The Finance Ministry is attempting to halt a steep increase in gold smuggling by strengthening countermeasures at points of sale.
Because smugglers make money from the margin they gain by avoiding consumption taxes, ministry officials fear smuggling will increase when the consumption tax rate is raised to 10 percent this October. In the future, gold buyers will be required to copy and store sellers' identification documents. Increased enforcement at the border, including crackdowns at customs stations, is also expected.
People are required to declare gold brought from overseas at customs and pay consumption tax on it. Smugglers purchase gold in places where it is not taxed, such as Hong Kong, then profit by pocketing the consumption tax that is added to the price when gold is sold in Japan.
Gold smuggling increased dramatically when the consumption tax rate was raised from 5 percent to 8 percent in 2014. In 2017, 1,347 incidents were discovered, in which about 6.2 tons of gold were seized. This is about 110 times the number of incidents discovered in 2013 before the tax hike, and about 50 times the amount seized.
The Finance Ministry, which has jurisdiction over customs matters, plans to require buyers to make copies of sellers' ID documents, such as passports or driver's licenses for individuals and registration papers for corporations. These copies would need to be kept so sellers can be tracked if gold is found to have been smuggled.
If buyers do not keep such documents, they will not be able to claim the "input tax credit," which allows businesses to subtract the consumption taxes paid on purchases from their taxes.
As this would increase businesses' tax burdens, the ministry believes it will have some effect. This measure is to be included in the tax reform outline for fiscal 2019 and could be put into practice as early as October.
Tanaka Kikinzoku Kogyo K.K., a major gold buyer based in Tokyo, said it plans to buy more copiers for ID confirmation documents and improve its storage systems at the about 100 stores it manages directly or through agents nationwide.
"It adds to administrative costs, but if we can't get the input tax credit, the loss would be huge," a senior company official said.
However, some are unhappy about the changes. A senior executive at another buyer said: "We are already careful about refusing suspicious purchases. It's difficult if we have to bear the responsibility."
The Finance Ministry announced new countermeasures in November 2017, including that it would install walk-through metal detectors at customs stations nationwide and that it would essentially increase the upper limit of fines on smugglers. The ministry also called on major trading companies that export gold to not buy gold when smuggling is suspected.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
