Theoretically, if an Australian government were to remove the GST-free status on investment grade silver bullion, what would be the impact on the price and liquidity of silver? I have been wondering about the likelihood of this as more people consider moving into precious metals and the government may then decide that they could get away with an opportunistic tax (especially if they first run a campaign to link gold and silver with "greedy rich people avoiding tax" or with the funding of terrorism.)
I think the good baron has it. In the short term it would be good for people with an existing large stack as it would essentially increase the retail cost if silver 10% and this would eventually work it's way through the whole Australian market, raising the value of your stack 10%. That could take a while though because as BB points out there would be a whole period of interpersonal trading to avoid the tax, probably not unlike people who avoid ebay fees, offering to split the fees if you buy privately, basically offering silver they bought before the tax at 5% less than the common retail price. Eventually though, as more and more of people's holdings include post tax silver the price in private sales would reflect the extra cost of buying retail. Nobody is going to sell something for less than they paid when the intrinsic value hasn't changed. The buying from overseas would be intersting. With the added cost of shipping and possibly insurance it would only be economical for the largest purchases under 1k. No good trying to save 10% gst on $150 in silver from overseas if it cost you $20 to ship it to you. In which case you would probably see lots of group buys here to defray shipping costs and tricksy foreign websites allowing you to buy monster boxes at the cheaper 500oz rate in $990 instalments/shipments. Not sure how that would be viewed if you were pulled up on it though. I also think you would get some smuggling of bullion, particularly gold. This happens a lot in India where gold is taxed in an attempt to deal with the massive outflow of cash grin the country their thirst for the yellow stuff causes. Tourists are often tasked with flying the stuff in just like cocaine. You buy 20kilos somewhere nearby like new Zealand or anywhere that doesn't have stringent reporting laws on purchases like dubai (or you have someone out buying a few low premium 1oz coins/rounds at a time at lots of different places). At 900k for 20 kilos the profit is $90,000 a trip. Of course like all smuggling operations there are costs by you can see how it could quickly become profitable. Like drugs though the trend is moving towards just mailing it. At 10% profit you still make money if they intercept 1 in 20 packages sent. Because of the possibility of making purchases overseas to avoid gst I think the overall biggest effect would be a crippling of the local bullion industry and a huge outflow of cash to whichever bullion taxless country has the most reliable and cheapest shipping to australia. I know the local bullion industry (for local consumption, perth mint jobs based on export would be safe) probably doesn't employ that many people but it's a few hundred to a couple thousand jobs is rather were kept in australia.
One way around it would be to buy and store overseas, say Singapore. So that would be the end of local storage services. Perth Mint's domestic business would dry up and all that metal we value added to would probably end up being exported in low value added forms. So Govt wouldn't get any extra GST and as a country we would earn less export revenue. So totally stupid and short sihghted, which probably means there is a high likelihood of it happening
People from India visit Mustafa and wear the 24k gold Jewelry back to India. The top ones would set up boxes and stored them in Singapore. So long as they can TT out their money overseas. If the government want it, they will just take it. just the same as what we see the in USA bank accounts forfeitures. Terrorizing the IRAS taxing coffer Qaddafi's gold Ukraine''s gold gone into someone's else trucks. Importation could be made illegal with a stroke of a mouse. We really need to set up a mint branch in Siberia to serve SS members :lol:
I'm not sure Russia is the freedom loving crime and corruption free place you imagine it to be. Plus Siberia is real cold, silver is the best heat conductor which means you'd likely find your bars stuck frozen to your hands. I like the idea though, we just have to find the right place.
I've started to buy and store through Bullion Star in Singapore. I stepped foot in the place in July just to reassure myself before proceeding. All legit or as legit as one could hope for. Haven't had any problems so far. Not that I own any physical Palladium but if the gubbermint decides to raise GST won't this make the physical palladium market even more solid and less liquid?
I personally wouldn't be storing my metal in the same place I'm buying without a 3rd party/checks & balance. Best situation for safety & security is having multiple parties involved, 3rd party audits, etc. -- Also if you are doing Singapore, best to consider having it in the Freeport in the event tax issues arise as that place will always be exempt. Storing it at somebodies shop? - not so much.
I intend to use third party storage when the time comes. I just haven't accumilated enough to make it worth it yet.
That's what I do, living in the UK, where silver is taxed. I have enough in hand for my own purposes, the rest is stored outside the country.
If there's gst on silver, wouldn't the sub $1000 safety net be scrapped......every silver import would attract gst reagardless of $ ...........................................................................................................................................................
Agree, but when the government are on a mission to raise revenue......I think we all know how ruthless they can be.
