Singapore seeks gold hub status

Singapore is seeking to lure bullion refiners by scrapping taxes on gold, a move which may transform the country into a key Asian pricing hub.

SINGAPORE: Singapore is seeking to lure bullion refiners by scrapping taxes on gold, a move which could also attract trading houses to open storage facilities and transform the country into a key Asian pricing hub, industry sources said.

Singapore will exempt investment-grade gold and other precious metals from a 7% goods and services tax to spur the development of gold trading, Finance Minister Tharman Shanmugaratnam said on Friday.

The change takes effect in October and may lift demand for gold bars and coins in the fourth quarter and into 2012. Singapore’s investment gold demand nearly tripled to 3.5 tonnes in 2011, according to consultancy firm Thomson Reuters GFMS.

“It seems a little unfair to put a sales tax on what is essentially money. The removal of the GST on gold will allow Singapore to better compete with Hong Kong and other bullion trading centres in the region,” said Nick Trevethan, a senior commodity strategist at anz in singapore. Refiners have been put off by Singapore’s taxes, opting instead to mould and sell gold bars in Hong Kong, which does not impose duties on bullion, and Japan, where the consumption tax on gold is 5%.

Industry sources, however, said at least one major refiner has shown interest in opening a factory in Singapore around the talk of the tax change. More gold traders are expected to set up offices here and store more bullion, following JP Morgan Chase & Co which opened a precious metals vault in 2010.

“I think this is really going to change the landscape in Singapore. A lot of companies will find the incentive to start operations in Singapore,” a gold dealer said.

“This news is going to draw attention to Singapore as a safe place to park funds. Asset managers will also very excited.

“The trend in the last three years is that people are moving to physical hard assets from paper.”

Singapore imports gold bars from Australia, Switzerland, Hong Kong and Japan, which are then sold to buyers in South-east Asia and India, the world’s largest gold consumer.

Gold scraps from the across the region are also traded in Singapore, and this helps determine the premiums for gold bars against prices in London. — Reuters