Taxes drive Sri Lanka’s gold market underground

Taxes have driven Sri Lanka’s gold market underground, with only smuggled gold able to hold down prices, say industry sources.







Taxes have driven Sri Lanka’s gold market underground, with only smuggled gold able to hold down prices, say industry sources. "There is no official gold in the market," says Chanaka Ellawela, vice chairman, Sri Lanka Gem and Jewellery Association.

In 2004 Sri Lanka imported around 8 MT or Rs 8 bn worth of gold to satisfy local demand, mainly for women’s jewellery.

The main importers were the State owned Bank of Ceylon and private banks like Commercial Bank, Seylan bank and Hatton National Bank.

But since the introduction of a 15 percent VAT on gold imports the banks have washed their hands off the gold market.

"We have stopped importing gold," said J Durairatnam, assistant general manager international, Commercial Bank - the largest private sector gold importer.

"We can’t compete with the prices when the taxes are added up," he said.

Seylan Bank says the same story.

"We have temporarily suspended our gold imports because of the taxes.

By the end of December we