Dubai: The UAE could reconsider how it imposes import duty on recycled gold jewellery to make local retail prices more competitive. An independent consultancy could be brought in to look into the pros and cons of such a change, according to the chairman of Dubai Gold & Jewellery Group.
“What we are saying is have the duty only on the actual remodelled part and not on the whole material,” said Tawhid Abdullah. “Because a duty had already been imposed on the original jewellery. What we could like to see is not have to pay duty again on the recycled version.
“The likes of the UK and Germany, and in this region Egypt and Jordan, follow such processes. It would be great if the UAE can consider such a switch in keeping with the times.”
According to Abdullah, whatever gold that is being taken out of the UAE for recycling is duly certified about its origin and when it is brought back. Such certifications ensure that everything is done as per the book.
Jewellery retailers always have a sizable holding of such gold, given that quite a number of sales at the stores are done through jewellery exchange schemes. Such collected jewellery will then need to be recycled into designs that are more trendy. Shipping them out for recycling and then bring it back with duty on the value-added part of it offers cost benefits.
The UAE’s jewellery trade has been buffetted by spiralling costs of bullion. Shopper sentiment took a direct hit in the second quarter of 2019 and barely managed to recover in the fourth quarter. During this year’s DSF, gold prices shot up to six-year highs, but now has settled to more sedate levels. On Tuesday (January 14), it was trading at Dh1,542 an ounce range, down more than $6 from Monday’s price. But just last week, prices had monetarily shot past $1,600 and went all the way to $1,611.
All of this volatility has been impacting on gold shoppers, which is why the Dubai Gold & Jewellery Group is making a case for some relief on import duty. Even a duty cut on recycled gold would be a boost to their prospects at a time when gold is in the $1,500 plus range.
It was in January 2018 that the UAE imposed import duty of 5 per cent on jewellery, as well as rolled out VAT (value added tax).
Federal level help
Abdullah said the Group would put forth its suggestion on a duty benefit with Dubai authorities first and then at the federal level. In October last, the UAE Government had upgraded the gold industry in the country to “priority status”. A “UAE Gold Standard” is to be created to support a sector that accounts for 20 per cent of the UAE’s non-oil trade.
“We are only making suggestions to the government authorities about a rethink on import duty for recycled gold - if the government or independent agencies arrive at the same conclusion, it would be to the good,” Abdullah added.
“It’s not a big difference, but we still have 20 odd says to go,” said Tawhid Abdullah of Dubai Gold & Jewellery Group. “The way I see it, each time gold rises, it confirms its everlasting value as an asset. Things are not that bad demand-wise.
“Tourists are shopping for gold and the VAT refund mechanism has clearly worked for us.
“From our side, we could do even better if the various government department keep making the case that Dubai is indeed the “City of Gold”.”