Not all gold actually glitters
official gold imports are roughly 700 t/year, worth around $44.8 bn. Smuggled gold volumes are reported to be around 200-300 t/year, worth $19.2 bn. Gold smuggling takes place via air, sea and road routes and in different forms: bars, powder/dust and paste.
To prevent good smuggling, it's important to find out the reasons that allow it.
Customs In India, these work out to be 18% for officially imported gold. Direct saving for smugglers is ₹18 lakh for every ₹1 cr of gold smuggled in, which is a little less than 2 kg.
Laundering Indians holding unaccounted income send it abroad and receive smuggled gold, thus converting the former into gold holdings that are easier to store and are liquid.
Crim fin Smuggled gold is reportedly used to bankroll criminal activities, such as drug trafficking and terrorism.
Can anything be done to curb gold smuggling? If there's no import tax, there would be no financial incentive to smuggle gold (even as other reasons will still be there). However, even smugglers have financial costs of 2-3%. As such, the break-even level of import tax where the financial incentive to smuggle gold would be negated could be guesstimated at 3%.
If authorities reduce import tax to, say, 3%, then the loss to the exchequer on 700 t of official gold imports at 12% would be $5.38 bn. But since smuggled gold of 300 t would now come officially, it would generate an import tax income of 3%, or $0.576 bn. As such, the net loss to the exchequer would be $4.8 bn.
On the contrary, if the import tax is retained
