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Industry debates tax levels after easing gold trade

Speculation has been rife over the level of duties involved in the import and export of gold since the trade was liberalised last month, allowing gold to move freely in and out of the country via air, sea and border routes.

Although the authorities have yet to make any announcements, industry insiders reckon a 15 percent tax on gold imports is likely, while export taxes are expected to be nil. U Aung San Win, vice chair of the Myanmar Gold Traders Association, urged the government to carefully consider each segment of the gold supply chain when deciding on the appropriate tax.

“The Myanmar gold trading industry will take time to develop and mature. Currently, there are few traders and businesses are mostly involved in gold mining and jewelry. We will need more voices from the traders when deciding on the right level of taxes to implement.” He added that the exchange rate, transportation costs and level of local production should also be considered.

Illegal trade

One other important aspect to consider when implementing tax is the impact it will have on the industry, given the existing volume of illegal trade.

Illegal trade is based on demand and supply. “When local gold production was low, many traders bought gold at the border to meet demand,” he said. The way he tells it, 80pc of local gold consumption is met by imports from China.

Gold production has slowed further under the current government, which implemented strict environmental standards resulting in the restriction of mining activities. The government has also taken some measures to restrict illegal trade.

Meanwhile, traders also sell around 20pc of local gold supplies at the Myanmar-Indian border.

“It is hard to say how many businesses are how much cash flows are involved in that kind of trade,” U Aung San Win said. As such, the potential impact on the industry from levying high import taxes on gold should be carefully studied and considered.

Gold tax

The move to liberalise and tax the trading of gold comes after the Inland Revenue Department (IRD) announced in May last year a 1pc commercial tax and 5pc gold metal tax on the sale of gold jewelry and gold bars, respectively.

In fact, the 5pc tax on gold bars drove many gold firms into the red, leading to huge protests. Three months later, in August, the 5pc gold metal tax was withdrawn. . In December, the Ministry of Planning and Finance defined gold with 99.9pc to 99.99pc purity levels and densities of 19.25 grams per cubic centimeter as a precious metal. This also included 24 carat gold bars and coins.

“We don‘t want to see problems similar to the gold metal tax, that’s why we are trying to negotiate how much the tax should be now,” U Aung San Win told The Myanmar Times.

In Myanmar, the current price of gold is around K900,000 per tical compared to K840,000 per tical in August 2016 and K630,000 in late 2014.

Source: Myanmar Times

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