Gem Traders Blame Smuggling on Tax Rate

By Htet Naing Zaw 4 August 2017

NAYPYITAW — The government is losing a large sum on gems and jewelry sales as gems traders smuggle them into China because of a steep trade tax, said U Myint Han, vice chairman of Myanmar Gems and Jewelry Entrepreneurs Association.

“[Gems and jewelry] merchants are smuggling not because they don’t want to pay tax, but because they can’t afford to pay,” said the vice-chairman at a press conference on the first Myanmar Gems and Jewelry Day in Naypyitaw on Thursday.

The tax in question—the Special Commodities Tax Law—was introduced in 2016 for the sales of natural commodities such as teak, hardwood, log, processed wood, jade and gems, as well as fuel, alcohol, beer, and cigarettes.

In 2015, the commercial tax rate was set at 15 percent for raw gemstones such as jade, rubies, sapphires, emeralds and diamonds for foreign trading, but increased to 20 percent under the Special Commodities Tax Law, plus a 5 percent trading tax, and 3 percent service charge by Myanmar Gems Enterprise, meaning the total tax was 28 percent of the price of sold items.

However, it has since been lowered to an overall 18 percent after traders’ protested.

“This tax rate is inconvenient for merchants. And it is also a loss for the country. In China, you can sell as much as you like for just 2 percent [tax],” said the vice-chairman.

Gems and jewelry sales at the jade and gems emporiums have fallen as a result, he said. The 51st emporium in 2014 garnered US$2.4 billion in sales, when the commercial tax was set at 10 percent.

The following year, in the 52nd emporium, sales dropped to $500 million after the tax was increased, and dropped again to $380 million at the 53rd emporium last year.

“I’m sure gems and jewelry can be had for good prices only at the emporium, but not in the outside market. They get the best prices at emporium compared to other places including China,” said U Min Thu, deputy director-general of Resources and Environmental Conservation Ministry.

The tax on gems and jewelry sales has been reduced from 20 percent to 15 percent and the trading tax has been spiked recently following a request from merchants earlier this year, but the service charge remains unchanged. The total tax is now 18 percent, but smuggling persists, gems and jewelry merchants said.

“Some still smuggle even though the tax has been reduced, but not big stones, just small ones. Smuggling has existed for a long time in successive periods, but there is more smuggling now,” a gems merchant told The Irrawaddy on the condition of anonymity.

Under the previous governments, gems and jewelry merchants had to show they had paid taxes once a year, but under the new government they must get tax clearances monthly, with harsh penalties for those who fail to do so.

Parliament is working to amend the Myanmar Gemstone Law for the third time, and jewelry merchants at the conference hoped that these amendments would help streamline tax procedures.

Translated from Burmese by Thet Ko Ko.