South Korean Diamond Exchange Persuades Govt To Abolish Consumption Tax on Diamonds
Following five years of talks and intensive work by the Korea Diamond Exchange (KDE), the South Korean government has slashed taxes on loose diamonds, says exchange President Nam Chang-Soo.
The individual consumption tax was introduced in 1976 and abolished in December 2018 in time for the new year, he explained.
Yu Nam said that South Korea, which is ranked as the eighth-largest economy in the world, has suffered from a big problem of diamond smuggling due to the high tax rate, and that has created a negative impression about diamonds among the public.
"We hope that the abolition of the tax will have a very positive effect on diamond jewelry sales in South Korea," he said, adding that most diamonds brought into the country are smuggled.
"Together with the WFDB, we aim to build better business practices and to show diamonds in a more positive way to consumers in South Korea. Traditionally, consumers have not trusted the diamond trade and had negative feelings towards it.
"But I believe that trust will now rise and that we will see a big increase in sales of polished diamonds and of diamond jewelry."
Yu Nam said that annual sales of polished diamonds in South Korea amount to around $2.5 billion, while diamond jewelry sales are in the order of $5 billion.
The KDE was established in May 2011 and is 30th member of the WFDB. Its main activities are to support members in trading and to enhance transparency in B2B and B2C activities and to build strong consumer confidence in the country.
He explained that there had never a powerful diamond exchange or association in the past through which to communicate with government and exchange views and explain the problems that the industry was facing in country and hurdles that restrict the growth of the industry in the country. The KDE said it has built a strong and powerful link between the diamond and jewelry industry of South Korea and the government.
KDE regularly sends updates not only on the industry’s progress and statistics to the Trade and Commerce Ministry of Korea, but also elaborates on the scope of areas for support and improvement and legal changes required from the government to help the industry grow. The KDE is always aggressive in supporting current activities and planning and developing further for future support from various sources for its members and for the diamond and jewelry industry in South Korea.
KDE was successful in convincing the government to revise tax on loose diamonds in 2015 and on our strong recommendation we were also successful in convincing the government to abolish the 26% Individual Consumption Tax (ICT) on loose polished diamonds in 2018. This has laid a strong foundation in the domestic jewelry industry for significant development.
On December 8th, 2018, the bill was passed in the National Assembly to abolish the ICT on the import of loose polished diamonds into the country. Despite a strong foothold in the worldwide jewelry industry, the ICT had restricted the domestic jewelry industry’s growth and competitiveness globally. The abolition of ICT will boost the growth of the jewelry industry locally as well as worldwide. It has not only opened the door for the local jewelry industry, but also for foreign diamond manufacturers and dealers to establish their foothold in the market.
"The tax change on loose polished diamonds and precious stones has created plenty of opportunities for foreign companies in our country. I am also confident that this amendment in tax structure will lead to increased tax revenue from bigger official imports of diamonds and will curb underground business. This will also lead to the revitalization of the jewelry industry and develop finished diamond and precious stone studded jewelry to offer them at competitive prices to the world. This also will lead to increased consumption of loose diamonds in country and will create higher demand for diamonds in the country. Due to this, taxation formalities have become simpler and now importers pay 5% import tax and 10% VAT.
"We will take this opportunity as a starting point and take a more active step forward by establishing a KDE Building in Chong-no Jewelry Special Zone in Seoul. We are following in the footsteps of the Shanghai Diamond Exchange and with their assistance and advisory help we are trying to move a tax free Bonded Warehouse into this building where exporters can send goods on memo without paying any import tax and VAT and to return unsold goods.
We are planning to offer state of the art facilities in this building and assuring the safety of goods with utmost priority.
"We request members of the World Federation Of Diamond Bourses to inform their members about this development in our country and we invite them to become members of the Korea Diamond Exchange and to begin their trading activities in our county with the support of the Korean government and the Seoul metropolitan government."