Sri Lanka imposes new gold import tax

AFP/Colombo

Sri Lanka announced a 10% tax on gold imports yesterday in what observers said was a bid to curb smuggling to India as global markets trading in the precious metal reported sharp price drops to 2010 levels.

Earlier this week India - the world’s largest consumer of gold - hiked import duty on the precious metal to 8% to stem surging demand and reduce the country’s ballooning current account deficit, as consumers sought to exploit the fall in prices.

Local industry watchers say the new tax in Sri Lanka would push up local prices and claimed the government move was aimed at curbing local traders who smuggle gold into India.

Officials described the new tax as a temporary measure and said it came into effect midnight Thursday.

“Government has imposed a tax amounting to 10% on all gold imports with immediate effect,” a text message from the Department of Information said.

“The price of a gold pound locally increased by about Rs4,000-5,000 ($31-$39) following imposition of 10% tax on gold imports,” added an official from the National Gem and Jewellery Authority.

The price of gold in the London bullion markets plunged to $1,286.20 an ounce on Thursday — striking a low last seen in September 2010.

Sri Lanka’s Central Bank last week said the island had seen a marked increase in gold imports during the second quarter of this year.

Gold worth $100mn was imported by the end of May this year compared with a total $150mn worth of imports during all of 2012.

An employee makes a bangle at a jewellery work shop in Colombo yesterday.