jewellery Industry still relies on informal sources
There is no direct government ban on importing gold, but the jewellery industry appears to rely heavily on unauthorized channels. Industry insiders said companies felt more comfortable sourcing gold from unauthorized channels due to high taxes on legally importing gold. They said companies source gold through the National Board of Revenue’s (NBR) baggage rules as well as other informal channels.
Bangladesh Bank (BB) awarded licenses to 18 companies and a bank in 2018 to boost gold imports, prevent smuggling, and ensure greater transparency.
Data from the central bank shows that the banking regulator approved the import of 316.6 kilograms of gold bars to 12 companies between 2020 and 2021.
Even so, eight of those companies have imported only 133.37 kg of gold bars. According to BB, the largest jewelry company, Diamond World, imported 63.5 kg, Riya Jewelers imported 30.45 kg, Aroosa Gold Corporation imported 14 kg, Jarwa House Pvt. Ltd. imported 11.66 kg, and Golden World Jewelers imported 7.82 kg.
Approximately 80 percent of the demand is still met by smuggled gold, as per industry insiders, causing government revenue losses every year.
If the tax on gold imports isn’t reduced, legal imports will not increase, said Dewan Aminul Islam Shahin, vice president of the Bangladesh Jeweller’s Association (Bajus). The Jewellery Industry, the owner of 1.50 kg of gold bars, said legal imports bring high taxes.
Tax on imported gold is Tk 2,000, customs duty is 5%, and advance income tax is 5%. In addition, insurance costs are involved.
Unofficial gold sources, however, do not incur such costs. Furthermore, the forex reserve crisis has made banks uninterested in opening letters of credit (LCs) for gold imports, added Hasan.
The central bank indirectly discouraged gold imports in August last year by keeping a 100 percent margin on LC openings for gold. As a result of the current forex crisis, the banking regulator discouraged banks from importing the luxury metal.
The gold importer, seeking anonymity, said they prefer collecting gold using the NBR’s baggage rules.” When Bangladeshi expatriates arrive, they can bring gold as per the NBR’s baggage rules, and we collect it,” he said.
The NBR’s baggage rules allowed passengers to carry up to 234 grams of gold. If the amount was less than 100 grams, no duty was charged.
Under the new Baggage Rule 2023, passengers can only bring 116 grams of gold and must pay Tk 40,000 in taxes. The current price of a short (11.664 grams) of 22-carat gold is Tk 1,01,244 according to Bajus.
A former adviser to a caretaker government told The Mynewsbd that Jewellery Industry found it easier to source gold from informal avenues than legal channels if there was more transparency. Therefore, gold imports did not increase.
Governments must take strict measures to prevent gold smuggling. According to Khaveker Golam Moazzem, the government announced its gold policy to develop an Jewellery through formal channels by allowing gold imports. This is objectively positive, he said.
However, the government has not taken appropriate measures to stop the illegal arrival of gold, which is a barrier to the policy’s implementation. The gold policy thus has difficulty achieving its goals.