By Nelly Favis-Villafuerte The favorable response of Finance Secretary Carlos G. Dominguez to the request of the Bangko Sentral ng Pilipinas (BSP) to reduce the creditable withholding tax on gold and other metallic mineral products sold to the BSP from five percent to one percent of gross payments – once again revived the business relationship between the BSP and the small-scale miners.  Before the reduction of the said withholding tax, the small-scale miners practically stopped selling gold to the BSP for about six years. Under Section 17 of RA 7076, “All gold produced by small-scale miners in any mineral area shall be sold to the Central Bank, or its duly authorized representatives, which shall buy it at prices competitive with those prevailing in the world market regardless of volume or weight. The Central Bank shall establish as many buying stations in gold-rush areas to fully service the requirements of the small-scale minerals thereat.” When the small-scale miners resumed business transactions on gold with BSP, the BIR started again collecting the withholding tax after having zero collection for more than six years when there was zero sales of gold to the BSP. The gold buying stations in Naga, Davao, Zamboanga, Baguio, and Quezon City are once again activated. Also, the BSP is building up once again the country’s gross international reserves (GIR) using peso to buy domestically produced gold from local miners.  Thank you Mr. Secretary! The provisions of Republic Act No. 7076 titled “An Act Creating a People’s Small-Scale Mining Program and for Other Purposes” otherwise known as the People's Small-scale Mining Act of 1991 defines small-scale mining and small-scale miners as follows: "Small-scale mining refers to mining activities which rely heavily on manual labor using simple implement and methods and do not use explosives or heavy mining equipment; "Small-scale miners refer to Filipino citizens who, individually or in the company of other Filipino citizens, voluntarily form a cooperative duly licensed by the Department of Environment and Natural Resources to engage, under the terms and conditions of a contract, in the extraction or removal of minerals or ore-bearing materials from the ground.” When I was a BSP Monetary Board Member (2005-2011), BSP repeatedly requested the BIR Commissioner of the past administration to reduce the creditable withholding tax aforementioned.  The response of the BIR Commissioner then was negative. The local miners retaliated by stopping the sale of their gold produce to BSP. A stalemate situation followed which lasted for about six years – meaning no gold sales to BSP; no tax withheld by BSP; no remittance to the government (through BIR) of the withheld tax collected by BSP; no sales activity in the different gold buying stations in the country (Naga, Davao, Zamboanga, Baguio, and Quezon City); and missed opportunity for BSP for about six years to build up its gold inventory to augment its gross international reserves (GIR). One may wonder: Did the gold produce disappear in limbo when the small-scale miners stopped selling to BSP?  Was it dead-end street for the small-scale miners?  Not by any stretch of imagination.  It is more logical to speculate that as a desperate act of survival, the small-scale miners sold to other countries through the backdoor - legalities notwithstanding.  By any standard, this is not good for the country.  BIR Revenue Regulations No. 7- 2017 signed by Sec. Dominguez corrected this anomalous situation. BIR Revenue Regulations No. 7-2017 (dated October 26, 2017 and implemented last November, 2017) amended the earlier BIR Revenue Regulations requiring five percent creditable withholding tax for sale to BSP of gold and other metallic minerals, as follows:

• the creditable withholding tax was reduced to one percent. BIR RR No. 7-2017 retains the obligation of BSP as a constituted BIR withholding agent to remit the one percent withholding tax to the government; and
• BSP continues to pay the two percent excise tax due on its purchase of metallic minerals as required in the earlier BIR Revenue Regulations. (To be continued)

Have a joyful day! (For comments/reactions please send to Ms. Villafuerte’s email: [email protected]).