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Policy forces jewellers to depend on smuggled gold

  • Published at 01:27 am May 17th, 2017
Policy forces jewellers to depend on smuggled gold
High import duty under the baggage rules and the absence of any formal mechanism to import gold is forcing jewellery makers to become heavily dependent on smuggled gold, according to industry insiders. The government recently increased duty on the gold brought in by individuals under the baggage rules of the National Board of Revenue (NBR) and raised the duty-free import limit, which is causing a hike in gold prices in the local market, sources in the local gold market told the Dhaka Tribune. Until the 2014-15 fiscal year, under the baggage rules, a passenger could bring in 100 grams of gold without duty and an additional 200 grams of gold with Tk3,000 duty. In the 2016-17 fiscal year, the government imposed Tk3,000 customs duty and 4% advance trade vat (ATV) on the import of every 11.664 grams of gold by authorised gold businessmen only. “Our prime source of gold for jewellery making is usually locally recycled gold and the gold imported under the baggage rules,” said Dilip Kumar Agarwala, general secretary of Bangladesh Jewellers’ Samity (Bajus). Sometimes, Bangladesh Bank provides gold through auctions, sources said. There is also an option to import gold by opening Letters of Credit (LC), but that requires the payment of Tk300,000 of supplementary duty per kg of gold, which pushes the prices of jewellery further up, Agarwala said. Gold cannot be imported legally in Bangladesh, and supply has reduced as passengers are discouraged to bring in gold due to the increased duty. Added to that is the fact that Bangladesh Bank has not auctioned gold in the last three years. In this circumstance, traders are becoming dependent on smuggled gold to keep the prices balanced, several jewellers told the Dhaka Tribune. “About 65-70% jewellery in my shop is made of smuggled gold as we cannot legally import gold,” said a shopkeeper in Dhaka’s Baitul Mukarram area which houses the largest gold market in the country. However, former Bajus president Dilip Kumar Roy said though it was true that smuggled gold was being used to make jewellery, the amount was only 30%. In recent years, confiscation of smuggled gold at the airports has increased due to strong vigilance of the customs intelligence. According to the Custom Intelligence and Investigation Directorate (CIID), at last 1,101kg gold, worth around Tk520.86 crore, have been seized in the last four years. Experts, however, disagree with the notion that only government is to blame. They believe that the amount of gold smuggled into the country is higher than the local demand for gold. “If we look at the trend, the amount of smuggled gold surpasses the amount that is actually needed in our market. Smugglers are using Bangladesh as a transit to take the gold to other countries,” said Khondaker Golam Moazzem, research director of Dhaka-based think tank Centre for Policy Dialogue. Agarwala said to curb gold smuggling, the government should introduce a gold import policy with an SD rate that will enable traders to legally import gold at lower prices. Roy reiterated Moazzem’s statement, but he agreed with Agarwala that the government should formulate an import policy to stop gold smuggling. He further added that the central bank could supply gold to the local market through auctions to meet the market demand. But Moazzem believes that there is no need for legal gold import. “I think the baggage rules allow enough gold to enter the country to meet the local demand,” he told the Dhaka Tribune. “Allowing import will give the smugglers an opportunity to smuggle legally imported gold out of the country. It will also create pressure on the national reserve and the balance of payment.”