I love this. It shows that artificial, command and control government always fails to bring about the desired result.
How did alcohol prohibition in the US work out?
How is the War on Drugs working out?
Be very afraid when politicians say, "WE MUST DO SOMETHING."
That "something" is often worse than the original problem.
Then they pass another law to fix their previous failure, and the ever-growing snowball of stifling regulation keeps rolling.
New Indian rule backfires, boosts unofficial gold trade
India made it mandatory for customers to disclose their tax code, or Permanent Account Number (PAN), for purchases above 200,000 Indian rupees ($2,948.44) from Jan. 1.
This was done to track larger deals and deter the hundreds of millions of Indians outside the tax net from buying gold to keep their wealth out of sight of the authorities.
But jewellers and dealers say the opposite has happened.
"Some jewellers (are) moving to unofficial trade from official," said Mayank Khemka, managing director of jeweller Khemka Group of Cos. "No one wants to lose customers just because they don't have a PAN card".
To skirt the rule, jewellers and buyers are issuing many small invoices and informal receipts.
This is a reminder that regulations can have unintended consequences, as happened after India raised import taxes on gold to 10 percent in a series of hikes to August 2013.
The duty failed to curb demand but revived smuggling networks which, the World Gold Council estimates, imported 175 tonnes of gold in 2014, nearly a fifth of total annual arrivals.
"The new rule is boosting unofficial trade and it is making it easier to bring smuggled gold into circulation," a Mumbai-based dealer with a private bank said.
In India, just 3 percent of the people pay income tax. Many tax evaders choose to park their illicit wealth in gold as it is nearly as liquid as currency in the country.
