Dubai Diamond Exchange Chairman Peter Meeus spoke out strongly against a proposed 5% value added tax (VAT) on loose diamonds in the United Arab Emirates (UAE), saying it would threaten Dubai’s diamond trade.
Meeus said on the first day of the Dubai Diamond Conference earlier this week: “The possible cost implications of a VAT introduction for UAE traders are huge. In a business where profit margins are very thin, every quarter of a percent is important for traders handling billions of dollars to decide where to ship the goods.”
The comments were widely reported in the local press.
The UAE government aims to bring in a 5% VAT rate on rough and polished diamonds traded in the UAE as of January 1. Given that the country has marketed its diamond and jewelry industry for more than a decade on a zero tax policy, as well as other tax advantages as compared to other major diamond centers such as Antwerp, the proposal signifies a big change in policy.
“Our trading roots are based on the principles of a tax-free environment for import and re-export and a mind-set that industry drives government, not that government drives industry,” said Ahmed Bin Sulayem, chairman of the Dubai Multi Commodities Centre (DMCC).
Meeus said that diamond trading in the UAE had a value of $26 billion in 2016 – a huge increase on a figure of just $300 million in 2002 when the DMCC was established.
Meeus claimed that if the tax was imposed, the UAE would suffer and other centers such as Hong Kong, Panama and Singapore would benefit.
The subject of the proposed tax was discussed at one of the panel debates at the Dubai Diamond Conference where panelists discussed the ramifications.
Panelists, who included prominent retail jewelry heads, mostly agreed that the tax rise would have a negative impact, however some said the increase would not be dramatic.
