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Tariffs on diamond imports are expected to be lifted early next year, and the country's imports and exports of diamonds will be required to go through the customary declaration formalities of customs located inside the Shanghai Diamond Exchange (SDE), said Lu Peijun, director of Shanghai Customs, yesterday at the 2001 China-Belgium International Diamond Symposium.
"After the adjustment, the taxation on rough diamonds and polished diamonds will drop 50 per cent and 60 per cent," said Lu, who maintains that the new taxation policy falls in line with international practices and will fuel a regulated market for diamond businesses.
The city established SDE in October as a State-level diamond centre.
The policy adjustment, which is based on a paper issued by the General Office of State Council issued in August, awaits specific rules now being developed by the General Administration of Customs, the Ministry of Foreign Trade and Economic Co-operation and the Shanghai municipal government.
In addition to the 17 per cent value-added tax and the 10 per cent consumption tax, the current tariffs for rough diamonds and polished diamonds are 3 per cent and 9 per cent respectively.
"The high taxation has greatly affected the development of the country's diamond processing. On the other hand, it has also resulted in rampant trafficking," he said.
China is not a diamond-rich country, but the number of its diamond processing workers rank as the world's second largest.
Statistics show that Chinese mainland's sales of diamond jewelry reached 6.1 billion yuan (US$738 million) last year, and its world market share rose from 0.5 per cent to 1.8 per cent.
After the adjustment, the consumption tax formerly collected at the import and processing stage will be postponed until the retail stage, and the consumption tax for unset polished diamonds and diamond jewelry will be collected at a reduced rate of 5 per cent.
Moreover, rough diamonds and unset polished diamonds directly entering the SDE from overseas will be exempted from value-added taxes and consumption taxes, and diamonds traded in the SDE will be exempt from value-added taxes.
Full tax refunds will be given, based on the difference between the former refund rate of 13 per cent and the tax collected at the processing stage, when the diamonds are exported.
"Diamond flowing from the SDE to overseas cannot enjoy tax refunds," he added.
For diamonds imported from the SDE to domestic markets, value-added tax shall be duly paid. As for customs supervision, if diamonds imported in the name of processing trade are to be sold domestically, the diamonds must be sent to the SDE for transactions or filing.
(China Daily November 16, 2001)
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