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Al-Ahram Weekly 4 -10 February 1999 Issue No. 415 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 4 -10 February 1999 Issue No. 415
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Book Fair Economy Opinion Culture Features Living Travel Sports People Time Out Chronicles Cartoons Letters Fool's gold
By Sherine Nasr
Last Sunday, a meeting was held in Geneva to discuss the state of gold markets in different countries of the region, including Egypt. The three-day meeting brought together members of the World Gold Council (WGC), international companies running gold mines and major gold traders and manufacturers."This meeting is thus of great importance," said Samah Nabil, WGC representative for Egypt. "The reports that were discussed gave an accurate picture of the true state of the gold market in each of the countries. The aim is to promote gold trade all over the world and to re-define the potential of each market."
The report on the Egyptian market was not encouraging. "It dealt with the laws that are hindering smooth trade movement: the excessive customs duties, stamping fees and sales taxes, all of which pose considerable threats to the industry," said Nabil.
The report deliberately refrained from highlighting the more serious violations and malpractices that have recently affected Egypt's gold market such as the illegal stamping of gold which costs the market millions of pounds a year.
"An explicit reference to these violations in a regional meeting would definitely have destroyed Egypt's reputation for years to come," commented Nabil.
Representatives of the WGC in Egypt have been pushing for meetings of gold traders, manufacturers and government bodies to discuss the numerous laws which have caused chaos in the market. A Gold Manufacturers Division was recently established to speak for the country's over 5,000 manufacturers, who have never before had a representative body.
"We have held meetings with the ministers of finance and industry. We used mathematical methods to prove that the imposition of sales taxes on gold has ultimately ruined the market and has led to more tax evasion than ever before," said Eng. Mohamed Nabil, Representative of Overseas Relations at the Jewellery Egypt International Company.
No serious attempts have been made to correct the situation. "The ministers are good listeners, and that's it," he said.
Attempts by Division members to meet the Minister of Trade have, so far, come to nothing.
The Gold Manufacturers Division has submitted a study to the ministries of trade and finance showing that lower taxes would lead to less tax evasion and, therefore, greater revenue.
"For example, a kilogramme of officially imported gold costs LE1,000 in customs, stamping fees and sales taxes while it costs only LE200 (paid to the smuggler) if smuggled," said Mohamed Nabil.
As a result, the volume of smuggled gold exceeds 250 tons annually compared to less than 100 tons which enter the country legally. "If the government imposed LE250 in taxes per kilogramme instead of LE1,000, it would be able to make LE62.5 million a year. At present it cannot make half this amount because of the excessive taxes on imported gold," he said.
Another piece of legislation which has unintentionally encouraged smuggling is that which requires the re-stamping of already stamped imported gold ingots.
"This is an example of another ridiculous procedure that makes it all the more difficult for gold traders," said Mohamed Nabil who pointed out that the gold reserve at the National Bank mainly consists of imported gold from Switzerland which is not re-stamped.
According to Samah Nabil, gold importers are not granted stamping licences. "Only those who own a factory are granted this licence," she said. This encourages importers to buy cheap smuggled gold and to stamp it outside the government's Stamping Authority so as to make huge profits.
"This is an example of how complicated procedures, rather than regulating the market, can damage the industry," she added.
