PROPOSED JAPAN TAX MAY DAMPEN TOKYO GOLD TRADING

  A proposed sales tax on gold transactions
  could put a damper on the Tokyo market and encourage a shift of
  trading to Hong Kong and Singapore, senior vice president and
  Tokyo branch manager of Credit Suisse Paul Hofer told a press
  conference.
      "If you impose five pct on both buy and sell transactions,
  Tokyo participants in the gold market could be out of business,"
  he said. The tax would create such a spread that Japanese would
  be unable to compete in the international market, he added.
      "How can the government really raise taxes if the system
  they impose is prohibitive of generating business?" he said.
      The government now imposes a 15 pct tax on physical trades
  exceeding 37,500 yen for gold jewellery and coins and a 2.5 yen
  tax per 10,000 yen on futures transactions, gold dealers said.
      The new five pct tax would be imposed on companies trading
  more than 100 mln yen a year and apply to paper gold trades,
  gold deposits with banks and trading of gold bars as well as
  that of jewellery and coins, dealers said.
      However, the tax would lower the rate on jewellery and
  coins to only five pct from the current 15 pct, they said.
      Hofer said in 1982 Switzerland had imposed a 5.6 pct gold
  turnover tax on Jan 1, 1980, but abolished it on Oct 1, 1986.
      A study by one of the Swiss banks showed that in early
  1980, the first year of the tax, the volume for all Swiss banks
  fell by up to 25 pct compared with 1978 and 1979, Hofer said.
      Transactions of paper gold also fell up to 75 pct of the
  volume prior to imposition of the tax, he said.
      While gold transactions in Switzerland decreased, the
  volume of trades outside the country, particularly in London
  and Luxembourg, increased between 10-25 pct, Hofer said.
      Japan is a major importer of gold, buying a yearly average
  just under 200 tonnes, gold dealers said.
      Last year Japan imported about 600 tonnes of gold, but the
  government had bought about 300 tonnes for minting coins to
  commemorate the 60th year of Emperor Hirohito's reign, dealers
  said.
      Gold trading in Tokyo is dominated mainly by Japanese
  trading companies, while Credit Suisse is the major foreign
  participant.
      Daily turnover in the Tokyo spot market ranges between one
  and 10 tonnes with the average around three tonnes, while
  futures turnover amounts to about four tonnes, gold dealers
  said.
      "All of us are concerned daily with the fact that the Tokyo
  market is growing, that Japan is becoming one of the three
  major financial markets in the world ... And in my personal
  opinion I think it would be a very big mistake to put a damper
  on this positive growth or developments by imposing such a tax,"
  Hofer said.
      "I don't think it fits the philosophy of an
  internationalising market," he added.
      Officials of several major Japanese trading houses,
  attending the press conference, said they supported Credit
  Suisse's call for the government not to impose the gold tax.
  

