Ukrainian jewellers sound the alarm: new tax could kill business
20 August 2024 17:10
ЕКСКЛЮЗИВ
The draft law introducing a 30% tax on the sale of jewellery and an additional 5% on bank gold came as a real shock to the Ukrainian jewellery business. It not only caused outrage among entrepreneurs, but also raised serious concerns about the future of the industry. Jewellery brands that have been working for years to create a recognisable Ukrainian product are on the verge of destruction. Representatives of the ZARINA and SOVA brands spoke about this in an exclusive commentary for "Komersant Ukrainian"
Commenting on the situation, the ZARINA brand notes:
“The first thought that arose after the news of the 30% tax on jewellery sales (5% on bank gold) was: why destroy the jewellery industry in Ukraine? Who does it bother so much? It seems that no calculations were made when this proposal was submitted, neither the margins nor the cost of jewellery were taken into account.”
Jewellery representatives criticise the draft law, emphasising that this approach has disastrous consequences for the entire sector.
“Why are jewellery representatives shouting about this? Because it is discrimination against the jewellery industry. ‘Jewellery is a luxury and therefore it is fair’ is the only argument I hear in favour of the proposed draft law. 30% is not fair. 30% is a proposal to make us a garakiri,” ZARINA said in a commentary
.
Unclear motivation and lack of calculations
According to representatives of the jewellery business, the introduction of such a tax will lead to massive downsizing or even closure of companies.
“With the current proposal, jewellery businesses will be halved or even closed. We expect the industry to shrink by a third, which will have a negative impact not only on business but also on the entire economy. There will be fewer taxes, which is the opposite result from the expectations of the Cabinet of Ministers,” ZARINA warns.
The company noted that the jewellery business in Ukraine continues to exist not because of, but despite all the difficulties and changes in the country.
“I emphasise that we are not campaigning against taxes, but they should be rational and fair, with efficiency calculations, with the possibility of further existence of the industry. Let’s not destroy, but preserve and support Ukrainian businesses,” ZARINA representatives urge.
Lyudmila Sova, CEO of SOVA Jewellery House, in a comment 
The first thing that jewellery business representatives pay attention to is the selective approach to taxation.
“Singling out jewellery and setting the maximum military tax rate for it is a violation of the principle of equality of all taxpayers before the law,” says Liudmyla Sova.
Another problem is the unreasonable tax rate. The draft law does not provide clear justification for the 30% military tax rate on retail sales of jewellery and the 5% rate on sales of precious metals.
Double tax burden
The issue of double taxation is particularly painful for the jewellery business. The amendments proposed by the draft law contain provisions that set double rates of military duty on the same goods.
“For example, the draft law provides for a 5% military tax on precious metals (when they are sold as precious metals) and a 30% military tax on them when they are sold as finished jewellery. This means that the total tax percentage will increase to 36-42%, as the vast majority of jewellery is made from purchased precious metals,” explained the CEO of SOVA jewellery house.
Decrease in budget revenues and shadow economy
She emphasises that the innovations could lead to a reduction in the customer base, lower sales volumes and job losses.
“Given these factors, prices for jewellery will increase by at least 35%, which may reduce consumer demand. In addition, jewellery will become unaffordable for many customers, as jewellery is not always a luxury item, consumers buy wedding rings and crosses, which are part of the traditions and culture of Ukrainians,” adds Liudmyla Sova.
The jeweller provided statistics for 2023-2024, which showed the dynamics and significant growth of budget revenues from the jewellery industry. For example, taxes in 2023 amounted to UAH 283,477.5 thousand, compared to UAH 612,085.9 thousand for 6 months of 2024. The reason for this increase is the cancellation in December 2023 of the 10% mandatory state pension insurance fee for the hallmarking of jewellery.
“Instead of increasing tax revenues from the military fee, the new draft law may have the opposite effect. Such innovations should be discussed with industry representatives in advance to form a real objective picture,” concludes SOVA CEO.
Both brands express concern about the possible reduction of jewellery businesses, job losses and a decrease in tax revenues to the budget, which is the opposite outcome from the government’s expectations. The brands insist that taxes should be rational, fair and reasonable to ensure the continued existence and development of the industry, rather than its decline.
Earlier , Valeria Guzema, a Ukrainian jewellery entrepreneur, jewellery designer and owner of the Guzema Jewelry brand, expressed serious concerns about the impact of this draft law on the legal jewellery business in Ukraine.
