The Philippine government has been losing billions of money as the bulk of the country’s mineral production from small-scale mining – mainly gold – are still being sold straight to the black market, a Philippine Institute of Development Studies (PIDS) research showed.
The government think tank made this assumption largely on the basis that small scale miners sell their gold to the informal sector instead of the Bangko Sentral ng Pilipinas (BSP).
But PIDS also said there is still no way for the government to measure the contribution of small-scale mining to the economy because most of its output is leaked through the black market.
According to PIDS, the main factor why small scale miners prefer the black market is the imposition of tax on gold production of small-scale mining in 2010 by BSP and Bureau of Internal Revenue (BIR).
PIDS said this “led to unintended consequences” and resulted in BSP’s gold purchases drastically falling from 28.56 metric tons (MT) in 2010 to 0.95 metric tons in 2012.
Latest figures in 2018 pointed to a much lower 0.33 metric ton in purchases by the BSP.
At present, the BSP buys gold through its five buying stations located in Baguio City, Davao, Zamboanga, Naga, and Quezon City.
The subsector of small-scale mining is largely informal in the Philippines despite testaments on the ground that it accounts for roughly 70 percent of all precious mineral produced in the country,” PIDS said.
“Despite efforts to formalize the sector, there have been numerous barriers to its formalization, which translate to opportunities foregone, not only for the economy, but also for the well-being of affected communities. The small-scale mining subsector is now almost invisible in terms of captured benefits, and the workforce behind it,” it added.
PIDS said that “it is time that the bureaucracy put a stop to these losses and ensure that industry outputs do not disappear through the black market.”
It then suggested the government formalize markets for the small-scale miners.
“While the only legal sale of gold from small-scale mining is through BSP, the establishment of the bank’s buying centers greatly depends on scale economies. To augment this, there needs to be an accreditation scheme by the bank for gold buying centers,” PIDS said.
“This can also invigorate value-adding through other industries, such as jewelry-making which has an immense potential contribution to the economy. The passing of legislation that rationalizes taxation in BSP’s gold-buying activity is a step toward the right direction, and promises the recapture of sales lost through the black market,” it added.
In June last year, MGB lauded the passage of Republic Act No. 11256 or An Act to Strengthen the Country’s Gross International Reserves (GIR), which the agency said will support the country’s gold production.
The new law exempts from excise and income tax the sale to the Bangko Sentral ng Pilipinas (BSP) of gold sourced from small-scale mining activities.
The measure also covers the sale of gold by small-scale miners to accredited traders for the eventual disposal to the central bank.
This tax incentive will encourage small scale miners and traders to once again sell their gold to BSP based on international market price instead of selling their gold elsewhere, MGB said.
“At the end of the day, RA No. 11256 will not only boost the GIR of the country but also increase the country’s annual total metallic production value. Likewise, industries involved in jewelry making, medical, electronics stood to benefit from the passage of said law,” MGB said.
Data from the Mines and Geosciences Bureau (MGB) showed that the country’s metallic mineral production value went down by 14.37 percent in the first six months of the year to P53.88 billion from the P62.92 billion recorded in the same period in 2019.
Production, too, went down by double digits for nickel ore, gold, copper, silver, and chromite from January to June.
MGB said that during the period, the performance of the country’s metallic sector was “seriously dictated” by the current happenings worldwide including COVID 19 pandemic, slow down economic activities, lethargic world metal prices, and limited and hampered mining operations.
Of the total metals production, gold accounted for 41.51 percent or P22.12 billion.
In terms of production, gold saw a 27 percent decline in output, producing 8,246 kilograms during the period compared to the 11,252 kilograms recorded in the same period last year.