Withholding tax on gold cut to plug black market lure

To dissuade small miners from tapping the black market, the government cut their creditable withholding tax (CWT) on sales made to the Bangko Sentral ng Pilipinas (BSP), the Department of Finance (DOF) said Tuesday.

In a statement, the DOF said Finance Secretary Carlos G. Dominguez III last week signed the revenue regulations that reduced the rate to 1 percent from 5 percent previously.

The new regulations nonetheless kept at 2 percent the excise tax slapped on gold sales.

The Monetary Board, the BSP’s highest policymaking body, was already informed of this new set of rules, Dominguez said.

“The new CWT rate will help gold miners in the cities of Davao, Zamboanga, Naga and Baguio to get a fair market price for their gold produce instead of being shortchanged when they sell to the black market,” the Finance chief said.

Together with the reduction of assay fees and processing of gold payments at the BSP’s Security Plant Complex, the new tax rate would thus boost the small-scale gold industry, he added. The complex in Quezon City is where gold is assessed and bought.

Dominguez added he would also “propose bottom line-friendly appropriate numbers to the Monetary Board in consultation with SPC.”

The Finance chief said they wanted these revenue regulations to be institutionalized by amending the tax code.

Dominguez said the new rules would “allow the BSP to build its gross international reserves without having to spend dollars as it would be able to buy gold directly using local currency.”

“Unlike using pesos to buy foreign exchange to buy gold, which will affect the peso-dollar rate, this flexibility will not have a direct impact on the movement of the peso against the dollar,” he explained.

Under Republic Act No. 7076 or the People’s Small-Scale Mining Act of 1991, the BSP is mandated to buy gold from small miners. The gold is then refined to make them acceptable in global bullion markets.

Besides the Quezon City complex, the BSP also has gold-buying stations in the cities of Baguio, Davao, Naga and Zamboanga.