SHANGHAI: China is scrapping a long-standing gold tax incentive in a potential setback for consumers in one of the world’s top bullion markets.
Starting on Nov 1, Beijing will no longer allow some retailers to offset a value-added tax when selling gold they bought from the Shanghai Gold Exchange, whether sold directly or after processing, according to new legislation from the Finance Ministry.
The rule covers both investment products – such as high-purity gold bars and ingots, as well as coins approved by the People’s Bank of China – and non-investment uses, including jewellery and industrial materials.
The move should bolster government revenue at a time when a sluggish property market and weak economic growth have strained public coffers.
But the changes will also likely increase the cost of buying gold for Chinese consumers.
A buying frenzy among retail investors around the world recently helped gold’s record-breaking rally move to overbought territory, setting the precious metal up for an abrupt correction.
Gold’s worst rout in more than a decade coincided with a reversal of relentless buying through exchange-traded funds, which had been on the rise since late May.
It also matched the end of seasonal buying linked to festivities in India.
A trade truce between the United States and China, meanwhile, eased demand for bullion as a haven asset.
But gold is still holding near the US$4,000-an-ounce milestone it breached earlier in October. — Bloomberg
