Chinese tax authorities are to audit all the nation’s gold traders, people familiar with the matter said, as the government presses ahead with a clampdown on the practice of using fake precious-metal exports to mask capital flows.
An annual list of businesses to face mandatory audits this year include gold traders, exporters taking advantage of tax rebates and companies involved in mergers, stake sales and other equity transactions, said the people, who asked not to be identified because the audits have not been made public.
Auditing the traders highlights continued government suspicion that over-invoicing for gold exports has been used as a way to evade capital controls. Chinese auditors have also rung the alarm over metals processors profiting from loans backed by falsified gold transactions.
If the audit uncovers major tax violations within the past two years, authorities would then probe this year’s operations as well as work from previous years, the people said. Local tax authorities began the audits this month, they said.
The Chinese State Administration of Taxation did not immediately respond to calls for comment.
The planned audit has been reported on accounting blogs.
While the order does not go into detail, it may apply to firms that import and export gold, as well as companies that buy bullion to make products such as jewelry, traders said.
Government investigators last year scrutinized trade in precious metals, including jewelry, after exports rose to about US$10.8 billion in September from US$1.39 billion a year earlier.
The sectors facing mandatory audit fit together because traders have sometimes falsely classified precious metals to take advantage of export rebates. In one case last year, outbound shipments of silver were classified as acoustic wire to take advantage of a 17 percent rebate aimed at encouraging high-end domestic manufacturing.
China was the world’s biggest bullion consumer last year and has pushed to expand the gold trade by establishing new pricing benchmarks. China started offering international institutions access to yuan-denominated gold contracts in Shanghai’s free-trade zone in September last year.
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