‘Gold import schemes being misused for smuggling to India’

KARACHI: Tax authorities have unearthed a network of traders involved in smuggling of gold to India by misusing facility in Pakistan that permits import of the precious metal only to the exporters of jewellery, sources said on Tuesday.

“A significant number of importers/ exporters of gold/jewellery are registered on fake addresses.

They are exporting artificial jewellery in the name of gold to fulfill the requirement, while imported gold is being smuggled to India, where gold import is much expensive due to higher duty structure,” a source, privy to the matter, told The News.

Currently, gold is imported in Pakistan under entrustment and the self-consignment schemes for its subsequent export in shape of jewellery.

Officials at the Regional Tax Officer (RTO-II) Karachi confirmed that there were various reports of misuse of the schemes in the past.

Tax managers said the gold importers were found misusing the schemes as instead of exporting in shape of jewellery the yellow commodity was being smuggled to India. Inquiry by an Intelligence and Investigation department of the Federal Board of Revenue (FBR) found abuse of the scheme that resulted

in huge losses to the exchequer.

“High import duty of 10 percent in India is the main cause of smuggling of gold from Pakistan to the neighboring country,” the source added.

The Auditor General in a report three years back said such schemes of gold import caused a substantial loss of Rs2.706 trillion to the national kitty.

Tax managers submitted proposals to the Federal Board of Revenue to prevent illicit payment for import of gold through hawala/hundi. The State Bank of Pakistan (SBP) had also proposed

the finance ministry that

gold imports should be formalised by allowing payments through the interbank market.

Tax experts said foreign exchange resources currently being diverted to hawala channels to finance gold payments would consequently come into the banking system and that would also reduce spread between interbank and kerb markets.

Tax officials further proposed that the existing two modes of importing gold might be abolished.

“It is the nexus of currency smugglers, fraudster gold importers, fake jewellery exporters, currency speculators and unscrupulous elements in foreign exchange companies that could be held responsible for frequent speculative attacks on the rupee in last three years, often attracting the SBP warnings and stricter rules for forex companies,” the RTO said in a proposal.

The tax office said big importers of gold with adequate capital and financial resources might be permitted through auction of licence.

The Regional Tax Officer also proposed the Federal Board of Revenue to limit two designated banks to open letters of credit for gold imports.

The importers/exporters must mention in their Income tax returns the complete details of imports and exports along with the values.