Removal of Taxes on Local Jewelry Industry

A LADY legislator is seeking the removal of the excise and value added taxes imposed on the Philippine jewelry business to further promote the industry and enhances its growth.

Representative Susan Yap (2nd District, Tarlac), author of House Resolution 2466, said the atmospheric cost of taxation is killing the local jewelry manufacturing industry.

"The local jewelry manufacturing industry is under threat of extinction, while domestic trading has become more attractive," Yap said.

According to Yap, gold and silver, the two most important raw materials used in fine jewelry production, are sourced from the Philippines, which is the 25th highest gold-producing country, with a total production of 33 tons of gold in the year 2001.

Yap added that there are about 250 firms in the country engaged in the jewelry industry, employing a pool of more than 100,000 workers.

Small and medium-scale jewelry enterprises hold about 50 percent of the industry, while the top 10 largest jewelry chains and manufacturers hold less than 25 percent.

Yap said the Philippine government has no restrictions for the importation of gems and jewelry, making these products liberalized items.

Yap urged the appropriate House committee to look into the status of implementation of current laws on the jewelry industry to prevent driving the industry underground.

Yap said Republic Act 8502 otherwise known as the Jewelry Industry Development Act of 1998, states the granting of tax and duty relief to jewelry manufacturing including importation of gemstones and raw materials components and equipment.

"The industry has a promising future but the government treats jewelry, pearls and other precious stones and metals as non-essential luxury items and therefore, taxed heavily. An excise tax of 20% as well as the value-added tax of 12% proved to be unjust and inequitable and it has driven the industry underground," Yap stressed.

Yap further said that the unjust and inequitable taxes have resulted in the proliferation of smuggling which the Philippine government has failed to stop, to the detriment of those jewelry enterprises trying to surface from the underground.

On the average, only 20% of the total jewelry production is being exported, while the remaining 89% is being sold in the domestic market, Yap said.

Yap added that even with the government incentives and subsidies that exist, the local manufacturers cannot avail of the same because most of them are unregistered and are unable to produce the required official documents as they presently operate outside the tariff and tax structure.

"The Philippines has, in effect, repressed its jewelry industry even though it is the only country in Southeast Asia with over US$12 trillion in mineral reserves of gold, the key raw material for jewelry, while other countries in the area have nurtured their infant jewelry industries through legislation and sustained promotion and assistance, in recognition of the role of the jewelry industry as an engine of growth for the country and more importantly for the workers in the industry," Yap said.