Sri Lanka imposes 10 percent tax on gold imports

June 21, 2013 (LBO) – Sri Lanka slapped a 10 percent tax on gold, a senior government official deputy Treasury Secretary S R Attygalle said, as world gold prices fell to levels seen in 2010. India had imposed an 8.0 percent tax earlier.

Sri Lanka’s gold import surged to 100 million US dollars in the first four months of the year from about 150 million for the full year 2012 Central Bank Governor Nivard Cabraal said last week.

Attygalle said the tax imposed from mid-night last night was expected to be temporary.

Some industry watchers had believed that Sri Lankan gold traders were suspected of earning profits importing gold and smuggling it to India. Analysts say the profits will now be earned in Singapore or Dubai.

The tax will also keep domestic gold prices up and maker Sri Lankan made jewellery less competitive to tourists than earlier.

Sri Lanka’s banks which had engaged in large gold backed lending have seen their collateral whittle away as gold prices fell.

World gold prices have fallen to around 1,303 US dollars an ounce from 1,700 levels last year as the US dollar strengthened.

Update II