GOLD has long symbolized security and wealth, particularly in Asian societies where it plays a crucial role in financial planning and dowries.
However, behind its gleaming appearance, a shadow economy thrives—tax evasion, black money and fraudulent trade.
Pakistan, with its modest 64.6 metric tons of gold reserves, faces challenges regulating its gold market.
Counterfeit scams and unregistered transactions fuel the black economy, demanding stricter regulations and consumer protections.
In one case, a villager sold his buffaloes—his main source of income—to buy gold for his daughter’s wedding, believing it was the safest investment.
Six months later, he discovered the gold was counterfeit.
When he confronted the jeweler, the vendor initially denied the fraud.
After agreeing to exchange the ornaments, the vendor trapped the victim in further psychological and financial loss, ensuring his silence through intimidation.
This case highlights the vulnerability of both rural and urban consumers who lack knowledge of gold authentication methods.
It also underscores the broader issue: the unregulated gold trade facilitates money laundering and tax evasion, depriving the state of revenue while exploiting consumers.
Even those in urban areas with reputable dealers can fall victim to gold valuation mistakes.
I experienced this when I took my kin’s carcanet to a jeweler for modifications.
Unaware of how weight loss, impurity deductions and the jeweler’s profit margins would affect the transaction, I ended up losing over PKR 2 lacs.
This shows how a lack of financial literacy in gold transactions can lead to significant losses.
Pakistan’s gold market thrives on undocumented transactions, making it a prime vehicle for laundering black money.
Traders frequently under-invoice sales, evade taxes or smuggle gold into the country to avoid import duties.
The Federal Board of Revenue (FBR) has tried to regulate this through mandatory documentation and stricter oversight, but enforcement remains weak.
Supreme Court Rulings on Fraudulent Gold Transactions: Key Supreme Court rulings have addressed fraudulent gold transactions:
1.Muhammad Naeem vs.State (2018 SCMR 315) – Misrepresentation of gold purity is punishable under Section 420 of the Pakistan Penal Code (PPC), 1860, with up to seven years of incarceration.
2.Rana Traders vs.
Federation of Pakistan (2021 PLD 452 SC) – Mandated gold purity documentation, emphasizing consumer rights.
3.Muneer Ahmed vs.
State (2015 SCMR 1020) – Reinforced that selling counterfeit gold is a criminal offense.
These rulings are crucial but need stronger enforcement to be effective.
Should Gold Be Taxed More Rigorously?
Gold is a safe asset, but its role in tax evasion cannot be ignored.
Countries like the United States and India impose capital gains tax on gold investments, whereas Pakistan’s tax mechanisms remain porous, enabling illicit activities.
Introducing gold transactions through Exchange-Traded Funds (ETFs) and registered mutual funds could help formalize the industry and curb illegal practices.
A key issue is the lack of awareness about gold purity, especially in rural areas.
Buyers must understand the differences between 18K, 21K and 22K gold to ensure they get what they pay for.
Media must lead awareness campaigns to prevent misuse.
Pakistan must strengthen consumer protection laws, enforce strict penalties for fraudulent traders and promote documented transactions.
Only through reforms and financial literacy can gold transition from a tool for black money to a regulated, transparent asset.
—The writer is contributing columnist, based in Sanghar, Sindh.(advaddero@gmail.com)
