The BSP today announced that Republic Act (RA) No. 11256, An Act to Strengthen the Country's Gross International Reserves (GIR), was approved by Congress and signed by President Rodrigo R. Duterte last 29 March 2019.
The new law exempts from excise and income tax the sale to the 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.
R.A. No. 11256 seeks to remedy the 99% drop in BSP's domestic gold purchases from more than 900 thousand fine troy ounces (FTO) in 2010 to around 10 thousand FTO in 2019 as a result of the taxation of the sale of gold to the BSP beginning July 2011.
The tax regime under R.A. No. 11256 would allow the BSP to increase its purchases of domestic gold to further build up the level of the Philippines' GIR, which serves as the country's primary buffer against external economic shocks. An increase in BSP's gold purchases using pesos leads to a net increase in the GIR, thereby improving the country's economic standing and lowering the cost of both funding for the Republic as well as doing business for the private sector. It also prevents the smuggling of Philippine gold through the black market to other countries and allows small-scale miners and traders to sell gold at international market prices.
While the National Government would only forego around P35 million annually from its income on BSP's gold purchases, the Philippines as a whole is expected to benefit from keeping the gold right in the Philippines for sale to the BSP. Aside from helping build up the foreign reserves of the country, the law is expected to also lead to greater availability of gold in the domestic markets for jewelry making, dental requirements and other industrial and commercial uses.
Source: Bangko Sentral ng Pilipinas (BSP)