|
When Yan Zhong took a brief training course in December to learn how to use the computer trading network at the Shanghai Gold Exchange, he expected the market to open by the end of last year. It didn't, and no new date has been set for its opening, due in part to a rift between various government departments, industry sources say.
"There are only a few exchange officials in the trading hall," said Yan, a gold dealer with Shanghai Lao Feng Xiang Co. Ltd., the city's leading gold processor and retailer. "We don't know when to go back because the date for the official opening is still a mystery."
The new exchange was supposed to mark the opening of China's tightly regulated gold market, but deregulation is proving more difficult than expected.
Government officials, it seems, can't agree on whether or not gold firms doing business at the market should have to tie a 17 percent value-added tax onto their goods. Currently, domestic miners and processors are exempt from the VAT, even though the tax is charged on other resources, such as silver and copper.
"Whether to impose the VAT or not after the market deregulation is crucial for the operation of the gold exchange, but the government is in a standoff," said an industry insider, who declined to be identified.
In a move to attract more trading members, the exchange asked the government to exempt its members from the tax, said the insider.
But the country's tax authorities are opposed to the idea, which would cost the government a fortune in lost revenue and would be unfair to other resource industries.
Officials from the central bank and tax bureau refused to comment on the issue, but industry officials say the dispute is probably the main reason for delaying the opening of the new exchange.
Decision-makers are being careful about how they liberalize the gold market, weary of making the same mistakes they made during a failed attempt to deregulate the silver industry.
The government opened a silver exchange in mid-2000 to liberalize trading in the commodity, but trading was slow, a situation many blamed on the VAT.
And many in the industry also blame the tax for an increase in smuggling and other forms of tax evasion.
Currently, more than 70 percent of China's gold mines are profitable, but most could not survive if burdened by the application of a 17 percent VAT, industry sources say, arguing that the mines are profitable because the central bank buys all of their output, and they are not subject to value-added taxes.
(eastday.com January 17, 2002)
|
