basis.
They said this can be immediately gleaned from the obscure addresses of the respondents in Metro Manila and
nearby provinces and not in posh and gated villages.
The same sources said Ocampo went into hiding because of his alleged inability to post P20,000 bail bond to
secure temporary liberty.
As a result of the BIRs uncomprising stand against, gold traders had stopped selling the commodity to the BSP
which said it might buy gold abroad to bolster its dwindling stocks.
Ms. Henares, however, insisted she will continue prosecuting gold traders suspected of cheating on their tax
payments.
We are levelling the playing field, everybody must pay correct taxes, she said.

Stop gold tax, Philippine govt urged

Source: http://www.nationmultimedia.com/aec/Stop-gold-tax-Philippine-govt-urged-30194142.html
Philippine Daily Inquirer November 13, 2012 1:00 am
Four Philippine lawmakers are urging the Bureau of Internal Revenue (BIR) to suspend the tax on gold as it
has drastically reduced the volume of the metal sold by small-scale producers to the Bangko Sentral ng
Pilipinas (central bank or BSP).
Officials and traders said the gold tax - made up of a 5-per cent withholding tax and a 2-per cent excise tax that
the BIR started to enforce last year - was the biggest factor behind the spike in gold smuggling.
The 7-per cent tax, usually borne by the traders, is imposed on gold sales to the BSP.
Gold smuggled out of the country, much of it going to China via Hong Kong, has resulted in a 95-per cent drop
in gold purchases by the central bank. Under the law, small miners should sell their gold to the central bank.
Cagayan de Oro Representative Rufus Rodriguez said Internal Revenue Commissioner Kim Henares should
immediately scrap the tax, while Senator Gregorio Honasan Jr. suggested that the tax be suspended until the BIR
had plugged all the loopholes in the tax system.
"The gold tax is a glaring case of bad taxation. It is doing more harm than good because it is a big flop in raising
government revenue and it is hurting our financial stability," Rodriguez said.
He noted that the biggest victims of the excise tax were small miners from Mount Diwalwal in Mindanao.
Honasan, a member of the Senate ways and means committee, said: "I don't think we should continue with
something that is clearly not working as expected. I agree that gold should be taxed, but I don't think it should
be done this way. The BIR must come up with a better strategy on how to tax gold sales but until then, it should
put this to a stop."
Production down
The Mines and Geosciences Bureau (MGB) reported that gold production fell 26 per cent to 51.21 billion pesos
(US$126 million) in the first half largely due to the 95-per cent drop in gold purchases of the BSP with the
imposition of a tax (initially pegged at 12 per cent in October last year and reduced to 5 per cent in April this
year).
The MGB estimated that the central bank purchased only a little over 9 per cent of all the gold produced in the
country, down from 74 per cent a year ago.
Two vice chairs of the House ways and means committee, Isabela Rep. Giorgidi Aggabao and Nueva Ecija Rep.
Rodolfo Antonino, were also alarmed by the country's shrinking gold reserves.
"Obviously, smuggling accounts for the low gold inventory. But the trouble with lifting the tax is it will benefit
equally the big-time gold mining companies and not just the community miners who eke out [a living by
producing] a few ounces every day and who are most prone to avoid taxes," Aggabao said.
Stricter oversight
Aggabao said that while he believed that the tax should stay, the BIR should get its act together.
"True, the tax fosters a lucrative parallel grey market, but the solution is stricter oversight, especially on small
mining activities," he said.

Antonino said the BIR should explain in a hearing the result of the implementation of the gold tax in the last 12
months to enable members of the House ways and means committee to act on the troubling decline in gold
reserves.
Patrick Caoile, treasurer of the Philippine Mine Safety and Environment Association, said the BIR clearly
"miscalculated" the gold tax as it not only failed to deliver the targeted increase in revenue, but also put at risk
the country's gold reserves.
"The BSP needs to replenish its gold reserves. The BSP normally gets its gold from small miners but since the
gold tax forced them to ship out their haul outside the country, the BSP will be forced to buy gold from other
countries and at a premium. It is possible that we might be buying the same gold that came from our small
miners," Caoile said.
He said the tax would work if the government forced all miners to sell all their gold to the government.
"It's been more than a year since it sapped the gold tax, and I doubt if the BIR has seen the pot of gold it has been
looking for. The least the BIR should do is to take long, hard look at its gold tax policy. There is nothing bad in
saying mea culpa," Caoile said in a phone interview.
Prices to go up
Caoile warned the BIR against taking a hardline stance on the gold tax in the face of expectations that gold prices
would shoot up from $1,700 to $3,000 per ounce amid a further weakening of the US and European economies.
"Many investors believe that the [reelection of US President] Barack Obama will lead American planners to
double the money supply and increase inflation, an excellent scenario for higher gold prices. If our gold
continues to go out due to the gold tax, our central bank will be forced to buy gold at higher prices," Caoile said.
The Philippines, the world's 18th largest gold miner, produced just over 1 million troy ounces of gold in 2011,
worth $1.6 billion at current prices, said a Reuters special report titled "Philippines' black market is China's
golden connection."
The report, which came out in August, said about 56 per cent of that came from small-scale miners.
Foreigners on tourist visa
Leo Jasareno, MGB head, told Reuters that the government was aware that gold from small-scale mines either
passed through traders on the black market or was sold directly from mines to foreigners coming in on a tourist
visa.
"We have heard a lot of rumours about that - that it is being sold in Binondo (Chinatown)," he said.
Traders and officials say it looks like much of the gold is going to Hong Kong, the main conduit for gold flows
into China.
Hong Kong's top source of gold imports from 2005 to 2010 was the Philippines, official data from the Chinese
territory shows. Philippine gold shipments to Hong Kong hit a peak of 81,471 kilogrammes in 2010, way above
imports of just 11 kg nine years earlier, and were steady at 81,192 kg in 2011, according to Reuters.
Hong Kong customs regulations require that all trade or business related to gold shipments be registered with
authorities, but they do not put restrictions on gold carried by passengers.
Official statistics in the Philippines, reflecting legal exports, show gold exports to Hong Kong in 2010 and 2011 at
just around 3 per cent of the total volume recorded by Hong Kong authorities.

The Philippine data represent only shipments by big mining firms with supply contracts, as exports of gold from
small-scale mines are banned. Officials from the statistics office could not explain the discrepancy, saying the
data were based on records of the Bureau of Customs.
The strong demand for gold in the Philippines is also shown by foreign groups placing regular ads in
newspapers announcing "buying events" for gold jewellery at swanky hotels in Metro Manila.
The announcements, usually full-page ads, have been going on for months.

Gold trader from Taguig City gets minted for tax evasion
Posted on November 29, 2012
Source: http://www.gov.ph/2012/11/29/gold-trader-from-taguig-city-gets-minted-for-tax-evasion/
A November 29, 2012, press release from the Department of Finance, Bureau of Internal Revenue
The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against
Francois Joseph Xavier Rast, proprietor of Rast Metalor Phils., for four counts of attempt to evade or defeat tax;
and four counts of willful failure to supply correct and accurate information in his Annual Income Tax Returns
(ITRs) and to pay the correct taxes, for Taxable Years (TYs) 2006, 2007, 2008, and 2009, in violation of Section 254
and Section 255 of the National Internal Revenue Code of 1997, as amended (Tax Code).
Rast, a registered taxpayer with business address at 708 VFP Bldg., II, Veterans Center, Taguig, was included in
the list given to the BIR in November 30, 2012, by the Bangko Sentral ng Pilipinas (BSP) containing the names of
individuals who had gold and silver sales transactions with the BSP.
Documents show that RAST sold to the BSP in the years 2006, 2007, 2008, and 2009 (refined) gold and silver
amounting to P118.15 million, P209.54 million, P306.93 million, and P238.06 million, respectively, or for a total
amount ofP872.68 million. A certification of the total sales and net payments received by RAST and copies of the
Letters of Delivery and Sale detailing the number of pieces and the weight of the gold and silver sold signed by
him were obtained by the BIR from BSP.
Investigation by the BIR disclosed that RAST willfully failed to declare all his income in his Annual ITRs for TYs
2006 to 2009. A comparison of the gross income he declared in his tax returns with the net payment he received
from BSP in the years in question revealed that he grossly under-declared his income by more than 30% (P775.07
million). The same conclusion was also uncovered from his Quarterly VAT returns for the said years in question.
Under Sec. 248 of the Tax Code, an under-declaration of taxable income by more than 30% constitutes a prima
facie case of fraud tantamount to tax evasion.
RAST was assessed deficiency income taxes for four taxable years in the aggregate amount of P558.03 million,
inclusive of surcharges and interests, broken down as follows: P35.58 million 2006; P146.87 million
2007; P220.09 million2008; and P155.49 million 2009.
The case against Francois Joseph Xavier Rast is the 137th filed under the Run After Tax Evaders (RATE)
program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.
bir.gov.ph

Remove tax on gold miners, traders: BSP exec

DATE AND BY TUESDAY, 07 OCTOBER 2014 19:55
BY CHENEEN R. CAPON
Source: http://www.edgedavao.net/index.php?option=com_content&view=article&id=18086:remove-tax-ongold-miners-traders-bsp-exec
An official of the Bangko Sentral ng Pilipinas (BSP) wants the removal of the tax collected by the Bureau of
Internal Revenue (BIR) from small-scale gold miners and gold traders.
If that happens, small-scale miners will be encouraged and go back to selling their gold to BSP,BSP deputy
governor for monetary stability sector Diwa C. Guinigundo told reporters yesterday at Pinnacle Hotel and
Suites.
He said the 2 percent excise tax and 5 percent creditable withholding tax (CWT) on
gold sold by small-scale miners and traders imposed by the BIR has caused a reduction in the amount of gold
sold to BSP.
BSP is only receiving less than 5 percent from the original amount we bought before the memorandum order
issued by BIR was implemented in five gold-buying stations nationwide, Guinigundo said.
Before July 2011, BSP could purchase a total of 800,000 to 900,000 troy ounces of gold, but it went down to
20,000 to 30,000 in the succeeding years until today, he said.
A report said the precious metal sold by small-scale miners to BSP fell drastically from 25,232 kilos in 2010 to
17,389 kilos in 2011.
Small-scale gold miners and gold traders were discouraged to sell gold to the state as mandated by Republic Act
No. 7076 (Peoples Small Scale Mining Act of 1991) because of the tax imposed by BIR.
Tax is collected in BSPs gold -buying stations in the Philippines, one of which is in Davao City. The others are
located in Baguio, Zamboanga, Naga, and the Security Plant Complex in Quezon City.
The BSP then refines the gold purchased to forms acceptable in the international bullion markets.
The tax, however, has pushed gold miners and traders to the black market where they can be shortchanged
instead of BSP paying them international price, Guinigundo said.
The buying price of BSP based on the international buying price is P1, 206 per troy ounce.
Guinigundo said the decrease in the gold sold to BSP does not only affect small-scale miners and gold traders
but also BSP and the government.
Everyone appears to be on the losing end. The BSP cannot build up its gross international reserves, he said.
The government also loses because it cannot collect taxes imposed on gold miners and traders who are selling
their gold to the black market or the backdoor.
Guinigundo said BSP has already coordinated with law makers who will help amend the law imposing tax
collection on small-scale gold miners and gold traders.
It is still on the drafting phase, he said.
Earlier, four legislators urged the BIR to suspend the tax, saying it has reduced the gold sales by small-scale
miners to the Bangko Sentral in 2012.
However, BIR Commissioner Kim Henares argued that if lawmakers want the tax on gold scrapped, they might
as well ban mining.

When you mine, you destroy the environment. Thats why you compensate the government... Under our law,
everything found under the earth is owned by the government and you should pay government for that,
Henares said on Mornings@ANC.
Henares pointed out that the problem is not taxation but law enforcement of local government units and the
Department of Environment and Natural Resources (DENR).

BIR opposes proposal to scrap tax on gold

ABS-CBNnews.com
Posted at 11/12/2012 12:01 PM | Updated as of 11/12/2012 5:21 PM
Source: http://rp2.abs-cbnnews.com/business/11/12/12/bir-opposes-proposal-scrap-tax-gold
MANILA, Philippines - The Bureau of Internal Revenue (BIR) is opposing some lawmakers' proposal to scrap
the tax on gold.
Four lawmakers are urging the BIR to suspend the tax, saying it has reduced the gold sales by small-scale miners
to the Bangko Sentral.
Under the law, small-scale miners are required to sell their gold only to the BSP. But with the withholding tax
on gold implemented in the last quarter of 2011, small-scale miners started selling gold to smugglers outside the
country.
BIR Commissioner Kim Henares argued if lawmakers wanted the tax on gold scrapped, they might as well ban
mining.
"No, when you mine, you destroy the environment. That's why you compensate the government... Under our
law, everything found under the earth is owned by the government and you should pay government for that,"
she said on Mornings@ANC.
Henares pointed out that the problem is not taxation but with law enforcement of local government units and
the Department of Environment and Natural Resources.
"It's not a taxation problem. Even if you remove the 5% creditable and the 2% excise tax, they will still not sell to
the BSP because BSP will have to report to BIR that this person earned this much money and they should pay
taxes... The problem is not taxation, but law enforcement side of it," Henares said.
In the second quarter, the amount of gold sold by small-scale miners and traders to the BSP fell 98% from a year
earlier. The decline in BSP's gold purchases began in the second half of 2011, when the BIR collected the excise
tax and creditable withholding tax from gold sales by small-scale miners and traders.
The BSP purchased a total of 168 kg of gold in the April-June quarter, valued at P334.9 million ($8 million),
substantially lower than the 7,510 kg it purchased in the same period last year.
Gold reserves are important to the BSP because it gauges a country's ability to pay back debts.
The average gold production in the country is 30 tons per year, 70% of which comes from small-scale miners. ANC

BSP joins appeal for review of gold tax

Source: http://winnipeg.filipinojournal.com/m3/philippine-news/bsp-joins-appeal-for-review-of-gold-tax/
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said theres merit to the proposal from
the Bureau of Intvernal Revenue (BIR) to soften its stance on the gold tax as BSP has joined the clamor for a
review of the 7-percent tax on gold sales.
Believing that the smuggling of the precious metal out of the country could become even more rampant if the
tax issue remained unresolved, the BSP is proposing to adjust the method of computing the taxes on gold sales
as against the call of legislators for the removal of the gold tax
Guinigundo added that congress and BIR would have to work out a practical, acceptable, realistic base rather
than the gross amount of gold on which to apply the tax rates.
The BSP is authorized to buy gold mined within the country where proceeds are charged a 5-percent creditable
withholding tax and a 2-percent excise tax computed based on the gross amount of gold sales
Gold from mining sites is sold from one trader to another. The last trader nearest to one of the BSPs gold-buying
sites and the final seller of the gold to the BSP is the one charged by the BIR with the taxes totaling 7 percent.
Currently there are BIR offices in all of the five gold-buying sites of the BSP namely, Baguio City, Quezon City,
Naga City, Davao City and Zamboanga City.
The Mine and Geosciences Bureau (MGB) for its part said all the government had to do was to give a little
encouragement to small-scale miners and tighten up against the illegal mining of the precious metal. MGB
director Leo Jasareno said BSP had started meeting with small-scale miners to urge them to sell their gold to the
government.

BSP backs clamor for review of gold tax

Source: http://business.inquirer.net/92632/bsp-official-joins-calls-for-review-of-gold-tax
Michelle V. Remo and Gil Cabacungan
Philippine Daily Inquirer 4:15 AM | Tuesday, November 13th, 2012
The Bangko Sentral ng Pilipinas (BSP) has joined the clamor for a review of the 7-percent tax on gold sales,
believing that the smuggling of the precious metal out of the country could become even more rampant if the tax
issue remained unresolved.
Asked to comment on criticisms of the taxes on gold sales, BSP Deputy Governor Diwa Guinigundo said there
was indeed merit to the proposal for the Bureau of Internal Revenue (BIR) to soften its stance on the gold tax.
But while legislators are calling for the removal of the gold tax, the BSPs proposal is to adjust the method of
computing the taxes on gold sales.
The BSP is the one authorized to buy gold mined within the country. Proceeds of gold sold to the BSP are
charged a 5-percent creditable withholding tax and a 2-percent excise tax. Said taxes are computed based on the
gross amount of gold sales.
But under the current tax system, only those who directly sell gold to the BSP are taxed.
From mining sites, gold is sold from one trader to another. The last traderthe nearest to one of the BSPs goldbuying sites and the final seller of the gold to the BSPis the one charged by the BIR with the taxes totaling 7
percent.
To ensure the immediate collection of the taxes, the BIR has set up desks in all of the five gold-buying sites of the
BSPBaguio City, Quezon City, Naga City, Davao City and Zamboanga City.
Congress and BIR would have to work out a practical, acceptable, realistic base [rather than the gross amount
of gold] on which to apply the tax rates, Guinigundo said.
It would appear, therefore, to be more practical to do the adjustment before the tax rates are applied.
Otherwise, we might be seeing more black-market disposition of local gold in the global markets. Tax revenues
would also be reduced in the process, the BSP official added.
Because of the controversial tax, significant amounts of gold are believed to be smuggled out of the country.
The BSP admitted that the volume of gold it bought had shrunk significantly since last year, when the BIR
strictly enforced the collection of taxes on gold sales by setting up desks in the BSPs gold-buying sites.
To address the issue, Congress plans to revise the controversial gold tax together with other precious metals
under the proposed reforms in revenue-sharing in the new executive order (EO) signed by President Aquino last
July.
We cannot stop the BIR from collecting the gold tax because it is the law. Congress can only change this if we
enact new mining taxes under EO 79. Until then, we just hope the Bangko Sentral can replenish its gold reserves
from other sources, said Davao City Rep. Isidro T. Ungab, chair of the House ways and means committee.
Ungab said his district had a firsthand knowledge of the harsh effect of the gold tax on small miners at the
Mount Diwalwal gold find in Compostela Valley and the Davao region, which accounts for the bulk of gold sold
by small miners in the country.
Its a very serious issue especially in my province where the small miners prefer to sell their gold find in the
black market rather than pay the 7 percent tax to the Bangko Sentral, Ungab said.

With BIR Commissioner Kim Henares refusing to give in to calls from lawmakers to suspend the gold tax,
Ungab said the government should at least ensure that it would implement it more efficiently and plug the
loopholes for smuggling.
Its a good issue to look into. We need to control the industry. We have to check what is doable. But personally,
I feel this will not be finished within this Congress, Ungab said.
But for the Mining and Geosciences Bureau (MGB), all the government had to do was to give a little
encouragement to small-scale miners and tighten up against the illegal mining of the precious metal.
We just have to convince them that it pays to pay taxes, MGB director Leo Jasareno told the Inquirer, adding
the BSP had started meeting with small-scale miners to urge them to sell their gold to the government.
He agreed that the drop in sales of gold to the BSP was alarming. In previous years, an average of 30 tons of gold
was sold annually to the BSP.
But last year, only 5 tons were sold to the BSP, mostly by large-scale mining firms, he said. We could expect
that the rest were sold by small-scale miners in the underground market.
Environment Secretary Ramon Paje estimated the drop in gold sales to the BSP at 80 percent but would not say if
it was due to the gold tax. With a report from Jeannette I. Andrade
Originally posted: 10:58 pm | Monday, November

Plunge in BSP gold purchases worrisome

Post Meta
by Ben Rosario
November 14, 2013 (updated)
Source: http://www.mb.com.ph/plunge-in-bsp-gold-purchases-worrisome/
Manila, Philippines The Commission on Audit (COA) yesterday called on the Bangko Sentral ng Pilipinas
(BSP) to take immediate action in addressing the significant plunge in the purchase of gold in the past two years.
The COA said the 94 percent drop in the sale of gold to the BSP and could adversely affect the economy.
It noted that the imposition by the Bureau of Internal Revenue (BIR) of taxes on the sale of gold to BSP
contributed largely to the drop in gold purchases by government.
The imposition of taxes by the BIR on the sale of gold to BSP resulted to reluctance by the panners/traders to
sell their gold that thereby brought about the significant decline in panned gold purchases which might
eventually deplete BSPs gold inventory and adversely affect the international reserve as well as the economy,
the COA said in its 2012 annual audit report for the BSP.
(BSPs) mandate to maintain adequate international reserves to meet any foreseeable net demands for foreign
currencies may be compromised considering that gold is one of the compositions of the international reserves,
the COA said.
Auditors advised BSP and BIR to consult Congress in trying to resolve the tax issue.
In coordination with BIR, review/study the basis for the computation of tax considering that not all sellers of
gold are small scale minters, with some of them being traders, who buy gold from pawnshops, panners and
private persons, COA said.
The plunge in gold purchases started in 2011 when the BSP entered into a memorandum of agreement with the
BIR for the collection of excise taxes on gold acquisition.
Under Republic Act 7076 or the Peoples Small Scale Mining Act all gold produced by small-scale miners in any
mineral area should be sold to the BSP which will have to buy them at competitive prices prevailing in the world
market.
To ensure effective implementation of the law, the BSP and the BIR signed the MOA that gave the BSP the
responsibility in collecting the two percent excise tax and the five percent creditable withholding tax on gold
purchases.
Auditors noted that there have been decreases in gold purchases in the past five years but significant drops were
noticed from 2011 to 2012.
A 38.73 percent reduction in gold purchases was noted between 2010 to 2011.
In 2012, the decrease registered an all-time low of 94.09 percent.
Inquiry disclosed that the decrease in gold purchases was due to the implementation of the two percent excise
tax and five percent CWT from the sale of gold as per BSP Office, the COA said.
The COA said panners and traders have temporarily ceased selling gold.
Read more at http://www.mb.com.ph/plunge-in-bsp-gold-purchases-worrisome/#l3HlHygx5Y0AAKee.99

BSP incurs gold revaluation losses

Post Meta
by Lee C. Chipongian
June 26, 2014
Source: http://www.mb.com.ph/bsp-incurs-gold-revaluation-losses/
The Bangko Sentral ng Pilipinas (BSP) recorded $852 million worth of gold revaluation losses as of end-May
with reserves amounting to $7.79 billion, down 9.86 percent year-on-year or from $8.64 billion. The central bank,
however, still managed to post $292 million or 3.89 percent in gold revaluation gains counting from December
2013.
Gold buying rate remained low at $1,319 per troy ounce compared to end-2012 of more than $1,600. At the end
of 2012, BSP gold hoard totaled $10.35 billion, recording $2.34 billion worth of gold revaluation gains. By end2013, reserves were down to $7.49 billion.
Central banks have gold hoards that they use as a hedge against inflation or fluctuating currencies since gold is a
stable investment.
The BSP also uses its gold reserves as collateral for some of its past loans, such as the $1.2-billion gold-backed
loans it took out from the Bank for International Settlements and paid in full by 2010.
The countrys international reserves would have achieved the BSPs forecast of $87 billion in 2013, if not for gold
revaluation losses amounting to $4 billion. At the end of 2013, foreign exchange reserves only reached $83.18
billion.
BSP sources said foreign exchange accumulation has slowed down as speculations over the US Federal Reserves
tapering actions have impacted on inflows as well as weaken gold prices.
For this year, the BSP has an $88-billion foreign exchange reserves projection which is now under review, along
with other external account estimates.
The BSP maintains that the country has enough reserves to withstand the stress that the US unwinding stimulus
will do to emerging markets.
This is even if accumulation of foreign currency and foreign assets are not as active as before, as what happened
in 2013 because of negative revaluation, mainly the decreased valuation of gold.
As of end-May, the BSPs foreign exchange reserves totaled $80.24 billion, lower compared to the same period
last year of $81.97 billion.
BSP Governor Amando M. Tetangco Jr. has said that the countrys external sector position has continued to help
shield the economy and the domestic financial market amid recent financial market volatilities following the
start of the US Fed tapering.
Our gross international reserves remain more than adequate to meet the countrys foreign exchange
requirements, said Tetangco.
Read more at http://www.mb.com.ph/bsp-incurs-gold-revaluation-losses/#CLEG2JhEwqgBs352.99

Benguet solons seek income and excise tax exemption on small-scale gold mining
By Philippine Canadian Inquirer on September 18, 2014
Source: http://www.canadianinquirer.net/2014/09/18/benguet-solons-seek-income-and-excise-tax-exemptionon-small-scale-gold-mining/
MANILA, Philippines Two lawmakers from gold-rich Benguet province have proposed to remove income and
excise taxes on gold sold to the Bangko Sentral ng Pilipinas (BSP) to curb the smuggling of the precious metal
out of the country.
House Bill 4951, filed by Rep. Nicasio Aliping, Jr. of Baguio City and Rep. Ronald Cosalan of Benguet, seeks to
amend Sections 32 (B) (7) and 151 of Republic Act (RA) 8424, or the National Internal Revenue Code, as
amended, so that gold sold by small-scale miners to the BSP will be exempted from the payment of income and
excise taxes.
In the bills explanatory note, the legislators said the desire among small-scale miners to avoid paying taxes
levied on gold prompts them to sell in the black market where gold ends up being smuggled out of the country.
Section 17 of RA 7076, or the Peoples Small-Scale Mining Act of 1991, mandates that all gold produced by smallscale miners in any mineral area shall be sold to the BSP, or its duly authorized representatives, which shall buy
it at prices competitive with prevailing world market rates regardless of volume or weight.
However, the lawmakers noted that the excise tax on gold is assessed against the BSP in the absence of proof
that the gold miner or producer has paid the said tax.
The BSP thus collects outright the 2-percent excise tax on gold based on the gross amount of gold sold. In
addition, the BSP withholds 5-percent of gross payments as creditable withholding tax, Aliping said in a
statement.
This has adversely affected the gold-buying operations of the BSP which resulted in a significant plunge in its
purchases of gold in 2012 and 2013 as compared to 2011. So that from the 554, 994 fine troy ounces of gold
purchased by the BSP in 2011, its purchases drastically dropped to only 32,888 fine troy ounces in 2012, and
down further to a measly 17,778 fine troy ounces in 2013, Aliping added.
Cosalan said any depletion of the BSPs gold inventory would affect monetary stability and the convertibility of
the Philippine peso.
The banking and credit system will consequently suffer to the detriment of the economy, Cosalan added.
The proposed law would encourage miners and traders to sell their gold to the BSP rather than in the black
market, the legislators said.
The BSP would thus be able to maintain adequate international reserves to meet forseeable net demands for
foreign currencies, Cosalan said.
HB 4951 is now pending at the Committee of Ways and Means chaired by Rep. Romero Quimbo of Marikina
City.
With report from Cyra Moraleda

Clarifying withholding tax on minerals

Source: http://www.punongbayan-araullo.com/pnawebsite/pnahome.nsf/section_docs/KM216Y_10-4-12
Clarifying withholding tax on minerals by: Charity P. Mandap
A major focus of the Bureau of Internal Revenue (BIR) is mining, an industry that is viewed as a good revenue
source as it is subject to excise, value-added and income taxes.
Relative to this, the BIR has clarified the taxability of the sale of gold in its recent Revenue Regulations (RR) No.
6-2012 issued on April 2, 2012.
The regulations amend RR No. 7-2008 on the Taxation on the Sale to BSP of Gold and Other Metallic Mineral
Products Extracted or Produced by Small-Scale Miners, and Further Amending Section 2.57 2(T) of RR No. 2-98,
as amended.
A significant amendment is the expanded scope of the regulations. RR 7-2008 covers only transactions between
small-scale miners and the Bangko Sentral ng Pilipinas (BSP). With the changes in place, RR 6-2012 now uses the
words sellers instead of small-scale miners and buyers instead of only the BSP. RR No. 7-2008 contains no
reference to large-scale mining or other entities. In fact, it specifically implements Republic Act (RA) No. 7076 or
the Peoples Small-Scale Mining Act of 1991. It provides a detailed background, definition and qualification of
small-scale mining, giving the impression that he regulation is applicable only to small-scale mining. If the intent
is to cover large-scale mining, RR 7-2008 could have easily incorporated the same. Thus, under the basic rule on
statutory construction known as expressio unius est esclusio alterius, or in laymans terms simply means what
is not included is deemed excluded, RR No. 7-2008 is applicable only to small-scale mining.
Meanwhile, RR 6-2012 now provides for the applicability of VAT on the sale of gold. Where RR No. 7-2008
merely provides for the zero percent VAT on the sale of gold to the BSP, the new regulations reiterate the
applicability of the 12% VAT on the sale of metallic minerals to persons and entities in general. The general term
persons and entities could only mean persons and entities other than BSP. Thus, the new issuance covers sale
of minerals to persons and entities other than the BSP.
The inclusion of large-scale mining in the coverage of the regulations attains relevance in the withholding of the
10% tax by a buyer on income payments for purchases of minerals, mineral products and quarry resources
under Section 2.57.2 (T) of RR No. 2-98. Considering that RR No. 7-2008 overs only small-mining, the 10%
withholding tax required under the same regulations should be construed to apply only to transactions
involving small-scale miners.
In spite of this, the BIR in some cases maintains that the 10% withholding tax should also be applicable to
transactions involving large-scale miners. With the BIRs interpretation, buyers who withheld only the 1% tax on
income payment to large-scale miners (as prescribed by an earlier regulation, RR No. 17-2003) have been made
liable to withholding tax deficiency on the 9% difference. As a consequence, buyers of minerals, on whom the
responsibility to withhold is placed, are being exposed to penalties for failure to withhold the correct taxes.
The intent of the BIR to cover transactions involving large-scale mining under RR 12-2008 could have been
explained in a public hearing on the regulations during the drafting stage. Unfortunately, no such event took
place. As a public hearing is required to validate the regulations, can the BIR implement the changes or raise tax
rates in a regulation that was issued without due notice and hearing?
Under RR 8-2012, the controversial withholding tax has been reduced to 5% (from 10%, or up from 1%) which
now applies on all transactions whether with large scale or small-scale miners. The earlier regulation, RR No. 172003 prescribed only a 1% withholding tax rate.
The reduction in the withholding tax rate , hopefully, should be able to address the burden on both the buyers as
withholding tax agents and on the sellers. The buyer-withholding agent is now made liable for the amount of
taxes not withheld plus interest and penalties should there be a failure of compliance with the regulations.
Moreover, the change to 10% withholding tax rate under RR No. 7-2008 was a big jump from the original 1%. In

many cases, an excessive withholding tax rate only results in huge amounts of creditable withholding taxes in
the taxpayer account if the amount withheld is higher that the income taxes payable.
The new regulations also added a paragraph to the requirement of proof of withholding and remittance of the
5% withholding tax to enable sellers/possessors to claim the costs and expenses associated therewith. This
addition amplifies the importance of the withholding of tax on purchase of minerals, failure of which will cause
the disallowance of the costs and expenses to sellers/possessors.
As certain ambiguities of RR No. 7-2008 have been addressed by th recent issuance, buyers of minerals,
regardless of whoever is selling, can now be assured that the 5% rate is the correct withholding tax.

BSP's 9-mo gold purchases from small miners nosedive 94%

Gold purchases from small scale miners and traders by the Bangko Sentral ng Pilipinas
(BSP) continued to go down amid smuggling and sales tax issues
Source: http://www.rappler.com/business/special-report/whymining/whymining-latest-stories/18717-bsp-s9-mo-gold-purchases-from-small-miners-nosedive-94
MANILA, Philippines - Gold purchases from small scale miners and traders by the Bangko Sentral ng Pilipinas
(BSP) continued to go down amid smuggling and sales tax issues.
On Friday, December 28, the Mines and Geosciences Bureau (MGB) released data showing a 91% drop in
volume and value of BSP purchases in the 3rd quarter to 159 kg and P317.8 million, respectively.
These brought the cumulative 9-month purchases to a dismal 945 kilograms valued at P2 billion. These reflected
a 91% drop from the same figures a year ago.
Contributing to the decline was the slower production value of metallic materials, which fell by 18.85% in the
first 9 months of the year to P97.99 billion, due to suspension of several mines and slow down in gold purchases
by the BSP according to data from the mgb.
The suspension of operations following a tailings pond spill in August at the Padcal mine of Philex Mining
Corp, the biggest gold producer in the country, was a major factor. Other mines suspended during the period
were Shuley Mine and Nicua.
Gold contributed 34% to the total production value, while copper accounted for 16%.
Sales tax issue
The BSP admitted that the volume of gold it bought had shrunk significantly since 2011, when the Bureau of
Internal Revenue (BIR) strictly enforced the collection of taxes on gold sales by setting up desks in the BSPs
gold-buying sites.
Proceeds of gold sold to the BSP are charged a 5% creditable withholding tax and a 2% excise tax, both based on
the gross amount of gold sales. However, under the current tax system, only those who directly sell gold to the
BSP are taxed.
Because of the controversial tax, significant amounts of gold are believed to be smuggled out of the country.
Low metal prices
Metal prices in the international market likewise remained languid with nickel, copper and nickel exhibiting
negative nine-month averages year-on-year of 13.6%, 14.11% and 27.02%, respectively.
The slowdown in the global economy led prices to close at lower levels compared to the previous years, the
MGB said. - Rappler.com

GOLD SMUGGLING - Where have all the gold gone?

DATE AND BY SUNDAY, 28 JULY 2013 11:15
BY ANTONIO M. AJERO
Source: http://www.edgedavao.net/index.php?option=com_content&view=article&id=12084:gold-smugglingwhere-have-all-the-gold-gone&catid=51:on-the-cover&Itemid=265
GOVERNMENT men, particularly agents implementing the Run After Tax Evaders (RATE) campaign of the
Bureau of Internal Revenue (BIR), are monitoring the movements of small-scale miners and gold traders in the
Davao Region to find out where they are bringing their gold since they have stopped selling to the Bangko
Sentral ng Pilipinas.
Sources close to Edge Davao said that the government agents are checking reports that miners and gold traders
are smuggling the precious metal out to Hong Kong and other foreign points where gold trading is brisk and
prices are much higher.
The small-scale miners and gold traders in areas like Mt. Diwalwal and other places in Compostela Valley and
Davao Oriental have reportedly stopped bringing their gold to the BSP after BIR started to strictly impose last
July 2011 the so-called 10-percent creditable withholding tax in addition to the 2-percent excise tax stipulated in
the Mining Act. Creditable withholding tax is the portion of payment deducted from the income or collection of
the seller.
Under the law, the buyer retains 10 percent of the total transaction as withholding agent of the government.
For sellers of gold, the tax due is a heavy loss.
Before the imposition of the creditable withholding tax, the gold buying section in Davao Citys BSP branch paid
an average of P45 million a day for the gold sold to the bank.
Before this, during Martial Law, less than 20 percent of the gold production in Diwalwal and other areas was
sold to BangkoSentral due to very low buying price. Gold produced in Davao then was traded through the
underground market called Binondo Central Bank (BCB) which was reportedly organized by the Marcos
dictatorship. (The BCB was ordered disbanded on February 26, 1986 days after the EDSA People Power
Revolution ousted then President Marcos. Then Trade Secretary Roberto Ongpin, its head, and the Marcos
estate, First Lady Imelda Marcos, former Armed Forces of the Philippines (AFP) and his children, Irwin, Wyrlo,
Rexor, Helma and Faida were accused of organizing the BCB to engage in buying of millions of dollars and
bringing the same out of the country for deposit in foreign banks, thereby obtaining millions of dollars for
themselves. Ongpin himself was accused by government prosecutors of acquiring P1,649, 734 illegally through
the BCB and asked the Sandiganbayan to order Ongpin to return the money, and pay P50 billion in moral
damages and P1 billion in exemplary damages. Philippine Daily Inquirer.
In January 2012, the Sandiganbayan dismissed the case citing absence of evidence, according to a report by the
Philippine Star on January 25, 2012).
The situation improved during the time of President Cory Aquino after her administration increased the BSPs
buying price of gold.
Almost all gold producers and traders have been selling to BSP since then, until last July 2011 when the
Department of Finance through the BIR implemented the 10-percent creditable withholding tax.
As a result of the stoppage, mining and quarrying industry had a negative growth rate last year, according to
the Performance of the Davao Region Economy 2012, a report on the Gross Regional Domestic Product of
Region 11 last year compared to the performance of the countrys 16 other regions as reported by Rosendo M.
Aya-ay, acting regional head of the National Statistical Coordination Board (NSCB) in Region 11, during a press
conference held by the NSCB and the National Economic Development Authority (NEDA) at the conference
room of the Department of Social Welfare and Development (DSWD) in Region 11.
Aya-ay presented the statistical data, whileNEDA 11 Regional Director Ma. Lourdes D. Lim made observations
on the significance of the numbers and percentages.

The presscon was attended by NSCB Secretary General Jose Ramon Albert, National Statistics Office (NSO)
Administrator Carmelita Ericta and Statistical Research Center Executive Director GervasioSelda Jr. who came
all the way from Manila to help in the media event.
The 2012 GRDP performance indicated that among industry sector (mining and quarrying, manufacturing,
construction, and electricity, gas and water supply), mining
and quarrying contributed only P1.6 billion in 2012, a sharp decrease compared to P4.1 billion in 2011 and P5.9
billion in 2010 computed at constant 2000 prices.
Director Lim of NEDA said that the decline of minings contribution is due to stoppage of miners and traders in
selling their gold produce to the BSP after the imposition of the 10-percent creditable withholding tax.
She said there was a need to educate the miners and gold traders on the importance of selling their gold to the
BSP, adding she does not see the possibility of the BIR back-tracking and suspending the tax in question.
Well just have to convince them that the taxes they will pay would enable the government to implement
projects that will eventually benefit miners and their families, Lim said.
Another government official who declined to be identified said that BIR will soon file charges for tax evasion
against small-scale miners and gold traders who are not dealing with Bangko Sentral or are not reporting
accurately their income to the BIR.
He said the BIR had established the identity of small-scale miners and gold traders.
When interviewed about the problem, veteran small-scale miners and former Diwalwal barangay captain Franco
Tito suggested that government review the tax because this is reason the gold traders have stopped selling to
BSP.
Kasagaran man gud sa mga minero, sir, may mga utang sa gold buyer mao nga didto sila mobaligya. Ang mga
gold buyer mao nag black market kay sumala nila dako na ang ginakuha sa central bank unya gamay lang ang
ilang patong kada gramo sa ilang gipalit sa mga gagmayng minero, (Usually, the miners are indebted to the
gold buyers, so that they sell their gold to them. The gold buyers are the ones selling to the black market,
because according to them, the central bank now deducts a lot of taxes from them, despite the fact their mark-up
per gram is very minimal), Tito said.
According to veteran business writer Carmelito Q. Francisco, the high prices of gold in the international market
also prompts gold buyers to decide to sell to the informal market, instead of the Bangko Sentral.

Gold sold to BSP by small-scale miners drops by 90%

By Mindanews on July 4 2012 10:36 am
DAVAO CITY (MindaNews/03 July)
From P800 million in February to P75 million in March or a 90% drop.
Source: http://www.mindanews.com/business/2012/07/04/gold-sold-to-bsp-by-small-scale-miners-drops-by90/
A huge chunk of gold output from small-scale mining operations in the Davao Region may have been sold to
the black market instead of the Bangko Sentral ng Pilipinas (BSP), keeping away revenues from government
coffers, authorities said.
Director Edilberto Arreza of the Davao Regional office of the Mines and Geo-Sciences Bureau, told reporters at
the sidelines of the Forum on Responsible Mining Tuesday that Bureau of Internal Revenue (BIR) Commissioner
Kim Henares bared the drop in gold sale during their meeting last month with the Davao Regional Enforcement
and Coordinating Council on Mining Taxation and Proceeds.
He said Henares disclosed that gold sold to the BSP was at least P800 million in February this year but plunged
to only P75 million the next month.
Arreza said the regional coordinating council has formed a task force to determine the existence of the black
market and to persuade the miners to sell back the gold to government or face the consequences, because we
will run after them.
Artemio Disini Jr., president of the Chamber of Mines of the Philippines, said the drop in gold sale to the BSP
should raise concern especially that small scale mines now constitute 70 percent of gold production in the
country.
Jesus Dureza, former Presidential Adviser for Mindanao, told reporters during a break at the mining forum held
at the Grand Men Seng Hotel ascribed the estimated 90% drop in gold sale to the BSP to the recent move of the
Bureau of Internal Revenue (BIR) to collect excise and withholding taxes on top of other taxes.
Dureza, who also served as chair of the Mindanao Economic Development Council and later the Mindanao
Development Authority under the Arroyo administration, said government would easily collect 12 percent of
the total gross value of the gold sold. They were startled by the 12 percent. They have not been used to paying
taxes, he said of the small-scale miners.
Arreza noted that that the sudden drop in gold sales began during the implementation early this year of BIR
Revenue Regulation 7-2008, which required imposition of two percent excise tax and five percent withholding
tax on gold that the miners produced and sold to the BSP. The regulation was crafted in 2008.
The law requires small miners should sell gold to the BSP, which would be refined and included in the countrys
Gross International Reserves.
I think government should look closely into this situation, Dureza said, referring to the plight of small scale
miners and the need for government to acquire through sale, the gold from them.
Arreza said the number of small scale miners were still a subject of an inventory but he said their number would
not be less than 50,000 spread in the Diwalwal gold rush in Monkayo, and Boringot complex in Pantukan,
Compostela Valley province.
Dureza and Arreza were at the Forum on Responsible Mining organized by the JCI Senate Philippines and
attended by a panel from the Chamber of Mines and representatives of various sectors, including leaders and
representatives of the sector opposing large scale-mining. (MindaNews)

BSP gold purchases down 98% in Q2

By Erik dela Cruz, Reuters
Posted at 08/20/2012 10:51 AM | Updated as of 08/20/2012 5:11 PM
Source: http://www.abs-cbnnews.com/business/08/20/12/bsp-gold-purchases-down-98-q2
MANILA - The amount of gold sold by small-scale miners and traders to the Philippine central bank in the
second quarter fell 98 percent from a year earlier, government data showed on Friday, suggesting that
smuggling of the precious metal out of the country continues unchecked.
The dramatic drop in gold purchases began in the second half of 2011 when the Bureau of Internal Revenue
started collecting a 2 percent excise tax and 10 percent creditable withholding tax from gold sales by small-scale
miners and traders.
The Bangko Sentral ng Pilipinas, mandated by law to buy the output of small gold miners, bought a total of 168
kg of gold in the April-June quarter, valued at P334.9 million ($8 million), substantially lower than the 7,510 kg it
purchased in the same period last year.
The central bank's total gold purchases for the first half of the year reached 786 kg, down 95 percent from a year
earlier, figures from the Mines and Geosciences Bureau (MGB) showed.
The country's gold output in the first half fell 63 percent to 8,382 kg from a year earlier, the MGB said, bringing
down the value of metallic minerals produced in the six months to June by 26 percent to P51.2 billion.
The Southeast Asian country produced 37.1 tonnes of gold in 2011, down from 41 tonnes in 2010, ranking it 18th
among global gold producers, according to Thomson Reuters GFMS.
However, official Hong Kong data showed that in 2011 the Philippines shipped more than 80 tonnes of gold to
Hong Kong -- about 14 percent of the city's total gold imports, suggesting that loosely regulated small scale gold
producers are understating their output. Hong Kong is a gold-trading hub and the main conduit for gold flows
into China.
The Department of Environment and Natural Resources said a proportion of local gold output in recent months
had either been sold on the black market or smuggled out of the country, although it did not give an estimate.
The department added that it had sought the help of the Presidential Anti-Organized Crime Commission to
prevent gold smuggling.

Lift Levies On Gold Sold To BSP, Government Asked

Source: http://thenewsweeklyph.com/lift-levies-gold-sold-bsp-government-asked/
A local solon is asking Malacanang to lift the taxes on gold being sold to the Bangko Sentral ng Pilipinas to
discourage small scale miners from seeking the black market and plug the ongoing gold smuggling out of the
country.
This way, BSPs gold resources are enhanced, said Baguio Rep. Nicasio Aliping and Benguet Rep. Ronald
Cosalan in their measure seeking to lift the excise and income taxes on gold sold to the BSP.
Both lawmakers said it would encourage small-scale miners and traders to sell their gold to the BSP rather than
on the black market.
House Bill 4951 authored by the lawmakers seeks to further amend Sections 32 and 151 of Republic Act 8424, as
amended, otherwise known as the National Internal Revenue Code.
Rep. Aliping said, in order to promote the accumulation of gold resources and the sale of gold to the BSP,
Section 17 of Republic Act 7076, otherwise known as the Peoples Small-Scale Mining Act of 1991, mandates
that all gold produced by small-scale miners in any mineral area shall be sold to the BSP, or its duly authorized
representatives, which shall buy it at prices competitive with those prevailing in the world market regardless of
volume or weight.
But the excise tax on gold purchased is assessed against the BSP in the absence of proof that the gold miner or
producer has paid the excise tax, Aliping said.
The BSP thus collects outright the two percent excise tax on gold based on the gross amount of gold sold. In
addition, the BSP withholds five percent of gross payments as creditable withholding tax, said Aliping, vice
chairman of the House Committee on North Luzon Growth Quadrangle.
Small-scale miners and traders who seek to avoid payment of excise and income taxes sell their gold to buyers
in the black market. From the black market, the gold is smuggled out of the country, Aliping added, hence
affecting, he said, the gold-buying operations of the BSP which resulted in a significant plunge in its purchases
of gold in 2012 and 2013 as compared to 2011
Records showed that from the 554,994 fine troy ounces of gold purchased by the BSP in 2011, purchases
drastically dropped to only 32,888 fine troy ounces in 2012, and down further to a measly 17,778 fine troy ounces
in 2013.
The smuggling of gold out of the country would thus be curbed and the accumulation by the BSP of gold
resources would be greatly enhanced. The BSP would thus be able to maintain adequate international reserves
to meet foreseeable net demands for foreign currencies, added Rep. Cosalan.
Cosalan further noted any depletion in the BSPs gold inventory would affect monetary stability and the
convertibility of the Philippine peso. The banking and credit system will consequently suffer to the detriment
of the economy, he said.
He explained the BSP has statutory authority to buy and sell gold in any form at prevailing market prices. Gold
buying is an integral mandate of the BSP to manage the gross international reserves of the country according to
Cosalan.
The gold holdings of the BSP is determinative of the strength of the countrys international reserve position and
also serves as security and hedge against inflation, the Benguet lawmaker further noted.
House Bill 4951, now pending at the Committee on Ways and Means chaired by Rep. Romero S. Quimbo (2nd
District, Marikina City), seeks the amendment of Section 32 (B) (7) of RA 8424 so that excluded from gross
income and shall be exempt from taxation is Income derived by small-scale miners from the sale of gold to the
Bangko Sentral ng Pilipinas pursuant to Republic Act 7076.

The bill also seeks the amendment of Section 151 of RA 8424, as amended, so that Gold sold by small-scale
miners to the Bangko Sentral ng Pilipinas pursuant to RA 7076 shall be exempt from the payment of excise tax.
Provided, however, that if excise tax thereon was paid prior to the sale of gold to the BSP, the taxpayer may file
a claim for the refund or credit for excise tax paid.

Taxes discourage small miners from selling gold to the BSP, official says
Source: http://www.bworldonline.com/content.php?section=Nation&title=taxes-discourage-small-minersfrom-selling-gold-to-the-bsp-official-says&id=95890
Nation
Posted on October 10, 2014 07:44:00 PM
By Carmencita A. Carillo, Correspondent

DAVAO CITY -- Gold purchased by the Bangko Sentral ng Pilipinas (BSP) from small-scale miners have
plunged, no thanks to several taxes collected on sale transactions by the Bureau of Internal Revenue (BIR).
The Philippines central bank is only able to purchase 20,000 troy ounces from small-scale gold miners, from a
previous high of 900,000 troy ounces, BSP Deputy Governor Diwa C. Guinigundo said.
Data from the Mines and Geosciences Bureau indicate that the gross production value in small-scale mining as
collected by the BSP stood at P42.9 billion in 2010, fell to P34.1 billion in 2011, then significantly plunged to P1.2
billion in 2012 and only P300 million in 2013.
As of the first quarter this year, purchase value was only P40 million.
Mr. Guinigundo blamed the situation on the BIRs policy of collecting 2% excise tax and 5% creditable
withholding tax at the BSPs five buying stations since July 2011.
The decline in the number of gold sold to us by the small scale gold miners is significant due to the BIRs policy
to collect taxes right at our buying centers, Mr. Guinigundo said on Tuesday during the 2014 Awards
Ceremony for BSP Stakeholders in Mindanao.
Mr. Guinigundo said the 900,000 troy ounces of gold they used to purchase is estimated at P51.5 billion, which
would have contributed $1.2 billion to the countrys gold reserves.
From 2012 to 2013, were lucky if we can even make two to three gold bars a month, he said.
Each gold bar weighs approximately 12 kilos.
Neither the government nor the miners benefit from the existing arrangement.
Everybody appears to be at the losing end because the BSP is not able to build up its gross international
reserves (GIR) and the BIR is not able to collect the taxes from the small miners, he said.
The small scale miners, meanwhile, are also put at a disadvantage by getting low prices in the black market.
Buyers know they (miners) do not want to sell their gold to the government, then they are being offered
uncompetitive rates for their gold, Mr. Gunigundo pointed out.
Section 17 of Republic Act 7076, the Peoples Small Scale Mining Act of 1991, provides that All gold produced
by small-scale miners in any mineral area shall be sold to the Central Bank, or its duly authorized
representative.
Small-scale miners are not allowed to use hydraulic and compressor methods and are limited to extracting
50,000 metric tons of ore before processing per year.
The MGB estimates about 3,000 registered small-scale miners in the country, who are limited to gold, silver, and
chromite extraction.

BSP has gold buying centers at its offices in the cities of Zamboanga and Davao in Mindanao, and Naga, Baguio
and Quezon City in Luzon.
Mr. Gunigundo said some members of Congress from the areas where BSP has buying stations are already
looking into the possibility of amending Republic Act 8424 or the National Internal Revenue Code to exempt
small scale miners from the excise and withholding taxes.
BSP reported gross international reserves of $80.43 billion as of end-September, slightly lower than the $80.87
billion as of August.
The decrease in reserves was attributed to the revaluation adjustments on the BSPs gold holdings and other
foreign currency-denominated reserves as well as payments for maturing foreign exchange obligations of the
national government.
The GIR is composed of central bank assets held in different currencies, gold and special drawing rights with the
International Monetary Fund, as well as foreign exchange deposits of the government and other state-run firms.
Gold, which remained the second largest contributor to the reserves at $7.569 billion, was also lower than the
previous months $8.050 billion.
BSP data shows that foreign currency holdings increased 42% from $858 .4 million in August to $1.216 billion in
September while the reserve positions increased by 1.2% from $597.6 million to $604.5 million during the same
period.

Trading of Philippine gold with BSP falls 92% in Q1; smuggling blamed
Source: http://business.inquirer.net/64361/trading-of-philippine-gold-with-bsp-falls-92-in-q1-smugglingblamed
Kristine L. Alave
@inquirerdotnet Philippine Daily Inquirer
8:56 PM | Sunday, June 10th, 2012
Read more:
MANILA, PhilippinesDespite rising metal prices worldwide, the amount of gold traded in the country
plunged by an unbelievable 92 percent in the first quarter of the year, leaving the Department of Environment
and Natural Resources (DENR) to wonder where the precious metal all went.
From 7,493 kilograms of gold worth P14.11 billion purchased in the same period in 2011, the gold purchases of
the Bangko Sentral ng Pilipinas (BSP), the only authorized agency to buy and sell gold, went down to a dismal
618 kilograms worth P1.35 billion in the first quarter, the DENR reported.
Given the continuing high price of gold and the increasing number of small-scale mining areas, the decrease in
gold purchases by the BSP clearly means that the gold output is going to the blackmarket and smuggling,
Environment Secretary Ramon Paje said.
He said the Presidential Anti-Organized Crime Task Force should investigate this.
Although the gold output has been declining in 2012, it has so far been markedly higher than the quantity
brought to the BSP, the DENR said. In the first quarter of 2012, the DENR said actual gold production
plummeted by 65 percent to 4,056 kg, with the value dropping by 57 percent to P9.33 billion.
Paje said the taxes imposed by the Bureau of Internal Revenue on gold trade in 2011 may have led gold buyers
and sellers to trade underground or smuggle it abroad. This way, they could avoid paying the two percent
excise tax and the 10 percent creditable withholding tax to the government.
Prices of gold and silver were up by 21.95 percent and 2.68 percent, respectively. The yellow metal traded above
the $1,600 per troy ounce level, the highest of which was $1,743 per troy ounce recorded in February 2012,
according to the DENR.
DENR officials said it has been difficult to track actual production of gold, which was mostly mined by smallscale miners. MGB Director Leo Jasareno said they mostly relied on gold data from the BSP and the reporting
from established mines.
With the global economy still floundering, gold is seen as a safe haven for investment.
The DENR said it expected greater gold volumes in the coming quarters as big mining companies have been set
to operate in various parts of the country.

Reduce tax rate on BSP purchase of gold to curb smuggling -- Senate think-tank
By: Likha Cuevas-Miel, InterAksyon.com
May 22, 2013 7:20 PM
Source: http://www.interaksyon.com/business/62367/reduce-tax-rate-on-bsp-purchase-of-gold-to-curbsmuggling----senate-think-tank
MANILA - To curb the smuggling of gold out of the country, the government should consider reducing the tax
rate on the sale of the precious metal to the Bangko Sentral ng Pilipinas (BSP), a Senate think tank said.
According to the Senate Tax Study-Research Office (STSRO), gold smuggling continues given its status as an
economic indicator, a hedging tool against the US dollar, aside from being useful in industries. Economic
downturns push its price to shoot up--enough incentive for traders to smuggle the commodity out of the
country.
The Mines and Geosciences Bureau (MGB) earlier reported a drop in the country's metallic mineral
output because of the lower volume of gold that the BSP bought from small-scale miners.
BSP Governor Amando M. Tetangco said the new tax on gold purchases was to blame for the drop in
production.
The MGB said about 90 percent of the gold produced by small-scale miners is smuggled from Manila to Hong
Kong before entering mainland China. Some of it also enters Malaysia, the bureau said, adding that organized
crime groups may be involved in the smuggling of around 24 tons of the commodity.
Hong Kong statistics showed that from 2005 to 2012, the Philippines was the top source of imported gold,
peaking at 81,471 kilograms in 2010. In contrast, official Philippine statistics showed that gold exports to Hong
Kong in 2010 and 2011 comprised only three percent of total recorded volume. Official data represents
shipments made by big mining firms with supply contracts, since small-scale miners are banned from exporting
their gold.
STSRO said traders have enough reason to export rather than sell to the BSP. First, the price of gold in the
international market is higher than what the central bank would pay for. Second, the BSP in 2011 began slapping
a two-percent excise tax and a five-percent withholding tax on gold purchases.
"Considering that it is mandatory for small scale miners to sell its gold to the BSP, it therefore recommended to
evaluate the merits the tax impositions on gold sold to the BSP," STSRO said.
Aside from lowering the taxes on local sale of gold, the government should also consider rationalizing the tax
regime for mining, as stated in Executive Order No. 79. There should also be participation in the Extractive
Industries Transparency Initiative to create a centralized industry database, STSRO said.
On top of this, there should be a separate mining section in the National Internal Revenue Code, as
recommended by the International Monetary Fund, to clarify the treatment of components of income and
deductions of mining firms when computing their liabilities in addition to royalties.
Lastly, the STSRO said the anti-smuggling bill should be passed, with a separate provision on illegal export of
the precious metal.

Solons seek income and excise taxes exemption of gold sold to Bangko Sentral ng Pilipinas
Total views: 617
17 September 2014 10:31:28 AM
Writer: Rowena B. Bundang, Media Relations Service-PRIB
Source: http://www.congress.gov.ph/press/details.php?pressid=8168
Lawmakers are seeking to remove the excise and income taxes on gold sold to the Bangko Sentral ng Pilipinas
(BSP) to curb smuggling of gold out of the country and enhance the BSP's gold resources.
The removal of such taxes would encourage small-scale miners and traders to sell their gold to the BSP rather
than on the black market according to Reps. Nicasio M. Aliping, Jr. (Lone District, Baguio City) and Ronald M.
Cosalan (Lone District, Benguet).
The solons' proposal is embodied in House Bill 4951, which seeks to further amend Sections 32 and 151 of
Republic Act 8424, as amended, otherwise known as the "National Internal Revenue Code.
Aliping said in order to promote the accumulation of gold resources and the sale of gold to the BSP, Section 17
of Republic Act 7076, otherwise known as the "People's Small-Scale Mining Act of 1991," mandates that all gold
produced by small-scale miners in any mineral area shall be sold to the BSP, or its duly authorized
representatives, which shall buy it at prices competitive with those prevailing in the world market regardless of
volume or weight.
However, Aliping said the excise tax on gold is assessed against the BSP in the absence of proof that the gold
miner or producer has paid the excise tax.
"The BSP thus collects outright the two percent excise tax on gold based on the gross amount of gold sold. In
addition, the BSP withholds five percent of gross payments as creditable withholding tax," said Aliping, a vice
chairman of the House Committees on North Luzon Growth Quadrangle, and on Higher and Technical
Education.
He said small-scale miners and traders who seek to avoid payment of excise and income taxes sell their gold to
buyers in the black market. From the black market, the gold is smuggled out of the country, according to him.
"This has adversely affected the gold-buying operations of the BSP which resulted in a significant plunge in its
purchases of gold in 2012 and 2013 as compared to 2011. So that from the 554,994 fine troy ounces of gold
purchased by the BSP in 2011, its purchases drastically dropped to only 32,888 fine troy ounces in 2012, and
down further to a measly 17,778 fine troy ounces in 2013," said Aliping.
Cosalan, chairman of the Committee on Public Works and Highways, said by removing excise and income taxes
on gold sold to the BSP, small-scale miners and traders would be encouraged to sell their gold to the BSP rather
than on the black market.
"The smuggling of gold out of the country would thus be curbed and the accumulation by the BSP of gold
resources would be greatly enhanced. The BSP would thus be able to maintain adequate international reserves
to meet foreseeable net demands for foreign currencies," said Cosalan.
Cosalan further said any depletion in the BSP's gold inventory would affect monetary stability and the
convertibility of the Philippine peso. "The banking and credit system will consequently suffer to the detriment of
the economy," he said.
He explained the BSP has statutory authority to buy and sell gold in any form at prevailing market prices. Gold
buying is an integral mandate of the BSP to manage the gross international reserves of the country according to
Cosalan.

"The gold holdings of the BSP is determinative of the strength of the country's international reserve position and
also serves as security and hedge against inflation," said Cosalan.
House Bill 4951, now pending at the Committee on Ways and Means chaired by Rep. Romero S. Quimbo (2nd
District, Marikina City), seeks the amendment of Section 32 (B) (7) of RA 8424 so that excluded from gross
income and shall be exempt from taxation is "Income derived by small-scale miners from the sale of gold to the
Bangko Sentral ng Pilipinas pursuant to Republic Act 7076."
The bill also seeks the amendment of Section 151 of RA 8424, as amended, so that "Gold sold by small-scale
miners to the Bangko Sentral ng Pilipinas pursuant to RA 7076 shall be exempt from the payment of excise tax.
Provided, however, that if excise tax thereon was paid prior to the sale of gold to the BSP, the taxpayer may file
a claim for the refund or credit for excise tax paid."

Taxes continue to plaque BSP gold purchase exec

Item Author Written by Ed Velasco Date created Tuesday, 03 June 2014
Source: http://www.tribune.net.ph/business/taxes-continue-to-plaque-bsp-gold-purchase-exec
Bureau of Internal Revenues irritant excise and withholding tax against gold sellers at the Bangko Sentral ng
Pilipinas (BSP) continues to plague gold purchase of the central bank, a very reliable source confirmed.
Diwa Guinigundo, BSP deputy governor for monetary stability sector, described the severe drop in gold
purchase of the central bank as significant decline, echoing retired assistant governor Manuel Torres earlier
confirmation.
We could only buy in small, small trickles. Very, very few are selling to our gold buying stations. The issue
remains to be focused on taxes, Guinigundo told the Daily.
Last year, Torres said gold purchase of the BSP declined by at least 90 percent as many gold panners are
discouraged to pay two percent excise tax and five percent withholding tax to the BIR.
Torres, now a member of the board of the Philippine National Railways, declined to comment further.
Not only the BSP is saying that its gold purchase has been dropping hugely. Last year, the Mines and
Geosciences Bureau (MGB) confirmed that in 2012, the BSP bought 1,090 kilograms of gold from small-scale
miners, down 94 percent from 17,638 kilograms in 2011.
When it comes to monetary value, worth of gold bought in 2012 amounted only to P2.304 billion, down 93
percent from P34.665 billion in 2011.
Gold panners and other small scale miners are not leaving their operations just to sell gold to BSP.
They sell to middlemen and traders who sell them in turn to BSP.
But such parties are the ones assessed entirely of the two percent excise tax and five percent creditable
withholding tax, Guinigundo said.
Because gold purchase of the BSP is so low, the taxes the BIR aims to get is also up in the air.
Its only in the air because gold are now captured by Chinese smugglers and brought outside the country using
ports that are not thoroughly guarded, said a source who requested not to be named.
Since gold buying is almost nil, taxes are also nil, the BSP official added.

BSP gold buy down 76% due to smuggling

Philippine Daily Inquirer 2:02 AM | Friday, December 9th, 2011
http://newsinfo.inquirer.net/107601/bsp-gold-buy-down-76-due-to-smuggling (Source)
Where has the bulk of the gold gone?
Environment Secretary Ramon Paje on Thursday said that substantial smuggling of gold out of the
Philippines could explain the dwindling number of traders selling the yellow metal to the Bangko Sentral ng
Pilipinas (BSP).
Paje said gold purchases of the BSP from small-scale miners, who accounted for three-fifths of the countrys gold
production, declined 76 percent to 1,722 kilograms in the third quarter from 7,166 kg a year ago.
In terms of value, it went down from P12.32 billion in 2010 to P3.55 billion for the same period in 2011, said a
report from the Department of Environment and Natural Resources.
Paje suspected that the precious metal was being smuggled out of the country because sellers wanted to avoid
the 2-percent excise and the 5-percent withholding taxes imposed by the BSP.
He said the traders also wanted to take advantage of golds high prices in overseas markets.
Ports, private planes
We are very concerned about this drop. We suspect that there is smuggling, he said at a press briefing
Thursday.
Paje said the precious metal could be smuggled out of the country through ports or private planes.
Only the BSP, he said, was mandated to buy the output of small gold miners.
The price of gold has been increasing over the past months as developed economies face financial instability and
mounting debts.
Compared with currencies and other commodities, gold is seen as a stable and safe haven for investors.
Record high
Gold hit a record high of $1,900 an ounce in August, when the US government was formulating a way out of its
debt crisis.
On Thursday, gold was selling for $1,735 an ounce, according to the London Metal Exchange.
In a text message, Deputy Governor Diwa Guinigundo of the BSP said the drop in the central banks gold
purchases in the third quarter was reportedly caused by the collection of the 2-percent excise tax and the 5percent withholding tax from the gold sellers to the BSP.
Asked if there was not enough gold to buy, Guinigundo replied Yes.
The decline in the BSPs gold-buying activity comes at a time when central banks worldwide are stepping up
gold purchases to boost their reserves.
Countries diversify

Central banks, especially those in emerging economies, have accelerated gold purchases in recent months to
diversify growing foreign exchange reserves, with official sector gold purchases in the third quarter surging
over five-fold from a year ago to 148.4 tons, according to the World Gold Council.
Data from the International Monetary Fund showed the BSPs gold holdings fell the most so far this year among
central banks, with Mexico, Russia and Thailand as the biggest buyers.
Paje said gold smuggling was a form of economic sabotage as it was affecting the countrys foreign reserves.
Subsistence miners
He dismissed the idea that miners were hoarding gold, noting that they must sell it immediately to take
advantage of the high prices.
Most of the gold miners are subsistence miners, who need to sell their find quickly, Paje said.
The major gold-producing areas include Camarines Sur, Camarines Norte, Compostela Valley and the Caraga
region.
Paje urged the customs and law enforcement officials to look into the matter, noting that this involves organized
crime.
Selling gold abroad is a complex operation as miners need traders and buyers along the way, said the
environment secretary.
King of metals
Gold remains the king of Philippine metals in terms of value, if not volume, according to the Mines and
Geosciences Bureau (MGB). It accounts for about half of the earnings of the mining sector.
Gold production declined slightly from January to September this year, but the metals value rose by 3 percent
to P50.5 billion.
In the first nine months of the year, the gold volume was 25,249 kg, down 14 percent from the 29,401 kg a year
ago.
According to the MGBs third quarter report, the countrys overall production value rose 15 percent to P90.02
billion from P78.58 billion in the same period in 2010. Prices of silver, copper and nickel also went up.
Silver production was up 9 percent to 32,951 kg, and earnings grew 178 percent to P2.2 billion

New tax rule hinders BSP gold purchases

By Prinz P. Magtulis (The Philippine Star) | Updated May 6, 2013 - 12:00am
http://www.philstar.com/business/2013/05/06/938705/new-tax-rule-hinders-bsp-gold-purchases (Source)
MANILA, Philippines - Gold purchases by the Bangko Sentral ng Pilipinas (BSP) have plummeted a year after
the government changed the tax rule on the metal, putting pressure on its balance sheet and highlighting
smuggling concerns.
For this year, zero gold buys have been recorded by the central bank, the sole mandated buyer of gold produced
by small scale miners.
In April 2012, the Bureau of Internal Revenue (BIR) ordered the imposition of a two percent excise tax and five
percent withholding tax on gold purchases.
Our gold basically comes from gold purchases from small miners. That has dropped quite significantly, BSP
Governor Amando Tetangco Jr. told reporters last week.
BIR commissioner Kim Jacinto-Henares defended Revenue Regulations 06-2012 which laid out the taxing
mechanism for gold sold to BSP and other entities.
My position is that even if you sell or dont sell to the BSP, you will be charged with taxes, Henares told The
STAR in a phone interview.
Business ( Article MRec ), pagematch: 1, sectionmatch: 1
The Department of Finance (DoF), which makes policies in revenue generation, has been focused on catching
smugglers without much success.
Since last year, the (DoF) raised its concern about this. We are monitoring, Customs commissioner Rozzano
Rufino Biazon said in a separate phone interview.
We are on alert to monitor the movement of gold, but so far we have not made any catch, he added.
The World Gold Council (WGC) lists BSP as the 23rd largest gold holder among 100 central banks as of April
this year.
The local monetary authority has 192.7 metric tons of gold in its reserves, accounting for 11.6 percent of the total,
data provided by the International Monetary Fund to WGC showed.
The BSP last bought gold in August 2012 adding 0.1 metric ton to its coffers only to be offset by a decline of 1.9
metric tons in November.
Since then, no gold purchase or sale has been made.
Gold, considered a safe investment, are kept by central banks in their reserves to keep it in check. Tetangco said
the metals price is traditionally inversely correlated against the dollar.
When investors see the global economy softening, they leave the currencies and flock to gold, thereby lifting its
prices. A boost in prices benefits those who hold the metal who could sell or trade it for a higher price.
In the case of the BSP, higher gold purchases increases the countrys gross international reserves which amount
to $84.1 billion as of the first quarter of the year.
This puts a strain on the BSPs balance sheets.

In its annual report last year, the central bank said it incurred P86.31 billion in losses as of November, nearing a
new record. This was traced from a 46-percent decline in revenues, particularly in miscellaneous income.
The decline in miscellaneous was attributed partly to lower trading gains of gold in foreign financial
institutions.
The BSP was established through RA No. 7653 as a replacement to the old central bank. The latter was folded in
1993 after it incurred huge debts and losses, which until now are being settled.
Henares said the policy on gold sales would remain being one of tax leakages the Aquino administration wants
plugged.
For Biazon, the Customs bureau has no other choice but to accept that the agencys job just got tougher.
The problem is that the means of bringing gold out does not pass through the regular channels. They are most
likely carried by couriers, he said.
(But) thats the policy of the DoF. We are standing with the BIR. Although, it is really a bit difficult to monitor
that kind of activity.
Biazon, however, did not discount that some gold may have not even left our shores and are just being diverted
to the black market.
With the data we have, it cannot be conclusive, but most likely, it is possible because these are other Its difficult
to trace that, he said.