Is the Russian diamond industry heading towards a revolution? According to a Monday report by RAPAPORT, Russia plans to reduce import levies on rough diamonds from 20% to 15%. The new tax rates will take effect January 1, 2010.
The report noted that the Customs Union of Russia, Belarus and Kazakhstan intends to lower duty rates on synthetic diamond imports from 20% to 5%. Pearl import taxes are also expected to be cut from 20% to 10%.
Taxes placed on other rough, precious and semi-precious stones, as well as on sapphires and rubies, stand to be reduced from 20% to 15%. The ad-valorem tax on gold, silver and platinum-plated costume jewelry will be reduced by a similar rate as well.
The question is, why would the Russian government take such steps? One of the reasons may be to boost diamonds and jewelry trade in order to stimulate the local industry, as well as local consumption. Today, Russia is considered one of the world's biggest diamond producers and polishers, but it still has some regulation issues – like high taxes.
Russia's high taxation makes it particularly difficult and somewhat risky, to trade in Fancy Color Diamonds: with an import tax of 20%, diamond brokers and polishers import diamond to Russia with fear that they might be unable to sell their merchandise. Taxes are applied to any import, regardless of whether the dealer or the polisher manage to sell or export the stone later on.
The Russian government might take additional steps to ease the constraints of the diamond industry and increase trade. Data released earlier in December indicated Russia exported over 5.3 million carats in rough diamonds, worth $540.9 million, between July-September 2009.
A statement issued by the Russian Finance Ministry said that compared to the second quarter of 2009, rough diamond exports doubled in terms of volume and increased by18 times in terms of value.
The statement also noted that Russia exported over 4 million carats in rough diamonds worth $430.8 million to Belgium, and about 861,600 carats worth $82.2 million to Israel. At the same time, Russia's diamond imports grew in value and decreased in volume: Russia imported over 36,200 carats of diamonds worth $36.4 million, mostly from Israel and Belgium.
Alrosa, Russia's largest diamond miner, sold $1.73 billion worth of diamonds between January and October 2009. Alrosa accounts for 97% of Russian and 25% of global diamond output.
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