Citi: New gold tax rules could raise procurement costs by 7%

On November 3rd, Citi released a report on China's consumer industry. It said that the new gold tax regulation appears to reduce the value-added tax deduction rate for jewelers to purchase gold from 13% to 6%. The industry is still studying the policy provisions and there are various interpretations. In the most extreme case, the cost of gold procurement may increase by 7%. If retail prices remain unchanged, the impact on the net profit of Laopu Gold (06181.HK), Chow Tai Fook (01929.HK), and Liufu (00590.HK) in fiscal 2026 is expected to be 15%, 26%, and 6%, respectively. In this case, the entire industry is likely to raise prices to pass on cost pressures, and the competition landscape may be favorable for leading companies. However, it is unclear whether the policy intention is to increase transaction costs only for gold bar and coin investment, or at the same time to suppress gold jewelry demand. Therefore, Citi expects further clarification of implementation details in the coming days.