WGC chief pitches for duty cut for gold in Budget

The World Gold Council, the market development organisation for the gold industry, would favour a Customs duty cut on gold imports in the upcoming Budget, said its Chief Executive Officer David Tait.

Any such move of a cut in basic Customs duty to the previous level of 10 per cent (in July 2019 it was raised to 12.5 per cent) would certainly bolster demand for gold and also tackle the grey trade, Tait, who is visiting India, told BusinessLine.

“I would be pleased if they (government) in the upcoming Budget reverse the most recent hike (on gold import duty). To reverse that would be a great gesture. The biggest benefit will be reduction in amounts of gold transacted illegally,“ he said.

Having higher duties is “reverse incentive” that is “bizarrely penalising” the “good guys” and driving people underground. A cut in Customs duty will benefit the market as a whole and deliver social best practices, he said.

At the same time, Tait also said that he does understand that the GDP growth being what it is and tax revenues being what they are, it would be a case to pull every lever to cover the shortcomings.

“I would still try and find the money elsewhere as higher duties encourage smuggling, drive activities underground. It (having higher duties) does not generate an environment where gold is seen as a financial asset,” he said.

Global marketing initiative

Tait said that the WGC will, in the next few years, be aggressively marketing throughout the world the case for gold as a portfolio investment vehicle.

“Within the next five years, I am going to ensure that every single institution is confronted by a WGC person making that very case. I am talking about the case for including gold itself or gold backed financial instrument in the portfolio,” he said.

Asked about the outlook for gold in 2020, Tait said that geo-economic issues and global economic slowdown are the main issues that would be the main driver.

“I dont see the current geo-economic backdrop changing this year. My job over the next 2-3 years is to make people aware that having gold as part of that portfolio particularly when gold prices are going up or even when it is coming down is portfolio optimiser and Value at Risk (VAR) optimiser,” he said.

One would do well to look at gold as not a disaster trade and having gold sit in the portfolio will be helpful to everybody in the coming days, he added.

India being a key player in the gold market is leading the WGC’s Retail Gold Investment Principles (RGIP) initiative globally.

Gold industry here recognises the need to come together and adopt best practices to sustain and further grow their business with integrity, Tait said.

The new principles under RGIP will offer high-level best practice guidance for providers of all kinds of retail gold investment products, which in most markets do not constitute regulated financial products. This will be accompanied by guidance for implementation and allow for regional tailoring to cater for the needs of specific market participants, practices and local laws.

On Monday, Tait chaired a meeting in New Delhi with top 40-45 Indian gold industry leaders from across the value chain and had a healthy discussion on this initiative.