Why Bangladesh needs a gold import policy

Gold smuggling in Bangladesh continues unabated as the existing gold import procedure discourages jewellers to buy bullion from the global market formally. According to the Customs Intelligence and Investigation Directorate (CIID), from July 2010 to June 2017, their teams have seized 1682.001kg gold worth Tk801.165 crore. Industry insiders say this seized amount is insignificant compared to what is being smuggled out of the airports. Gold cannot be imported legally in Bangladesh. The fact that Bangladesh Bank has not auctioned gold in the last three years leaves traders depending further on smuggled gold to keep the prices balanced, several jewellers told the Dhaka Tribune. Industry insiders also cited high import duty under the baggage rules for depending on smuggled gold. The government recently increased duty on the gold brought in by individuals under the baggage rules of the National Board of Revenue (NBR) and raised the duty-free import limit, which is causing a hike in gold prices in the local market, sources in the local gold market told the Dhaka Tribune.

According to sources, gold nowadays comes to Bangladesh from the countries in the Middle East, Singapore, Thailand, Hong Kong and Malaysia

Until the 2014-15 fiscal year, under the baggage rules, a passenger could bring in 100 grams of gold without duty and an additional 200 grams of gold with Tk3,000 duty. In the 2016-17 fiscal year, the government imposed Tk3,000 customs duty and 4% advance trade vat (ATV) on the import of every 11.664 grams of gold by authorised gold businessmen only. According to sources, gold nowadays comes to Bangladesh from the countries in the Middle East, Singapore, Thailand, Hong Kong and Malaysia. The gold smuggling issue came to the fore after Apan Jewellers, a leading jewelry maker of the country, failed to produce any legal import document for a huge quantity of gold. The alarm bells went off when CIID seized 13.5 maunds (approximately 503.88kg) of gold and 427 grams of diamonds from a Apan Jewellers showroom in June this year. The government is now moving ahead with a plan to adopt a realistic policy from this fiscal, to allow jewellers to import gold and silver through the formally. “The government will prepare a policy for importing gold which will help this sector flourish and create an overseas market for exports,” said Finance Minister AMA Muhith as part of his budget statement for the fiscal year 2017-2018. In his statement, he mentioned various proposals by the bodies associated with the sector to formulate a realistic guideline to facilitate importing gold. Minister Muhith hoped to formulate the policy within this calendar year. Bangladesh Jeweller Association (Bajus) has for quite some time been demanding an effective gold policy to prevent gold smuggling in Bangladesh. Bangladesh Jewellery Manufacturers and Exporters Association President Ganga Charan Malakar told the Dhaka Tribune that the gold traders need an import friendly gold policy. The prime source of gold for Bangladeshi jewellers is usually locally recycled gold and the gold imported under the baggage rules. According to the baggage rules, an international passenger can bring up to 234 gram gold (20 bhori gold) by paying Tk 3,000 specific duty and 4% advance trade VAT for each bhori of gold. There is also an option to import gold by opening Letters of Credit (LCs), but that requires the payment of Tk300,000 of supplementary duty per kg of gold. “The policy to import gold and the price after paying all the duties and taxes should be in line with the international market,” Malakar said. “About 65-70% jewellery in my shop is made of smuggled gold as we cannot legally import gold,” said a shopkeeper in Dhaka’s Baitul Mukarram area which houses the largest gold market in the country. Finance Ministry sources said the jewellers have proposed that the government allow the import of gold without the traders needing to face banking complications, and set a minimum tax rate for a  minimum of 10kg to ease the process. Following the jewelers demand, Finance Ministry has made a position paper with recommendations from the National Board of Revenue (NBR) that the LC conditions can be relaxed for the import of gold based on discussions. The NBR recommended to allow only VAT registered jewelery organisations to enjoy the benefit. The specific duty on gold can be removed as VAT will be imposed on the import of gold under the VAT and Supplementary Customs Act 2012. Finance Minister AMA Muhith gave a nod to the position paper with some observations, according to sources at the ministry. Muhith observed that he wants businessmen to import gold and silver on a regular basis. “Only import through a letter of credit (LC) would be allowed and only the VAT registered companies can do it. They may not need import it under the baggage rules or get clearance from the bank (Bangladesh Bank).” Regarding this matter, Customs Intelligence Investigation Directorate (CIID) Director General (DG) Dr Moinul Khan told the Dhaka Tribune that the gold traders are exaggerating the facts. “We have our gold import rules and there is no problem in importing gold by the law. Importers can bring gold against LC, but they need an approval from the Bangladesh Bank,” he said. The CIID DG, however, acknowledged that there are some complexities in the existing gold import procedure. “We are working on easing the procedure as well. Bangladesh Jewellery Importers Association made some suggestions about importing gold after the drive in Apan Jewellers showroom. Their suggestions are still being reviewed.”