High value added tax drives illicit diamond trade
Thanh Nien News (Vietnam)
Sky-high value added tax (VAT) on gemstone imports has been to blame for a flood of illegal diamonds into the Vietnamese market, according to jewelry businesses.
The 10 percent VAT on diamond imports is collected right at the point of entry, causing selling prices to rise, discouraging traders from legally purchasing gemstones.
This explains why most gemstones – especially diamonds – on the local market are smuggled into the country.
Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Company said that before 1999 many gemstone businesses imported diamonds at 3 percent import tax.
Though import tax is now zero percent, businesses no longer want to import diamonds due to the high VAT, she said.
The price to import a four-millimeter diamond came at $400 and the rate was up to $440 after being counted with VAT. Meanwhile the price of an illegally imported diamond at the same size was about $410.
Unofficial statistics show that the volume of illegal imported diamonds was US$300 million last year, and lofty profits from expensive gemstones would send the figure to $500 million this year.
On September 22, HCMC police uncovered 1,000 diamonds valued at US$150,000 from Hong Kong to HCMC via Tan Son Nhat International Airport.
Earlier, Ho Chi Minh City police had also busted another ring led by foreigner smugglers of around 5,000 diamonds at the same international airport.
According to the HCMC-based Jewelry and Gemstone Company, border roads between Cambodia and Vietnam are major routes for organized diamond smuggling.
The Vietnam Gold Business Association has proposed the government change the way the value added tax (VAT) on gemstone imports is collected if it is to ensure the effectiveness of the fight against rampant smuggling.
The association said that VAT on gemstones and diamond imports should be lowered to zero percent from the current 10 percent.
As well, VAT should be collected after a transaction between the seller and the buyer instead of at the point of entry, it said.
However the government has yet to approve the proposals.
Reported by Thanh Xuan – Translated by Ha Viet
The 10 percent VAT on diamond imports is collected right at the point of entry, causing selling prices to rise, discouraging traders from legally purchasing gemstones.
This explains why most gemstones – especially diamonds – on the local market are smuggled into the country.
Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Company said that before 1999 many gemstone businesses imported diamonds at 3 percent import tax.
Though import tax is now zero percent, businesses no longer want to import diamonds due to the high VAT, she said.
The price to import a four-millimeter diamond came at $400 and the rate was up to $440 after being counted with VAT. Meanwhile the price of an illegally imported diamond at the same size was about $410.
Unofficial statistics show that the volume of illegal imported diamonds was US$300 million last year, and lofty profits from expensive gemstones would send the figure to $500 million this year.
On September 22, HCMC police uncovered 1,000 diamonds valued at US$150,000 from Hong Kong to HCMC via Tan Son Nhat International Airport.
Earlier, Ho Chi Minh City police had also busted another ring led by foreigner smugglers of around 5,000 diamonds at the same international airport.
According to the HCMC-based Jewelry and Gemstone Company, border roads between Cambodia and Vietnam are major routes for organized diamond smuggling.
The Vietnam Gold Business Association has proposed the government change the way the value added tax (VAT) on gemstone imports is collected if it is to ensure the effectiveness of the fight against rampant smuggling.
The association said that VAT on gemstones and diamond imports should be lowered to zero percent from the current 10 percent.
As well, VAT should be collected after a transaction between the seller and the buyer instead of at the point of entry, it said.
However the government has yet to approve the proposals.
Reported by Thanh Xuan – Translated by Ha Viet
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