Small scale miners smuggling gold to China?

La Trinidad, Benguet  – Small scale miners are smuggling gold to China via Hong Kong, causing  a 10-percent dip in gold trading in the Cordillera region, Benguet governor Nestor Fongwan said.

Blaming the imposed Revenue Regulation No. 6-2012, by the Bureau of Internal Revenue (BIR),  which imposes a seven-percent tax increase in gold sold to Bangko Sentral ng Pilipinas (BSP) in 2011, small scale miners have instead traded their produce outside.

The tax includes a five-percent withholding tax and a two-percent excise tax upon extraction.

All gold mined in the Philippines is required by law to be sold to BSP. However, traders buying gold from small scale miners (SSM) in the region resell the gold to foreign buyers, who in turn export them mostly to Hong Kong.

In the actual sense, traders and not small scale miners sell gold to the BSP, hence traders cannot impose the additional tax on SSM selling their gold in small amounts.

Vice-governor Crescencio Pacalso, who is from the mining district of Itogon, also in Benguet said that SSM look for traders that buy gold but do not impose the government tax.

The seven-percent tax imposed is too much for a small scale miner, Pacalso said, adding that the P1,000 tax on 10 grams of gold is a big amount to miners specially to those with families and children going to school.

Fongwan is urging the BIR to modify the tax scheme on gold. 

He said the tax collection agency,  miners and Central Bank  "should sit together and discuss tand set policies and guidelines to address the matter."

He added that they must come up with a better strategy to encourage the miners to sell their gold to them.

He said any tax increase should not scare the people concerned, Fongwan said.

There are some 20,000 small scale miners in the region.

The Philippines, the world's 18th largest gold miner, produced over 1 million troy ounces of gold in 2011, worth $1.6 billion at current prices. About 56 percent of that came from small-scale miners, data from the Mines and Geosciences Bureau said.