Saudi tax takes the shine off Bahrain gold trade
GOLD production in Bahrain has dropped dramatically over the past five years due to heavy taxes imposed by Saudi Arabia, the largest market for the metal in the GCC, according to traders.
Despite a GCC agreement to exempt each other’s goods from duties, gold being sent from Bahrain is taxed at 5.5 per cent of the total value by the Saudi authorities.
This has resulted in the amount of Bahraini gold being sent to Saudi Arabia dropping from an average of 500kg every week in the 1990s to an estimated 500gm per week now, said Bahrain Chapter of the GCC-Gold and Jewellery Association treasurer Mohammed Hussain Malim.
He said this would be the association’s first appeal to the new Bahrain Chamber of Commerce and Industry (BCCI) board.
“There is an agreement between Saudi Arabia and Bahrain and a law which states that goods made in Bahrain are tax free in the GCC,” said Mr Malim.
“However, gold does not come under this; we don’t know why.
“For the past four to five years, Bahraini gold has been taxed at 5.5pc of the total value; the sudden decision came into force around five years ago. We follow all the rules required for tax exemption. We have the gold officially stamped in Bahrain, certified by the BCCI and printed with the ‘Made in Bahrain’ seal.
“But only Saudi authorities refuse to recognise this; our gold is not taxed in the other GCC countries.
“Ironically, gold made in Saudi Arabia is not taxed in Bahrain.”
According to sources, Saudi taxes followed pressure from merchants there.
“We have raised this concern with the Industry, Commerce and Tourism Ministry, the BCCI and the Saudi Arabia chamber many times in the past,” said Mr Malim. “Saudi is the major and the largest market in the GCC for gold; demand for Bahraini gold is high there.
“Unconfirmed reports say that the Saudi wholesalers are insisting on the tax.
“Before, in the 1990s it was huge as per week we used to send 50kg gold to Saudi Arabia.
“This reduced gradually as the Saudi government started encouraging local traders to set up units and many Bahrainis started businesses in Saudi Arabia.
Smuggling
“Around five years ago the number fell down to almost 50kg a month, and this has further reduced to 4kg-5kg a month.”
Taxing gold would encourage smuggling, said Mr Malim, as it proves costly for traders to send and sell gold officially.
“Production of gold in Bahrain has reduced to half if not more compared to the past and obviously the businesses are suffering a loss,” he said.
BCCI member Abdulhakim Al Shemmari said the proposed GCC Customs Union has recognised the issue.
“Bahraini gold sent to Saudi is branded a non-GCC product which is unfair because Saudi gold is considered a GCC product.
“This has affected the industry adversely and the GCC Customs Union discussions have acknowledged this.”
The GDN reported on Wednesday that the Federation of GCC Chambers had organised a workshop at the BCCI on a GCC Customs Union draft bill to be tabled at the GCC Economic Forum in Riyadh next month.
Source: http://www.gdnonline.com/Details/332622/Saudi-tax-takes-the-shine-off-Bahrain-gold-trade
