Gold is the ultimate form of money. If you are a gold dealer in Asia, then you know that it is a pretty lucrative business in all the years, due to the insatiable demand by the Asian population. Currently, China and India holds approximately 25% of the world’s known above-ground gold stock
Some countries like Singapore has supported their own gold markets by allowing imports freely and not imposing any Goods and Services Tax (GST) on investment gold. This allows Gold to be bought, sold, dealt, traded at freewill, and without restrictions.
Those countries that has, however, imposed some form of tax or duty on gold, has actually created a problem of smuggling gold. Two clear examples are Japan and India. Last year, Japan authorities seized smuggled gold of over 2,000 tonnes, but do note that these are smuggled gold that were detected, notwithstanding any other gold that were not detected by the authorities. Other sovereign countries have questioned the imposition of these taxes and yet Japan and India has responded that it is merely to increase reported revenue.
Economists and analysts have however, reported the said countries have a fear of gold being the better form of money than their national fiat currencies, given the fluctuations. By doing so, these governments restricts the freedom of their citizens to use gold as an avenue to save or invest. Furthermore, such actions create a kind of financial repression and also criticised that this is used to manipulate prices of gold or national currency.
Although there are merits on both sides of the coins, we find it more compelling that taxes should not be imposed on gold as a commodity. In fact, it can be argued that by allowing a free market, it increases the reported revenue as well.
Just our two-cents.
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