Golden Distortion

November 15, 2012

The proposal to remove the tax on the sale of gold to alleviate the living conditions of poor miners missed the point. The lack of sales of gold in the local market may be attributed to bad government policies but its direct link to the imposition of the tax on the said transaction has not been established. In the first place, there seems to be no statistics showing this unhappy link. Even the declining gold reserve is a poor justification to the exemption sought by its proponents. In fact, a broadsheet reported that while the DENR admitted the drop in the sales of gold to the Bangko Sentral ng Pilipinas (BSP), the said agency could not say whether such drop was due to the gold tax.

Many of our small miners are living a hand-to-mouth existence. However, this fact could hardly be attributed to the taxes (5% withholding tax, and 2% excise tax) that the government is collecting on their transactions.

Poverty has many causes. Even if the government decides not to collect taxes on the sale of gold, the economic and social conditions of poor miners will likely be the same. These poor miners are poor for the same reason that most of the Filipino families are poor due to the gross inequities in the Philippine society. In general, they are poor because they do not have access to basic education, health and productive resources. Sadly, bad government policies or the lack of them always compound this lack of access of the poor.

Lest everything is discussed in economic terms, let us not forget the basic principles which the proposal fails to consider.

Mining is not an ordinary business activity. It is heavily burdened with certain fundamental constitutional principles. Curtly, business profitability is not one of these fundamental principles. As such, it should be considered least in policymaking.

The Constitution provides that all minerals are owned by the State. Section 2, Article XII of the 1987 Constitution categorically decreed, “All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State.”

Private persons or entities are given the authority to mine these minerals not as a matter of right but as a privilege granted by the State so that they can participate in the development of the country’s economy.   They do not possess any right to explore, much more extract, mineral ores anywhere in the Philippines.

Republic Act No. 7942, or the Philippine Mining Act of 1995, has introduced a liberal policy in the grant of permission to Filipino and foreign corporations to engage in the exploration, development and utilization of Philippine minerals. The Supreme Court has stamped its approval to this liberal policy in the case of La Bugal-B’Laan Tribal Association v. Ramos, G.R. No. 127882, December 1, 2005, 445 SCRA 1. The Supreme Court has noted that the Constitution does not provide any prohibition against the grant of exploration permit to foreign or local corporations and contractors. Nevertheless, the Supreme Court is quick to point out that under Section 20 of Republic Act No. 7942, an exploration permit merely grants to a qualified person the right to conduct exploration for all minerals in specified areas. Such a permit does not amount to an authorization to extract and carry off the mineral resources that may be discovered. Be that as it may, it is clear that the Philippines had opened the door to foreigners and gave them the chance to participate in mineral exploration, development and utilization.    

The relaxation of the constitutional requirements for the exploration and extraction of our mineral resources is withering away our national heritage. It is tantamount to a virtual surrender of the public interest to private commercial interest.   

The proposal to scratch the taxes over the sales of gold maybe considered as a retreat of the State in favor of private commercial interest in the field of mining. It is another surrender of public interest, this time of the sovereign power to tax—to greed and profit. Unfortunately, this unlikely incentive will also worsen the degradation and destruction of the environment and the depletion of the country’s mineral resources.