OUR predilection for gold is well known. Unfortunately, Pakistan’s market infrastructure for buying and selling gold is not properly regulated. Gold is a valuable and safe asset for the investors as well, because, regardless of where it ultimately ends up, gold perpetually remains in the world once mined.
Gold reserves in the developed economies continue to grow at a rapid pace, and, according to the latest World Gold Council report, the United States has the world’s largest stockpile of gold reserves at 8,133.46 tonnes; and it is the largest by some distance. The US reserves are just about equal to those of Germany, Italy and France combined. Pakistan’s gold reserves have remained constant at 64.65 tonnes till the second quarter of 2021.
The Federal Board of Revenue (FBR) has set up a board to oversee the deficiencies in the gold market, but it has been unsuccessful in regulating and taxing the millions of dollars in informal gold trade that occurs through the jewellers.
In an interview earlier this year, an official of the jewellers’ association raised voice against the FBR’s decision to regulate the gold market, claiming that it would result in harassment and a restriction of their operations unless the government makes a more comprehensive effort to digitalise the entire economy concurrently.
The jewellers, according to him, were willing to work with the government to streamline the process, provided the authorities refrained from forcing small gold businesses towards sales tax registration, as this might have a detrimental effect on their business.
I believe this is a flimsy argument. The government should apply a flat taxation system across the gold market. Every person should be held accountable, and no one should be unfairly burdened, whether they are small or big dealers. The FBR has an obligation to ensure that designated non-financial businesses and professions (DNFBPs), such as dealers in precious metals and stones, should comply with all financial obligations.
Millions of rupees in black money can be easily converted into gold and stored anywhere without the need for legal ownership. The government should take aggressive measures to regulate the gold sector to expand the country’s tax base.
In addition, the FBR must design workshops to educate the public about the features of gold that allow it to be wonderfully moulded and carved for various purposes. Being a good conductor of electricity and low on maintenance, gold is the metal of choice for various industries, and has medical and technical applications.
Regrettably, there is only one metal exchange in Pakistan, and it is still in its early stages of development. As a result, the public purchases gold in its physical form and has no idea that the yellow metal can be acquired indirectly, such as through futures contracts, gold exchange-traded funds (ETFs), or mutual funds.
An ETF has an advantage over bullion in that it may be sold for cash at the market price. One can sell it just as one sells stock exchange shares. Gold ETFs are more liquid than the metal itself, and can be traded from the comfort and security of one’s home.
Hafiz Muhammad Usman Rana
Birmingham, United Kingdom
Published in Dawn, October 24th, 2021