Gold smuggling likely to rise in India as festive buyers try to avoid new tax

A Indian legislation makes it mandatory for jewelers to keep records of customers’ personal identification numbers or tax code number for transactions above 50,000 rupees. (Reuters)
Updated 27 September 2017
0

Gold smuggling likely to rise in India as festive buyers try to avoid new tax

MUMBAI: Gold smuggling in India, the world’s second-biggest consumer of the metal, is likely to rise during the country’s peak holiday season as buyers try to avoid paying a new sales tax and to dodge new transparency rules.
In August, India moved to include gold sales under the Prevention of Money Laundering Act (PMLA). The law makes it mandatory for jewelers to keep records of customers’ personal identification numbers or tax code number for transactions above 50,000 rupees (SR2,870).
Indian gold demand typically rises in the last three months of the year as consumer buy more for the wedding season as well as for festivals such as Diwali and Dussehra.
“The government implemented the PMLA rule but it didn’t take efforts to popularise. Customers are not aware of the rule and are hesitating in giving necessary details,” said Surendra Mehta, secretary of the India Bullion and Jewelers Association. “Unaccounted sale will rise in the festive season as some customers are trying to buy without bills.”
The tax avoidance recalls the unintended consequences of India’s decision to raise import taxes on gold to 10 percent by August 2013.
The duty failed to curb demand but revived smuggling networks which, the World Gold Council estimates, imported 120 tons of gold in 2016, over one-fifth of total annual arrivals.
“The new rule is turning out to be counterproductive. Instead of giving required details, customers are buying without proper receipts to save tax,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city Kolkata.
The sales tax on gold rose to 3 percent from 1.2 percent as part of a new nationwide sales tax regime that started on July 1.
“Jewelers are buying smuggled gold at discount in cash, then making jewelery and selling it to consumers without receipts,” said Daman Prakash Rathod, director at wholesaler MNC Bullion in the southern city of Chennai.
In India, less than 4 percent of the people pay income tax. Many tax evaders choose to park their illicit wealth in gold as it is nearly as liquid as currency in the country.
The new limit of 50,000 rupees is too low and makes it mandatory to seek identification details of almost each customer, said Kumar Jain, vice president, Mumbai Jewellers Association.
“The rule has hurt sentiments. Usually demand improves ahead of Dussehra but this year demand is very weak,” Jain said.
Indians will celebrate Dussehra on September 30, a holiday when buying gold is considered auspicious.
Rural demand for gold, the driver of two-thirds of India’s demand, was weak because of erratic monsoon rains and rising gold prices, said Mangesh Devi, a jeweler in the western state of Maharashtra, who caters mainly farmers.
Local gold prices have risen nearly 9 percent so far in 2017.
India’s food grain production from summer-sown crops is likely to fall 2.8 percent in 2017/18 from a year ago.


UK jobless rate falls to new 43-year-low, but pay growth weakens

Updated 14 August 2018
0

UK jobless rate falls to new 43-year-low, but pay growth weakens

  • The figures painted a largely familiar picture of a tight labor market — including a record number of job vacancies — failing to translate into strong wage growth
  • Total annual wage growth slowed to a nine-month low of 2.4 percent, below forecasts for it to hold at 2.5 percent

LONDON: Britain’s unemployment rate fell to its lowest in over 43 years in the three months to June and fewer workers made do with insecure jobs, but there was little upside for most as pay growth slowed to its weakest in nine months.
Tuesday’s official figures also showed the sharpest annual decline in the number of EU workers in Britain since 1997, continuing a trend seen since the 2016’s vote to leave the EU, and a pick-up in annual productivity growth.
Despite some positive elements, the figures painted a largely familiar picture of a tight labor market — including a record number of job vacancies — failing to translate into strong wage growth.
Britain’s economy warmed up a little in the second quarter from its winter slowdown of early 2018, official data showed last week, but there was no sign of an end to its lackluster performance in the run-up to next March’s Brexit.
“This will not be what the Bank of England will have wanted to see, as one of the justifications for (its) decision to hike rates earlier this month was that it was expecting wage growth to start lifting off.
This hasn’t happened yet,” said Emma-Lou Montgomery, an associate director at Fidelity International.
The BoE raised interest rates on Aug. 2 for only the second time since the financial crisis.
Tuesday’s data showed productivity grew at its fastest annual rate since late 2016 and the number of people whose main job was an insecure zero-hours contract fell by the most since 2000, the Office for National Statistics said.
The unemployment rate fell to 4.0 percent in the April-June period, the Office for National Statistics said.
That was the lowest since the three months to February 1975 and beat economists’ forecasts in a Reuters poll for it to hold steady at a previous low of 4.2 percent.
The drop came despite a smaller-than-expected number of jobs created over the three-month period, 42,000 — less than half the average forecast by economists in a Reuters poll.
Sterling briefly rose above $1.28 against a broadly weaker dollar, as Tuesday’s data helped a struggling pound move away from 13-month lows plumbed last week.
Total annual wage growth slowed to a nine-month low of 2.4 percent, below forecasts for it to hold at 2.5 percent.
The ONS said changes to the timing of annual bonus payments was partly responsible.
Excluding bonuses, pay growth fell to 2.7 percent, well below the 4 percent rate typical before the financial crisis a decade ago.
Output per hour worked grew by 1.5 percent year-on-year in the April-June period, the biggest increase since late 2016 after a 0.9 percent rise in the first quarter of 2018.
With less than eight months until Britain is due to leave the European Union, the ONS data showed an acceleration of EU nationals leaving Britain’s workforce.
In the second quarter there were 2.35 million EU nationals working in Britain, down 86,000 on a year ago, the largest fall since records began.
“Shortages are already hampering firms’ ability to compete and create jobs, so it’s vital that the UK pursues an open and controlled post-Brexit immigration policy,” Matthew Percival, head of employment at the Confederation of British Industry, said.
The number of nationals from the eight East European countries that joined the EU in 2004 fell by 117,000, an 11.7 percent drop on the year. That was partly offset by a 54,000 increase in Romanians and Bulgarians.
The number of workers employed on often-precarious zero-hours contracts fell to 780,000, or 2.4 percent of the workforce, the lowest since 2015.