Gold smugglers help jewellers keep heads above water

In the wake of the imposition of a 15 per cent tax, Sri Lanka‘s gold industry now depends on smuggled gold to secure enough stocks for its production and selling at a reasonable price by keeping a very thin margin to satisfy customers, Colombo Sea Street jewellers said.

Importers have to bear the costs like Nation Building Tax and customs duties in addition to 15 per cent tax.

Smuggled gold now represents almost all requirements of local jewellers as they were not in a sound financial position to pay gold by paying additional 15 percent to licensed bullion sellers including banks for their requirements, they pointed out.

Gold importing banks have been affected by increased gold smuggling which enters the "grey market" where it is sold to end-users at 5 percent commission, an independent check made by Business Times revealed.

Meanwhile, President Maithripala Sirisena has directed officials to provide some relief for local jewellers facing difficulties due to the imposition of 15 per cent tax.

This directive was issued at a meeting held at the Presidential Secretariat in Colombo on Thursday. The Gem and Jewellery Authority had put forward a set of proposals including the introduction of tax-free gold import quota system with the consent of the Finance Ministry.

In April, the Government imposed a 15 percent tax on gold imports aimed at narrowing the current account deficit in the country where gold is considered as an accumulation of wealth for rich and poor alike.

The price of a gold sovereign in the Sea Street market has shot up to Rs. 62,000 from Rs. 52,000 due to purchases in the grey market, a leading sea street vendor said.

The Finance Ministry said the tax was reintroduced after a 5- year hiatus as authorities detected a rapid spike in imports in recent months.

Sri Lanka has intensified customs checks after a rise in gold smuggling into the country, a senior customs official said. More than 16 arrests have been made in the past few months after the Government slapped a 15 per cent tax on imports of gold.

Finance Ministry sources said nearly 8,000 kilos of gold had been brought into Sri Lanka in the first three months of this year. More than 15,000 kilos had been brought in last year.

The Gem and Jewellery Authority had put forward a set of proposals including the introduction of tax free gold import quota system with the consent of the Finance Ministry.