Industry analyst PRANAY NARVEKAR examines the direct and indirect tax structures in place in the four major midstream centres – Belgium, Israel, Dubai and India.
Charles Dickens, in his famous book, The Tale of Two Cities, set his story in the turbulent events of the French Revolution and covered them from the perspective of two cities, namely London and Paris.
While the events surrounding us are not quite that dramatic, the usually stable taxation scenario in the diamond pipeline has been in the midst of a few fairly radical changes in the last 1-2 years, as direct and indirect taxes at the four largest midstream centres get modified. Just like in any other industry, diamond companies will adjust their businesses to adapt to these changes. As they fully assimilate these modifications, it could alter the direction of the flow of goods in the pipeline.
Direct tax changes
The beginning of this year saw the tax policies in both Belgium (Antwerp) and Israel (Tel Aviv) change. Both countries had a similar income tax regime (except for differing rates) which had been put in place decades earlier. These countries levied a minimum tax on diamond companies, which was levied as a percentage of the turnover. If the actual tax liability, on the basis of the income or profit, exceeded this minimum amount, then the companies were liable to pay the higher amount.
While this was termed as a “turnover-based tax”, it was never truly a turnover-based tax. In a way, a certain amount of tax revenue would flow in for tax authorities while allowing the industry to reduce disputes regarding stock valuation and transfer pricing.
The tax rates were set in a period of stable and increasing prices, when most of the rough diamonds were sold through the De Beers. Post 2008, the diamond pipeline has seen a huge change, with price volatility being a part and parcel of the trade. Since 2011, the global price in dollar terms has reduced by nearly 25-30%. This drop directly cuts into the profitability of the industry.
هذه القصة مأخوذة من طبعة December 2017 من Solitaire International.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
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هذه القصة مأخوذة من طبعة December 2017 من Solitaire International.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
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