MANILA, Philippines — To avoid non-payment of taxes, the Bangko Sentral ng Pilipinas (BSP) and the Bureau of Internal Revenue (BIR) are discussing the procedure for the collection of the two percent excise tax on the future purchases of gold by the BSP.

A source said the BSP and the BIR are finalizing a proposed memorandum of agreement (MOA) on the collection of excise taxes on the gold purchased by the BSP. The BSP, which is required by law to purchase gold produced by small-scale miners, acts as a collecting agent of the BIR and withholds the two percent excise tax from the purchase price of gold, then subsequently files the tax return and remits the excise taxes collected to the BIR.

The source said the MOA negotiations include two versions, the first being that the BSP will act as collecting agent for the tax agency. The second version is that the BIR will set up a BIR desk at the BSP’s gold-buying stations which will free up the BSP from actually collecting taxes on behalf of the BIR.

For the past three years, the BSP has been asking the Department of Finance (DoF) to cancel a revenue regulation (RR) order which designated BSP as collecting agent for the two percent excise tax on the sale of gold.

The source said the BSP first asked the DoF in 2008 to reconsider RR No. 07-2008 which also assigned the BSP to not only collect the two percent excise tax on the sale of gold but also as withholding agent for the 10 percent creditable withholding tax.

To settle back taxes with the BIR, the Monetary Board recently approved payment of 50 percent of excise tax liabilities amounting to P5.3 billion.

The final total approved was P2.64 billion covering excise tax assessments from 2001 to 2010. The Monetary Board, the policy-making body of the BSP, has already approved a supplemental budget to provide funds for the payment of back taxes to the BIR.

Based on the BIR assessments, the BSP has unreported gains from gold trading of P11 billion in 2006 and another P800 million from income pertaining to increase in ‘other capital reserves’. Including an amount of P613 million, the total taxable income assessed by the BIR amounted to P12.64 billion. The tax dues based on this total amounted to P7.01 billion.

The source further said the BSP entered into a compromised deal with the BIR since delaying payments of taxes could have ‘reputational implications’ to the BSP for the non-payment of taxes which dully belonged to national coffers.