It is known that India is a world’s largest importer of physical gold about 1000+ tons in 2011. Thus, the quantity of imports held in India has remained hearty even gold prices have risen internationally. Increase in the import duty on gold, announced by the Indian finance minister, to see how tricky it is to manage the financial shortage. It is done by looking at recent noises about the augment in gold smuggling. These duties are necessary to bring down gold importers which form a large section in India. Same it is for the Japan, GST on the gold blow up the local gold price. One can buy gold outside the country at the global price and smuggled price and sold at the local price. This difference is huge and it can be kept by the smuggler.
For many dealers, especially in the middle of Asia smuggling gold to India and Japan become a profitable business. Middle Asians are highly enthusiast for physical gold. It is calculated that 25,000 tons of gold are held on India and 20,000 tons of gold to be held in china. In both countries the 1/4th percentage of world gold is stock.
Outside, India and china gold is a central place to all Asian countries. However, times forgotten Japan became one of the world’s largest gold marketplaces in the 70s and 80s. Here, thousands of tons of gold satisfy its investment to drive the gold market. Also, Hong Kong is one of the oldest markets that are almost a hub of physical gold for more than 100 years.
Some of other gold producing countries are Singapore, Thailand, Taiwan, South Korea and other Asian region. However, some countries government Hong Kong and Singapore, clinch a free market to support their gold markets and allowing unrestricted imports and unbreakable saving and invest to buy gold with zero service taxes.
In Asian countries such as Japan and India, still, place throw up import barriers, penalties, and taxes. This distorting the free flow of gold, counter smugglers for business, and also it distort gold local prices.
Incentives to smugglers in India and Japan
It is readily shown in the media daily instance of detected gold smuggling in India and Japan. Gold smuggling is a result of false action of action. Governments are charging penal taxes, rasping on the free ownership, free transportation of gold, by this means, distorting the ability people save or invest in the gold.
The spurs for smugglers are as follows:
When an economy takes gold imports at entry, import duty distorts the global gold price and blow up the price of the country in addition to taxes.
One can buy gold outside from country and smuggles into the country avoiding taxes and duties and sold by smuggler with addition of tax that huge difference earned as profit by the smuggler.
It is the same applied to the Japan; the GST on gold can affect the prices of gold. The smuggled gold outside from country can be sold on Japan with addition to GST and huge profits are kept by smugglers.