Tax on gold imports unsettles gold market | Sunday Observer

Tax on gold imports unsettles gold market

Sri Lanka’s gold market is in an unsteady state after the government slapping a 15 percent tax on gold imports this year according to gold merchants.

Merchants said there has been a sharp increase in gold being smuggled into the country after the tax was imposed. The government imposed the 15 percent tax as there had been a steady increase in gold imports in recent years draining foreign currency from the country.

Gold imports surged to 15,750 kilograms in 2017 from around 9,148 kilograms in 2016 and imports increased to 8,000 kilograms in the first quarter this year. Pattakannus (Pvt) Limited Chairman/ Managing Director A Thiagarajah said there is a marked increase in gold being smuggled into the country from India, Singapore and Dubai after the 15 percent tax was imposed.

“There are two gold prices in the market today; one is the bank price and the other is the unofficial price of the smuggled gold in the local market,’ Thiagarajah said.

Gold prices as of August 24 were an ounce Rs. 192,022, 24 carat 1 gram Rs. 6,780, 24 carat 8 grams (I pawn) Rs. 54,200 and 22 carat 1 gram Rs. 6,220.

Market experts said certain traders are making substantial profits by smuggling gold to the country and that the earnings from the trade are not shown in official accounts. “Official business’ are affected but not those who hide records and sell smuggled gold,” Thiagarajah said. However, turnover of many of the traders have dropped by around 25 percent after the new tax came into effect this year.

‘Our sales have dropped by around 25 percent since the tax was introduced,” Thiagarajah said.

Gold backed off a bit last week from gains earlier in the week responding to a combination of interest rate concerns and renewed trade war tensions. The metal dipped to US4 1187 during Asian trading hours and then recovered to the $ 1192 range as New York opened- down $ 3 on the day. -LF