New law to boost gold purchases — BSP

The Bangko Sentral ng Pilipinas (BSP) expects an increase in gold purchases this year due to the tax exemption granted to small-scale miners.

Republic Act 11256 or an Act to Strengthen the Country’s Gross International Reserves exempts small-scale miners from paying excise and income taxes when they sell to the national government.

“This measure has helped BSP increase its purchases of gold from small miners which in turn help strengthen our international reserves,” BSP Governor Benjamin Diokno said during the virtual pre-SONA forum held last Wednesday.

Last year, the BSP has conducted several focus group discussions with small-scale miners and traders in Baguio, Daet, and Davao regarding the salient features of the new law.

The new law allows the central bank to further build up its gross international reserves (GIR) and enhance the domestic economy’s buffers against external shocks.

Diokno said the country’s foreign exchange buffer is likely to exceed a record $95 billion this year after hitting an all-time high of $93.3 billion in May. This is enough to cover 8.4 months worth of import of goods and payments for service and primary income.

The BSP uses this buffer to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso against the US dollar.

Under RA 7076 or the People’s Small-scale Mining Act of 1991, all gold sourced from small-scale mining in the country should be sold to the BSP with two percent excise tax at globally competitive price.

The BSP then refines and converts all gold sales into good delivery gold bars via its mint and refinery operations department.

Data from the National Tax Research Center (NTRC) showed the central bank was averaging 29,854.33 kilograms of gold purchases between 2005 and 2010. Gold purchases, however, slumped 38.23 percent in 2011 and 99 percent in 2018.