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Friday, September 22, 2023

Knowing when to give

Quarterbacking the economic team is Finance Secretary Sonny Dominguez who is in charge overall of making sure that the government properly collects money to fund the infrastructure and services needed for economic development.

has submitted to Congress the first of several proposed tax reform packages designed to raise additional billions. A technocrat who has previously served in the cabinet of two former Presidents, Dominguez has a keen sense of what will work and what will not. He is very pragmatic. Having a good grasp of the total picture, Dominguez knows when to take and, just as important, when to give.

His recent decision to reduce (to only one per cent from the current five per cent) the withholding tax on gold sold by small miners to the Bangkok Sentral is one example.

By law, the People’s Small Scale Mining Act of 1991, the Bangko Sentral is supposed to buy the produce of small miners. The purchased gold is then refined into world quality gold bars at the BSP’s Security Plant Complex in Quezon City. The gold bars are then sold in the world market but some are physically kept in the BSP’s vault.

For a long while, everything went well. Everybody was happy. The small miners just walked in any of the gold buying stations nationwide of the BSP – in Quezon City, Baguio, Davao, Zamboanga and Naga – and were promptly paid. The BSP kept growing its gold reserves.

Then former BIR Commissioner Kim Henares stepped in sometime in 2011. Henares insisted on automatically withholding 5 per cent on sales of gold to the BSP. No ifs and buts about it. That’s the law, Henares said.

She may have been correct but unfortunately, Henares failed to anticipate the consequences of her decision. In the end, Henares was able to collect a whooping five per cent of nothing! To a man, the small miners got scared and stayed away from BSP. Instead, they sold their gold in the black market.

According to BSP Deputy Governor Diwa Guinigundo, the purchase of gold by the BSP plummeted and the production of gold bars practically went pfft. From 2005 to 2011, the BSP bought an average of 900 thousand troy ounces of gold which produced 2,500 gold bars a year. This plunged to only 35 thousand ounces, yielding 79 bars the year Henares stepped in.

Last year, sales to the BSP further declined to 14 thousand troy ounces or the finished equivalent of 25 gold bars.

BSP averted a layoff of employees by retooling and re-assigning them elsewhere in the Security Plant Complex.

the major collateral fallout, explained Guinigundo, was the reduction of BSP’s ability to build up its foreign exchange reserves.

Dominguez said that the reduction in the withholding tax rate will be effected via a revenue regulation but the DOF will work with Congress to institutionalize the revenue regulation thru an appropriate amendment of the National Internal Revenue Code.

If everything works out as envisioned, the small miners are expected to troop back to the BSP, instead of being shortchanged, as it frequently happens, in the black market.

The move is also expected to allow the BSP to grow its international reserve without spending dollars since the purchase of gold from the small miners will be done with pesos.

No more talks with the Reds

President Duterte has had it.

From hereon, there will be no more talks with the CPP-NDF, previously released negotiators for CCP- NDF will be re-arrested, and the CCP-NDF will be declared a terrorist organization.

The President has been dismayed by the apparent lack of sincerity of the other side as manifested by continued attacks on government troops and various extortion activities.

Critics are wondering why it took the President that long to realize that he was only being taken for a ride by the communists. “Ang tagal na tayong inuuto ng mga yan.”

Peace will continue to be elusive, at least in this administration. But one can not fault the President for not trying.

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